On January 27, 2017, the Supreme Court of Canada handed down its decision in the matter of Sabean v. Portage La Prairie Mutual Insurance Co.1 The case concerned the proper interpretation of “policy of insurance” within the wording of an endorsement, Standard Endorsement Form 44 (“SEF 44”), to an automobile insurance policy.2 Mr. Sabean argued that, by virtue of SEF 44, he was entitled to claim from Portage the entire difference between the amount he was awarded for damages from an automobile accident and the amount the tortfeasor’s insurance coverage paid.3 Portage argued that Mr. Sabean’s eligibility for future Canada Pension Plan (“CPP”) payments meant that those amounts were to be subtracted from the amount Mr. Sabean claimed pursuant to an exclusion contained in SEF 44, which provided for deductions equal to amounts paid out under “any policy of insurance providing disability benefits.”4
Justice Karakatsanis delivered the reasons for judgment on behalf of a unanimous Court. Ultimately, the Court decided that CPP disability benefits were not benefits paid pursuant to a policy of insurance.5 The judgment of the Supreme Court, when considered alongside the judgment of the Nova Scotia Court of Appeal from which Mr. Sabean appealed,6 represent two remarkably divergent outcomes despite the establishment of a common stance on the potential ambiguity of the clause to be interpreted. The Supreme Court’s analysis overlooked one small detail which, once properly understood, changes the way in which the analysis proceeds. In treating SEF 44 as a discrete contract, as opposed to merely a portion of a larger insurance contract, the Court framed the analysis in a way that was bereft of the insight that can be provided by insurance contracts as a whole.
In its decision, the Supreme Court cited Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co.7 as authority for the principles of contractual interpretation in the context of standard form insurance contracts.8 In Ledcor, the Supreme Court reaffirmed an earlier holding that in interpreting an insurance contract, the first principle to apply is “that where the language of the insurance policy is unambiguous, effect should be given to that clear language, reading the contract as a whole.”9 In this case, both the Supreme Court and the Nova Scotia Court of Appeal agreed that the wording of the exclusionary clause’s “policy of insurance” language was unambiguous and therefore should be read in its ordinary sense.10 It was at this first step that the Supreme Court failed to properly interpret what constitutes the “contract as a whole.”
The reasons given by Karakatsanis J. suggest that the Court chose to construe the entire contract as consisting solely of the wording of SEF 44, as evidenced by the statement that “SEF 44 is a standard form contract.”11 It would, arguably, be more accurate to state that SEF 44 forms merely a part of an insurance contract. This is the case for a few reasons. First, during my time as an insurance broker, I was never able to offer a client a free-standing SEF 44 insurance contract, as they are not offered by insurance companies in such a manner. SEF 44s are, in Saskatchewan at least, provided routinely as part of the purchase of automobile liability insurance.12 When a client purchases liability insurance, the insurance company provides an SEF 44 add-on automatically at no additional charge and, importantly, with no option to opt out of the SEF 44 coverage. As such, it is disingenuous to suggest that an SEF 44 contract exists without considering the context of a larger contract. Furthermore, policy wording booklets (the booklets that set out the terms of the insurance contract) are not provided piecemeal or separately depending upon the coverages purchased. Wording booklets are provided as a coherent whole with an admonition that not every coverage in the booklet will be applicable and that the terms are to be read in conjunction with the policy cover pages to determine the scope of the coverages purchased.13 This strongly suggests that the language of SEF 44 should be interpreted in conjunction with the entirety of an insurance contract, not simply the endorsement itself. It would make little sense to argue that when someone purchases an insurance contract with multiple coverages they have actually negotiated a number of discrete contracts which should be interpreted in an analytical vacuum devoid of any illumination offered by the remaining parts.
