



COURT OF APPEAL FOR ONTARIO

CITATION: C.H. Robinson Worldwide Inc. v. Northbridge
    Commercial Insurance Corp., 2016 ONCA 364

DATE: 20160513

DOCKET: C60002

Laskin, Simmons, and Huscroft JJ.A.

BETWEEN

C.H. Robinson Worldwide Inc.

Applicant (Appellant)

and

Northbridge Commercial Insurance Corp.

Respondent (Respondent)

Michael D. Magonet, for the appellant

James Manson, for the respondent

Heard: January 25, 2016

On appeal from the order of Justice Carole J. Brown of
    the Superior Court of Justice, dated January 16, 2015, with reasons reported at
    2015 ONSC 232, 124 O.R. (3d) 390.

Laskin J.A.:

A. Overview

[1]

C.H. Robinson Worldwide Inc. appeals the dismissal of its application
    for insurance coverage from Northbridge Commercial Insurance Corporation.

[2]

Robinson is in the transportation business, and one of the things it
    does is arrange motor carrier services for its customers. In March 2013, it
    retained KLM Express to transport a cargo of food products from Ajax to
    Calgary. The KLM truck carrying the cargo was involved in a collision and the
    cargo was destroyed. Robinson sued KLM for the full value of the lost cargo.
    When KLM did not defend the action, Robinson obtained a default judgment against
    it for $223,701.85.

[3]

Robinson then sought payment from KLMs insurer, Northbridge, under s.
    132 of the
Insurance Act
, R.S.O. 1990 c. I.8. Section 132(1) entitled
    Robinson to recover the amount of its unsatisfied judgment from Northbridge,
    but subject to the same equities as the insurer would have if the judgment had
    been satisfied.

[4]

The application judge denied Robinson recovery. She held that KLMs
    insurance policy was void because when applying for coverage KLM had made a
    material misrepresentation to Northbridge. The misrepresentation relied on by
    the application judge was KLMs answer to the following question: Does the
    applicant have any contracts with shippers that stipulate limits of liability
    that are required to supercede the applicants standard Bill of Lading? KLM
    answered this question no.

[5]

Neither KLMs standard Bill of Lading nor evidence about it was put
    before the application judge. Nonetheless, she held that KLMs answer amounted
    to a misrepresentation because the contract between Robinson and KLM provided
    liability for actual loss or damage that was well in excess of the limited
    liability under the Uniform Conditions of Carriage:
Carriage of Goods
,
    O. Reg. 643/05. The application judge concluded the misrepresentation was
    material because it affected the premium KLM paid for coverage.

[6]

Robinson makes two submissions on appeal. First, it submits the
    application judge erred by finding a misrepresentation in the absence of any
    evidence about KLMs standard bill of lading. Second, it submits even if KLM made
    a misrepresentation, Northbridge failed to show that the misrepresentation was
    material to its underwriting process. I agree with Robinsons first submission.
    It is therefore unnecessary to address its second submission. I would allow the
    appeal, set aside the order of the application judge, and grant Robinson
    judgment in the amount of its judgment against KLM.

B. Background

[7]

Both the agreement between Robinson and KLM, and KLMs insurance coverage
    with Northbridge are relevant to the main issue on this appeal.

(1)

The Agreement between Robinson and KLM

[8]

On June 22, 2012, Robinson and KLM signed an Agreement for Motor
    Contract Carrier Services. The agreement was to be effective for one year, and
    to continue in effect from year to year unless terminated by either party.
    Paragraph 12 of the agreement stipulated that KLM would be liable for actual
    loss and damage to shipments arising from its performance of or failure to
    perform the services required by this contract; and further shall be liable
    for the full, actual value of the shipments tendered by Robinson.

[9]

On March 1, 2013, Robinson retained KLM under the terms of this
    agreement to transport a cargo of food products for one of its customers. When
    the cargo was destroyed in an accident, Robinson relied on paragraph 12 and obtained
    a default judgment against KLM for the full value of the lost cargo, $223,701.85.
    The record is silent on why KLM did not pay or defend Robinsons claim.

(2)

KLMs Insurance Coverage with Northbridge

[10]

Under paragraph 13 of its agreement with Robinson, KLM was required to
    procure and maintain at its own expense cargo insurance of at least $25,000
    per shipment. At the time it entered into the agreement, KLM had an existing
    policy of insurance with Northbridge, but the coverage period was to expire in
    August 2012. KLM therefore applied to renew its policy for a further year.

