OSPCA v. Sovereign General Insurance: Ontario Court Of Appeal Holds That Interpretation Of Insurance Contract Raises Questions Of Mixed Fact And Law

As we have previously discussed, the 2014 Supreme Court of Canada decision in Sattva Capital Corp. v. Creston Moly Corp. held that contractual interpretation is a question of mixed fact and law, and a first-instance interpretation of a contract is therefore to be given deference on appeal. But is a trial judge's interpretation of an insurance contract to be reviewed on a standard of correctness given that "[t]hese contracts are generally widely used standard form agreements where appellate intervention is required so as to ensure consistency of result and certainty in the law"? The Supreme Court of Canada has granted leave to appeal an Alberta Court of Appeal decision, Ledcor Construction Limited, et al. v. Northbridge Indemnity Insurance Company, et al., that wrestles with this issue.

In its October 22, 2015 decision in Ontario Society for the Prevention of Cruelty to Animals v. Sovereign General Insurance Company, the Ontario Court of Appeal held that interpretation of insurance contracts is an "exercise involv[ing] the application of a legal principle of contractual interpretation in the context of insurance to the pleadings in issue, [therefore] a mixed question of fact and law is engaged." Deference was thus owed to the Court below. For a unanimous Court of Appeal, Justice Pepall nonetheless highlighted uncertainty in the law in this area, explaining:

[32] In Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, the Supreme Court abandoned the historical approach that maintained that contractual interpretation engaged a question of law. Rothstein J. addressed the issue in the context of the interpretation of a joint venture agreement that was the subject matter of a commercial arbitration. At para. 50, he wrote: "Contractual interpretation involves issues of mixed fact and law as it is an exercise in which principles of contractual interpretation are applied to the words of a written contract, considered in light of the factual matrix." As such, issues of contractual interpretation generally attract a deferential standard of review: para. 52. Rothstein J. explained that a central purpose of drawing a distinction between questions of law and those of mixed fact and law is to limit the intervention of appellate courts to cases where the results can be expected to have an impact beyond the parties to the particular dispute: para. 51.

[33] Rothstein J. recognized that an extricable question of law may be identified...