Having situated SEF 44 as a part of a larger whole, not as a freestanding contract, the organizing principle of property and liability insurance contracts, indemnity, can now be considered properly. Barbara Billingsley explains that indemnity “refers particularly to the valuation of the insurance proceeds being linked to the actual value of the loss.”14 Implicit in this is the understanding that insurance contracts generally do not permit dual recovery of loss.15 Karakatsanis J. references the indemnification aspect of the contract in her reasons as well.16 Saskatchewan Government Insurance (“SGI”) Canada’s Auto Pak Wording Booklet, for example, reproduces a portion of The Saskatchewan Insurance Act17 making direct reference to a forfeiture of indemnity in the event of fraud or misrepresentation.18 It would strain credulity to suggest that a property and liability insurance contract could be created between an insurer and an insured while the insured remains ignorant of the fact that it is a contract of indemnity. Were that to be the case, it would be open to one of the parties to question whether the parties had achieved consensus ad idem.
Once it is established that the principle of indemnity is part of the contract which must be read in conjunction with the exclusion in SEF 44 at issue in this case, the analysis proceeds in much the same fashion as that employed by the Nova Scotia Court of Appeal. The crucial difference is that instead of deciding, as the Nova Scotia Court of Appeal did, that the concept of indemnity is inherent to SEF 44 as an “excess” policy,19 which the Supreme Court avoided by strictly interpreting the meaning of “excess” and rigorously applying the understanding of the “average person applying for insurance” framework,20 I have situated SEF 44 in a broader context which shows that indemnity is critical to determining the ordinary meaning of the words “policy of insurance” while reading the contract as a whole. This, coupled with Karakatsanis J.’s concession that the introductory language of SEF 44 is broad enough in ambit to capture CPP benefits as being excluded,21 leads to the conclusion that given their ordinary meaning, the words of SEF 44 serve to preclude receiving overcompensation in the form of payment from the insurance company and payment of disability benefits from CPP. This conclusion is consistent with the Nova Scotia Court of Appeal’s decision.22
* BA Hons (University of Saskatchewan), JD Candidate (University of Saskatchewan).
1 2017 SCC 7, 406 DLR (4th) 623 [Sabean SCC].
2 Ibid at para 1.
3 Ibid at para 6.
4 Ibid at para 8.
5 Ibid at para 41.
6 Portage LaPrairie Mutual Insurance Company v Sabean, 2015 NSCA 53, 386 DLR (4th) 449 [Sabean NSCA].
7 2016 SCC 37,  2 SCR 23 [Ledcor].
8 Sabean SCC, supra note 1 at para 12.
9 Supra note 7 at para 49, citing Progressive Homes Ltd. v Lombard General Insurance Co. of Canada, 2010 SCC 33 at para 22,  2 SCR 245, citing Non-Marine Underwriters, Lloyd’s of London v Scalera, 2000 SCC 24 at para 71,  1 SCR 551.
10 Sabean SCC, supra note 1 at paras 13-14; Sabean NSCA, supra note 6 at para 19.
11 Sabean SCC, ibid at para 14.
12 For this, I can cite only my experience as an insurance broker. I was responsible for providing clients with extended automobile insurance policies (sometimes referred to as package policies) and had to discuss the inclusion of this coverage frequently.
13 See e.g. SGI Canada, “Auto Pak Policy Booklet” (January 2016), online: <https://perma.cc/8YU3-FTVK> at 1; Saskatchewan Mutual Insurance Company, “Extension Automobile Policy Saskatchewan” (September 2009), online: <https://perma.cc/B5YZ-RYV4> at 1.
14 General Principles of Canadian Insurance Law, 2nd ed (Markham: LexisNexis Canada Inc., 2014) at 19.
15 Sabean NSCA, supra note 6 at para 20, citing Campbell MacIsaac v Deveaux and Lombard, 2004 NSCA 87 at paras 52-53, 55-62, 224 NSR (2d) 315.
16 Sabean SCC, supra note 1 at para 15.
17 RSS 1978, c S-26, s 191(1).
18 SGI Canada, supra note 13 at 29.
19 Sabean NSCA, supra note 6 at para 21.
20 Sabean SCC, supra note 1 at paras 13, 19.
21 Ibid at para 22.
22 Sabean NSCA, supra note 6 at para 29.