November 2013

Car theft: A post-incident investigation leads to criminal charges

By Annie-Claude Ménard

Recently, in Barrette v. L'Union canadienne, compagnie d'assurances and Phaneuf (EYB 2013-227285), the Court of Appeal ruled in favour of a policyholder who was refused coverage by his insurance company, which believed he had stolen his own vehicle. In doing so, the Court of Appeal reversed the Superior Court decision handed down by the Hon. Nicole-M. Gibeau (Barrette v. L'Union canadienne, compagnie d'assurances and Phaneuf, 2011 QCCS 2609).

The plaintiff was leasing an Audi A4 insured by the defendant. Upon returning from a trip, the plaintiff realized that his vehicle was missing. Sûreté du Québec officers advised him that the car had been found burned out several kilometres from his home. The plaintiff therefore contacted his insurance company. Though he was hostile towards the defendant's adjusters, he participated in the investigation and provided a statement.

The defendant later denied the coverage since it concluded that the plaintiff had been involved in the theft.

The defendant's adjuster then sent false and incomplete information to the police department that was leading the criminal investigation. The plaintiff was accused of car theft?a charge that was eventually withdrawn. His defence fees totalled over $18 000.

The plaintiff pursued a civil claim for insurance indemnity and punitive damages against the defendants for failing to act in good faith and disclosing false information that led to criminal accusations.

Based on contradictory accounts of the existence of tire marks under the carport in which the vehicle was parked, Justice Gibeau concluded that the defendant had taken part in the theft. But the Court of Appeal determined that the Superior Court judge had made a palpable and overriding error in her assessment of the facts. In the opinion of the Court of Appeal, it was just as possible to conclude that members of a highly organized car theft ring had committed the crime. The plaintiff was granted $27 400 in insurance money and $4 000 to cover the premium increase.

The claim for punitive damages for lack of good faith was refused. The Court of Appeal ruled that while the insurer was at fault for communicating incomplete and false information to the police, it was the responsibility of law enforcement officers to carry out more stringent checks before laying criminal charges. The insurance company was also found to be at fault for considering irrelevant elements and failing to perform a complete investigation before denying coverage. The Court was of the opinion that the plaintiff was at fault for acting in a hostile manner towards the insurer and arousing the insurer's suspicion. He was not granted any damages.

The ruling is a clear example of how a post-incident investigation can impact the outcome of an insurance dispute. Insurers and policyholders must therefore be properly prepared and advised when an investigation is carried out. Calling upon the services of lawyer who specialized in the field is always the soundest option.