Dufresne, Healy, Cotnam
Appeals from a judgment of the Superior Court granting an application for declaratory judgment and dismissing an application to amend the grounds of defence. Principal appeal allowed in part and incidental appeal dismissed. Appeals from a judgment of the Superior Court granting an application for reimbursement of insurance benefits. The principal appeal is allowed in part and the incidental appeal is dismissed.
La Coop Fédérée was the victim of an internet fraud that led it to transfer close to US$5 million. It presented claims to its insurers, Co-Operators General Insurance Company and Liberty International Underwriters. Liberty, with whom it had insurance against fraud and misappropriation, paid the coverage limit under the policy, i.e., $1 million. Co-Operators, with whom it had a policy covering all of its property up to $15 million, denied coverage.
At trial, La Coop Fédérée sought full indemnification of its loss. Liberty, for its part, sought a portion of the indemnity it had paid, invoking the other insurance covering the loss. The trial judge found that the loss had to be borne by La Coop Fédérée, not the financial institution that had carried out the transfer, and established how the two insurers were to cover the loss.
The transfer of funds does not have the essential attributes of a bill of exchange within the meaning of the Bills of Exchange Act (R.S.C. (1985), c. B-4). The payment order at issue concerns only the terms triggering the electronic transfer of money. In addition, the transfer does not include a procedure for presentation for payment; it has an immediate and definitive nature that is distinguishable from the presentation of a bill of exchange, as its beneficiary has no title or document allowing him or her to demand payment, and the notion of negotiability is foreign to it.
The loss alleged by La Coop Fédérée was a risk covered by the Co-Operators’ policy because it concerned property belonging to it. La Coop Fédérée had a pre-authorized line of credit and carrying out the electronic transfer order caused it to become the debtor of the amount disbursed from that line of credit.
The judge erred in his characterization of the policy taken out by La Coop Fédérée with Liberty. Although the two policies could cover the same property and the same risks, it is inaccurate to state that Liberty’s policy covers all the property and all the risks of the insured, La Coop Fédérée. Liberty’s insurance is specific insurance within the meaning set out in paragraph of article 2496 of the Civil Code of Québec (S.Q. 1991, c. 64). As such, that insurance must be considered primary insurance and there can be no question of apportionment of the loss between insurers. Liberty discharged its duty and Co-Operators must bear the excess of the loss, less the amount of the retention and the deductible.
*Summary by SOQUIJ
Text of the decision: Http://citoyens.soquij.qc.ca