In the recent decision Intact Compagnie d'assurance c. Entreprises Transkid inc., 2024 QCCS 16, the Superior Court of Quebec (the "Court") was tasked with determining if a global transportation insurance policy providing civil liability insurance coverage in respect of goods transported by truck could extend to temporary storage.
The Facts
This matter concerns the theft of two trailers containing the goods of a games and toys distribution company named Imports Dragon ("Imports"). Imports' insurer, Intact Insurance Company ("Intact"), brought a subrogation action against Les Entreprises Transkid Inc. ("Transkid"), which had the custody and control of the stolen goods at the time of loss. Transkid then turned to its civil liability insurer, Echelon Assurance ("Echelon"), and asked that it assume its defence against the underlying action of Intact via a Wellington motion.
In its originating application, Intact alleges that Imports' goods were received by Transkid for storage. Intact further attributes the theft of the two trailers to Transkid's omissions as the depository of the goods.
In support of its claim, Intact filed the incident report and complementary report from the Montreal Policy Service.. According to the complementary report, the trailers were parked in Transkid's loading dock at the time they were stolen. Further, Imports' and Transkid's contract pertained to the transportation of goods, whereas storage was temporary pending delivery to a merchant.
The evidence filed by Transkid and Echelon also confirmed that their contract extended to transportation and that storage was only transitory.
The Analysis
a) The Duty to Defend
The Court addresses the Wellington motion brought by Transkid in view of the above factual context. It first sets out the principles applicable to this motion, which are well-known. The insurer's duty to defend is triggered when the facts alleged in the proceeding filed against the insured could possibly be covered by the insurance contract. The Court must identify the true nature of the claim assuming the veracity of the pleadings and exhibits but is not bound by the terminology used by the claimant.
b) The Insuring Agreement
The policy's applicable insuring agreement reads as follows:
We agree to indemnify you for the sums that you are required to pay, due to liability imposed by law, to you [sic] as transporter by virtue of a bill of lading, a transportation contract, or a shipping receipt delivered by you, for loss or property damage directly caused to the "insured goods" by an "insured cause of occurrence".
[Our translation of the original French]
The terms "insured goods" are further defined as follows:
- "insured goods": goods of others which are in your custody or administration, from the moment these goods are "loaded" in vehicles owned or operated by you, but only while these goods are in the ordinary course of transport and while these vehicles are in a terminal, and ending when these goods are unloaded at their intended destination, or until your interest as transporter ends, based on the first of these occurrences.
[Our translation of the original French]
The Court concludes that the insuring agreement reproduced above may apply. It relies on the complementary report of the Montreal Police Service filed in support of Intact's application. Based on this report, the stolen goods were stored in trailers parked in Transkid's loading docks and were set to be shipped to merchants.
The Court infers that the goods may have been loaded in the trailers pending their delivery to a merchant, or that they alternatively may have remained to be unloaded following their transportation. In both scenarios, the definition of "insured goods", which extends from loading to unloading even where the vehicles are parked in a terminal, may apply. As a result, the Court finds that it is possible that the insuring agreement could be triggered.
c) The Exclusion for "Stored Goods"
The Court then turns to the exclusions contained in the insurance contract. Notably, the policy contains an exclusion for "stored goods in virtue of a warehouse receipt or another written storage agreement" [our translation of the original French].
To invoke this exclusion, Echelon files two storage invoices issued by Transkid to Imports. Even if these two invoices could be considered as warehouse receipts pursuant to the exclusion, the Court concludes that they are incomplete and that they cannot be directly associated to the stolen goods.
Also, these two invoices were not filed in support of Intact's application, meaning that they should not be considered in the assessment of the duty to defend.
Further, even if the Court had concluded that there was a warehouse receipt or storage agreement as required by the exclusion, the evidence would still not prove that the stolen goods were about to be unloaded for storage.
In summary, the Court concludes that Echelon failed to establish the clear and unambiguous application of the exclusion for "stolen goods".
d) The Extension for "Temporary Storage"
Finally, the Court highlights the following coverage extension applicable to "Temporary Storage":
Coverage provided under this form applies to "insured goods" which are temporarily unloaded from vehicles in a terminal for the shortest period between a period not exceeding thirty (30) consecutive days and a period during which you are responsible as transporter.
[Our translation of the original French]
That said, the Court finds that it is not required to determine whether this extension may apply or not given its conclusions concerning the insuring agreement and the exclusion for "stolen goods".
e) Conclusion
In summary, the Court concludes that Intact's claim against Transkid may be subject to coverage. Therefore, it grants the Wellington motion and orders that Echelon take up the interest and assume the defence of Transkid.
* * * *
This decision shows the importance of the exhibits produced in support of the proceeding filed against the insured when analyzing an insurer's the duty to defend. In this instance, Intact alleged that Transkid was liable as the depository of the stolen goods. That said, the report of the Montreal Policy Service filed by Intact suggested that Transkid also acted as transporter and that the stolen trailers were parked in the loading docks of the warehouse, thereby giving rise to the possibility of coverage under the insuring agreement. It is thus imperative to read the allegations of the proceeding in light of the exhibits invoked therein in the context of a Wellington motion.
Furthermore, this judgment illustrates the burden of proof of each party in relation to a Wellington motion. The insured only needs to demonstrate that the insuring agreement could find application if the allegations of the originating application are proven. As for the insurer, it must establish that an exclusion of the insurance contract clearly and unambiguously applies in order to avoid having to defend its insured. Finally, if there is a relevant exception to the exclusion, the insured must prove that it could apply.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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