[11]

As part of the renewal application, Northbridge required KLM to complete
    a Small Business Fleet Transportation Insurance Survey (the Survey). KLMs
    answer to one of the questions on the Survey has given rise to this litigation.
    For convenience, I repeat the question and KLMs answer: Does the applicant
    have any contracts with shippers that stipulate limits of liability that are
    required to supercede the applicants standard Bill of Lading? KLM answered
    this question no.

[12]

Also of significance, in the Survey, KLM requested and paid for a policy
    limit of $250,000 per shipment, an amount exceeding Robinsons default judgment
    against it.

[13]

After it received the completed Survey, Northbridge renewed KLMs
    insurance coverage for a further year from August 2012 to August 2013.

[14]

The KLM insurance policy with Northbridge contained various conditions,
    one of which provided that the policy was void for material misrepresentation:

1) Misrepresentation and Fraud

The entire policy shall be void if, whether before or after a
    loss, you have concealed or misrepresented any material fact or circumstance
    concerning this insurance or the subject thereof, or the interest of any
    Insured therein, or in case of any fraud or false swearing by you relating
    thereto.

C. Did KLM Make
    a Misrepresentation in its Application for Insurance Coverage?

[15]

Robinson applied for an order that Northbridge pay the amount of the
    default judgment against KLM under s.132 of the
Insurance Act
. That
    section permits a judgment creditor (Robinson) with an unsatisfied judgment
    against a judgment debtor (KLM) to recover the amount of the judgment from the
    judgment debtors insurer (Northbridge).

132. (1) Where a person incurs a liability for injury
    or damage to the person or property of another, and is insured against such
    liability, and fails to satisfy a judgment awarding damages against the person
    in respect of the persons liability, and an execution against the person in
    respect thereof is returned unsatisfied, the person entitled to the damages may
    recover by action against the insurer the amount of the judgment up to the face
    value of the policy, but subject to the same equities as the insurer would have
    if the judgment had been satisfied.

(2) This section does not apply to motor vehicle
    liability policies.

[16]

Recovery under s. 132 is subject to the equities between the judgment
    debtor and its insurer. Thus, if KLM had paid Robinson and sought indemnity
    from Northbridge, but Northbridge would have had a defence to that indemnity
    claim, Northbridge could assert this defence to deny Robinson recovery of its
    judgment.

[17]

If KLM made a material misrepresentation to Northbridge when applying
    for insurance coverage, that material misrepresentation would void KLMs policy
    with Northbridge and give Northbridge a valid defence to Robinsons claim
    against it under s. 132 of the
Insurance Act
. The insurer has the onus
    of showing a material misrepresentation, and in this case the onus is
    significant: see, for example,
Fernandes v. RBC Life Insurance Co.
, 2008
    CarswellOnt 3998, 66 C.C.L.I. (4th) 115 (S.C.), at para. 7, affd 2009 ONCA
    864, 99 O.R. (3d) 627;
Commonwealth Insurance Co. v. York-Hannover
    Developments Ltd.,
1997 CarswellOnt
    680 (Gen. Div.), at para. 2, affd 1999 CarswellOnt 4309 (C.A.); and
Fidei
    Estate v. Sun Life Assurance Co. of Canada
, 1991 CarswellOnt 648, 5
    C.C.L.I. (2d) 224 (Gen. Div.).

[18]

Northbridge contends KLMs Survey answer that it did not have any
    contracts with shippers providing for liability exceeding liability in its
    standard Bill of Lading was a material representation. Northbridge claims the
    answer was a misrepresentation because in its contract with Robinson, KLM
    agreed to be liable for the actual or full value of any lost or destroyed
    shipment.

[19]

Northbridge did not produce its insureds standard bill of lading, nor did
    it lead any evidence of its terms. Nonetheless, it put forward two arguments to
    support its misrepresentation defence  one before the application judge, which
    she accepted, and one in this court. I do not agree with either of
    Northbridges arguments. In the absence of KLMs standard bill of lading,
    Northbridge has not met its onus of showing a misrepresentation.

[20]

Before the application judge, Northbridge relied on the Uniform
    Conditions of Carriage  General Freight, which are provided for in Schedule 1
    to O. Reg. 643/05 and deemed included in the agreement between Robinson and KLM
    under s. 191.01(1) of the
Highway Traffic Act
, R.S.O. 1990, c. H.8. Under
    s. 9 of the Schedule, the liability of a carrier such as KLM is limited to the
    lesser of:

·

The
    value of the goods at the place and time of shipment, and

·

$4.41
    per kilogram computed on the total weight of the shipment.

[21]

As the application judge noted, under s. 10 of the Schedule, parties can
    agree on a value for a shipment that exceeds the limited liability in s. 9. KLM
    and Robinson did so in their Agreement for Motor Carrier Contract Services by
    providing that KLM would be liable for the full or actual value of any lost or
    destroyed cargo. Had KLMs liability been limited by s. 9 to $4.41 per
    kilogram, it would have amounted only to $65,953.29.

