Executive Summary: Key Legal and Evidentiary Issues

• Scope of the insurer’s defences limited by its initial denial letter and the principle that new grounds (nullity/résiliation) cannot be raised later when they were known from the outset.
• Characterisation of the change from owner-occupant to non-occupant as an aggravation of risk rather than an excluded risk, triggering proportional indemnity under article 2411 C.c.Q.
• Assessment of the insured’s good faith and the absence of fraudulent intent despite his failure to update the insurer when he fully vacated the premises.
• Use of internal underwriting evidence to prove the insurer would have accepted the real risk at a higher premium, thereby supporting application of the proportional rule instead of nullity.
• Insufficient presumptions to show the tenant was the thief, given strong physical evidence of forcible entry inconsistent with a lawful key-holder and the standard of “graves, précises et concordantes” presumptions.
• Automatic default of the insurer under article 2473 C.c.Q., entitling the insured to legal interest and additional indemnity from 19 October 2020 for late payment.

Facts of the case

Daniel Desloges owned a residential property insured with Société d’assurance Beneva inc. (formerly La Capitale) under a home insurance policy in force from 2 October 2019 to 2 October 2020. The policy’s declarations described the risk as that of a “propriétaire occupant” (owner-occupant). In practice, however, Mr. Desloges had been renting out space in the property for several years. He testified that as early as 2015 he informed a representative of the insurer of his plan to rent part of the residence and was told that no change to the policy was needed. In 2018, he again contacted the insurer to advise that he would be renting the house furnished while keeping a pied-à-terre; an employee confirmed that this did not affect his coverage but asked him to notify the insurer if the situation changed. A lease with tenant Mathieu Poitras was signed in February 2018. By May 2020, Mr. Desloges no longer occupied the property at all. He did not advise Beneva at that precise moment that he had fully vacated, even though this change from owner-occupant to non-occupant amounted to an aggravation of risk under the policy’s general conditions and the Civil Code.

Around 10 August 2020, Mr. Desloges discovered that the property had been burglarised and vandalised. The police report documented extensive damage: doors were kicked in, locks were missing, frames were split, and one garage door had even been sawn through. The report also confirmed that a tenant, Mathieu Poitras, had been living there in the days before the incident. Mr. Desloges filed an insurance claim with Beneva for 25,143.73 CAD, representing the value of stolen and damaged property. Beneva did not dispute the quantum of loss but questioned coverage.

The insurer’s denial and evolution of its position

On 12 January 2021, Beneva formally denied coverage. In that letter, it relied primarily on a contractual exclusion for theft committed by a tenant and, in the alternative, invoked article 2411 of the Civil Code of Québec, arguing that the presence of a tenant was an aggravation of risk that would have required a higher premium. The denial letter also contained a boilerplate reservation of rights clause, stating that the insurer reserved the right to invoke other grounds for non-coverage later. It did not allege that the policy was null, nor that it had been or should be treated as cancelled or rescinded.

By the time of the small claims hearing, Beneva’s defence had shifted materially. Its representative argued that the policy should be considered null or deemed resiliated because the insured was no longer an owner-occupant but a non-occupant landlord at the time of the loss. In the alternative, Beneva maintained its original position that the theft was committed by the tenant and thus fell under the specific exclusion.

Policy terms and the nullity/resiliation argument

The court began by examining whether Beneva could, at trial, rely on nullity or resiliation of the contract. Québec case law and doctrine impose on insurers a duty to clearly set out the grounds on which coverage is denied in the initial denial letter. When an insurer knows of a potential defence and fails to raise it in its denial, it is generally presumed to have waived that ground and may be precluded (forclos) from raising it later. In this case, the facts showing that Mr. Desloges no longer lived in the residence were known to Beneva during the original investigation: he had so stated in his examination with the adjuster, and the police report also recorded that the premises were occupied by a tenant rather than the owner. Yet the letter of 12 January 2021 did not allege nullity or resiliation and instead relied on a tenant-theft exclusion and on aggravation of risk.

The court held that the generic reservation-of-rights clause could not be used to cure this omission. At most, such a clause might preserve the ability to rely on facts genuinely unknown when the letter was drafted. Here, Beneva already knew of the change in occupation and could have pleaded nullity but chose not to. In addition, an insurer seeking nullity of a contract of insurance is expected to tender back the premiums it received; Beneva had made no such offer. The combination of failing to mention nullity in the denial letter, having full knowledge of the relevant facts at that time, and not offering premium restitution led the court to reject outright the nullity/resiliation defence.

Aggravation of risk and application of article 2411 C.c.Q.

