With the Supreme Court’s decision, we expect that the Court of Appeal’s reasoning in Deguise will continue to generate scrutiny and impact all the participants in the liability insurance market
The Supreme Court of Canada has dismissed with costs all the applications for leave to appeal the judgments of the Quebec Court of Appeal in the Deguise saga, also known as the pyrrhotite case.
The Court of Appeal’s decisions in Deguise in 2020 addressed a number of insurance law issues and created waves in the insurance industry and the market at large.
The Pyrrhotite Case
At Clyde & Co, we published a series of 5 articles discussing the Court of Appeal’s very lengthy decision:
An impact on all the participants in the liability insurance market
With the Supreme Court’s decision, we expect that the Court of Appeal’s reasoning in Deguise will continue to generate scrutiny and impact all the participants in the liability insurance market, on topics such as defence costs outside of limits, triggers for multiple liability insurance towers, underwriting considerations, etc.
One potential impact of Deguise is already being felt through a legislative proposal to nuance Articles 2500 and 2503 of the Civil Code of Quebec, which provide that policy limits are exclusively for the payment of “injured third persons” and that defence costs cannot erode the limits. Deguise was far from the first decision on this topic, but it further highlighted the restrictions to contractual freedom created by these Articles.
That said, while insurance industry participants continue to contemplate the impacts of Deguise, we invite everyone to keep in mind that this case arose from very specific facts, such as the SNC policy wording, which should be considered before drawing overly broad conclusions.