[22]

In the light of the difference between the full value of the destroyed
    cargo and the value prescribed in s. 9 of the Schedule, the application judge
    found that Northbridges failure to produce KLMs standard bill of lading did
    not defeat its misrepresentation defence. Instead, she concluded at para. 23 of
    her reasons:

[T]he failure of Northbridge to produce the KLM standard bill
    of lading does not preclude Northbridge from making its misrepresentation
    argument. As stated above, regardless of KLMs standard bill of lading,
    liability will be limited by the
Carriage of Goods Regulation
unless
    modified by private contract.

[23]

I take a different view. The Uniform Conditions of Carriage are irrelevant
    in deciding whether KLM made a misrepresentation. Had Northbridge asked on its
    Survey:

Does the applicant have any contracts with shippers that
    stipulate limits of liability that are required to supersede the limited
    liability provided in s. 9 of the Uniform Conditions of Carriage?

And had KLM answered no to that question, its answer
    would have been a misrepresentation. But that is not the question Northbridge
    asked. Northbridge drafted the Survey and must accept the consequences of the
    answers to the questions it posed. The question in issue focused not on the Uniform
    Conditions of Carriage, but on KLMs standard bill of lading. As one was not produced,
    we do not even know whether KLM had a standard bill of lading, or if it did,
    what its terms were.

[24]

We can speculate that KLM did have a standard bill of lading that
    limited its liability to less than the full or actual value of any lost
    shipment. But Northbridge cannot rely on mere speculation to meet its onus to
    show a misrepresentation. Thus, in my opinion, the basis for the application
    judges finding of a misrepresentation cannot be supported. My opinion does not
    turn on the standard of appellate review. Even if the application judges
    finding is a finding of mixed fact and law and therefore entitled to deference,
    I would set it aside on the ground that is an unreasonable finding.

[25]

In this court, Northbridge put forward a different argument to support
    its misrepresentation defence. This argument is set out at paragraphs 45-47 of
    its factum:

45. Further, the appellants argument on this issue is not
    logically sound. Northbridge submits that the matter can also be resolved on a
    simple basis, as follows:

(a)

the Contract provided for
    full liability (i.e. 100% liability) on KLMs part for all shipments tendered
    to KLM by the appellant;

(b)

it follows therefore that
    the degree of liability stipulated by the Contract
must

have
superseded
    all other arrangements that could have been included on KLMs standard bill of
    lading where the degree of liability was less than 100%;

(c)

this is true regardless of
    whether KLMs standard bill of lading provided for a $2 per pound limitation, 50%
    liability, 75% liability, 99% liability, or something else;

(d)

the only case where the
    Contract would NOT supersede the liability provided for in KLMs standard bill
    of lading is where the bill of lading
itself
also provided for 100%
    liability;

(e)

in such a case, of course, both
    the Contract and KLMs standard bill of lading would provide for equal liability;

(f)

thus, KLMs
    response to the Survey question would have been true
if and only if
KLMs
    standard bill of lading contained a provision whereby KLM agreed to be fully
    liable for its shipments. In
all
other cases, KLMs response was
necessarily
    inaccurate
.

46. Northbridge submits that it would be commercially
    unrealistic for KLM to have agreed in its standard bill of lading to assume
    full liability for shipments in the event of a loss.

47. If KLMs standard bill of
    lading had provided for full liability, there would have been no need for the
    Contracts expanded liability provision.

[26]

Although superficially attractive, this argument also requires us to
    assume KLM had a standard bill of lading and to speculate about its terms.
    Presumably Northbridge, as KLMs insurer, was able to produce its insureds
    standard bill of lading if indeed one existed. Its failure to do so undermines
    its misrepresentation defence. In the absence of the very document that was the
    subject of the Survey question in issue, I am not persuaded Northbridge has
    shown KLMs answer to that question was a misrepresentation.

D. Conclusion

[27]

For these reasons, I would allow Robinsons appeal, set aside the order
    of the application judge, and grant Robinson judgment in the amount of its
    judgment against KLM (inclusive of interest and costs). Robinson is entitled to
    the costs of this appeal in the agreed on amount of $10,000 inclusive of
    disbursements and applicable taxes. If the parties cannot agree on the
    disposition of costs before the application judge, they may make brief
    submissions in writing.

Released: May 13, 2016 (J.L.)

John Laskin J.A.

I agree. Janet Simmons J.A.

I agree. Grant Huscroft J.A.