The court then turned to the core issue of aggravation of risk. A shift from owner-occupant to non-occupant is a classic aggravation: a non-occupied, rented dwelling is generally considered a different and higher risk than a home occupied by its owner. Under article 2466 C.c.Q. and the policy wording, such a change must be disclosed to the insurer. Article 2411 C.c.Q. provides the regime for the consequences in property insurance when the real circumstances would have entailed a higher premium: absent bad faith or proof that the risk would have been refused, the insurer remains bound, but the indemnity is reduced proportionally to the ratio between the premium actually paid and the premium that should have been charged.

On the question of good faith, the court found no evidence of fraudulent intent by Mr. Desloges. His earlier disclosures in 2015 and 2018 about renting, and the insurer’s express assurance that coverage remained intact, supported an inference of transparency and good faith. His failure to notify the insurer specifically when he fully vacated in May 2020 was a lapse in his duty to declare an aggravation, but not a deliberate scheme to mislead.

The more technical question was whether Beneva would have accepted the risk at all had it known the true circumstances, or whether this was a prohibited risk that would have led to total refusal and nullity. In support of its position, Beneva produced an internal email exchange where, after the loss, its underwriting staff evaluated the scenario of a non-occupant owner. That analysis clearly showed that Beneva would have agreed to insure Mr. Desloges as a non-occupant landlord until renewal, provided he paid a higher premium. Specifically, the premium actually charged was 1,746 CAD, while the appropriate premium for the real risk would have been 2,942 CAD. This evidence distinguished the case from decisions such as Dang and Haché, where the insurers proved that the type of risk at issue (e.g., permanently unoccupied property or other prohibited categories) would never have been underwritten.

Given that Beneva’s own documents confirmed it would have accepted the risk, the court concluded that the situation involved an aggravation of risk, not an excluded or prohibited risk. Since there was no bad faith and the risk would have been covered at a higher price, article 2411 C.c.Q. mandated application of the proportional rule. The ratio between the paid and proper premiums (1,746 / 2,942) produced a percentage of 59.35%. Applied to the established loss of 25,143.73 CAD, this yielded a compensable amount of 14,922.80 CAD. The court therefore fixed the insurer’s indemnity at that reduced figure.

Exclusion for theft committed by a tenant

Beneva’s secondary defence rested on a policy clause excluding coverage when the theft is committed by a tenant. Under Québec law, the insurer bears the burden of proving facts that justify an exclusion, on a balance of probabilities. Where there is no direct evidence, it may rely on presumptions of fact, but those presumptions must be serious, precise and concordant, not speculative.

In this case, the circumstances did not meet that standard. Beneva argued that the theft occurred shortly after Mr. Poitras left the premises and his Hydro-Québec account was terminated, suggesting he was the likely culprit. The court acknowledged that this timing was suspicious but found it insufficient, by itself, to establish that the tenant was the thief; it was equally plausible that once the tenant left, the property was left vulnerable and third parties took advantage.

The tenant did have keys while he lived there, but the physical evidence undermined the theory that he was the author of the break-in. The police report described significant forcible entry: a main door with the lock gone and the handle dented as if struck with a hammer-like object; a garage door kicked in with the wooden frame shattered despite a padlock; and another garage door that had been sawn through. The court found it illogical that a tenant with legitimate keys would batter and cut his way into the property instead of simply unlocking the doors. These visible marks of forced entry were more consistent with an outsider breaking in than with a lawful key-holder staging a burglary.

Furthermore, the police closed their file for lack of evidence connecting Mr. Poitras to the crime, and even Mr. Desloges, despite harbouring suspicions, admitted that he had no proof tying the former tenant to the theft. In the absence of serious, precise and concordant presumptions pointing to the tenant as the author, Beneva could not satisfy its evidentiary burden. The tenant-theft exclusion was therefore held inapplicable.

Interest, additional indemnity and final outcome

The court then addressed the timing of payment and the insurer’s default. Under article 2473 C.c.Q., an insurer must pay the indemnity within 60 days of receiving the notice of loss or all requested complementary information. After that deadline, it is in default by operation of law and liable for legal interest and the additional indemnity provided by article 1619 C.c.Q. In this case, the loss was declared on 11 August 2020, and Mr. Desloges was examined on 18 August 2020. There was no evidence of any further information requests. The 60-day clock therefore began on 18 August 2020 and expired on 19 October 2020 (with the weekend adjustment). From that date onward, Beneva was in default.

In its operative orders, the Small Claims Division of the Court of Québec partially allowed the claim. It condemned Société d’assurance Beneva inc. to pay Daniel Desloges 14,922.80 CAD as the proportionally reduced indemnity under the policy, together with legal interest and the additional indemnity under article 1619 C.c.Q. running from 19 October 2020 until full payment. The court also awarded him 223 CAD in court costs (filing fees). As a result, the successful party in the litigation was Mr. Desloges, who obtained a total fixed monetary award of 15,145.80 CAD in principal and costs, plus unquantified legal interest and additional indemnity from 19 October 2020, the exact amount of which cannot be determined from the judgment alone because it depends on the date of actual payment.