Executive Summary: Key Legal and Evidentiary Issues

• Scope of the insured’s duty to cooperate under article 2471 C.c.Q., given delayed production of invoices and supporting documents during the COVID period.
• Characterisation of the Interra construction contract as an alleged false or misleading statement under article 2472 C.c.Q., and whether there was actual intent to deceive the insurer.
• Causation and proof of “mises aux normes” costs arising from municipal zoning, PIIA and construction requirements after a major fire loss.
• Interpretation of specific policy extensions (Clauses 1, 13, 15 and 19 E/H/K of Form 4342-03) for landscaping, ecological improvements, pavements/parking and by-law upgrade costs.
• Allocation of reconstruction and upgrade expenses between indemnifiable code-driven requirements and amounts already covered in the basic building indemnity paid on a replacement-cost basis.
• Treatment of contractor management/profit mark-ups and professional fees, including when such sums qualify as covered “management fees” or “honoraires des vérificateurs (biens)” at the insurer’s request.

Background and parties

Fiducie Verronneau is an investment trust represented by Christian Verronneau and Robert Jutras. It owned a mixed-use immovable in Saint-Sauveur, Quebec, comprising three residential units upstairs and three commercial units on the ground floor. The building was about 100 years old, with mixed stone and concrete foundations, and had undergone multiple renovations over time. It was insured for property damage and related extensions by Promutuel Boréale, later merged into Promutuel Alta, under a commercial policy including a “Bâtiment” section and several important extensions such as coverage for trees and landscaping, ecological improvements, pavements and parking, and a global extension (Clause 19) for legal and zoning-driven upgrades, debris removal and professional fees. On 13 October 2017, the building was severely damaged by fire. The following day, Mr. Verronneau notified the insurer and met with its adjuster, Luc Dulude. He was instructed to secure the site, choose a general contractor for the rebuild and consider appointing his own adjuster, and to provide municipal contacts. The trust used its related company, 3096-6451 Québec inc., to handle emergency board-up. Over the next months and years, the claim evolved into a dispute over the extent of covered reconstruction and upgrade costs, alleged deficiencies in cooperation, and an alleged misrepresentation of construction arrangements.

Municipal requirements and reconstruction process

Because of the fire damage, the City of Saint-Sauveur soon indicated that the building had suffered a loss in excess of 50% of its value and that any reconstruction would be subject to PIIA (plan d’implantation et d’intégration architecturale) controls and approval by the urban planning advisory committee (CCU). Meetings with municipal officials in early 2018 highlighted several requirements: the city did not want front-yard parking on the main street; parking should be moved to the rear; and the new construction had to present quality architecture consistent with the original building and surrounding heritage environment. An initial reconstruction proposal that essentially reproduced the former footprint and front parking arrangement was formally refused in March 2018. The city required the building to be moved forward, aligned with neighbouring structures on rue Principale, and the parking shifted to the back. This shift triggered the need to demolish and redo the rear foundation and to redesign the whole site. The insurer’s adjuster, Miriam Marchand, was informed of these municipal refusals and requirements and acknowledged at trial that she knew the insured was facing difficulties with the city. The city also imposed additional conditions regarding semi-buried refuse and recycling containers, landscaping, and an on-site water management system through catch basins and retention structures to prevent runoff into municipal sewers and a nearby river. To comply with these demands, the trust retained a designer and then an architect, Patrice Germain, to prepare PIIA-compliant plans. A new implantation plan was accepted in June 2018. A demolition permit issued in July 2018 and a building permit followed in October 2018, based on plans estimating reconstruction at around $500,000. The building’s original area was maintained but its siting and several site works changed substantially.

Insurance payments and evolving dispute

In November 2018, the trust appointed Interra as general contractor and advised Ms. Marchand accordingly. In December 2018, Promutuel paid the trust $511,286.64, representing the building’s actual cash value at the date of loss plus demolition, less a prior advance. The insurer reiterated that documentation would be required to determine entitlement to replacement-cost benefits and to certain policy extensions. To facilitate financing, the trust signed a construction contract with Interra at the end of 2018. From early 2019, Ms. Marchand followed up mainly on loss-of-rents documentation. In April 2019, the insured sent a detailed email regarding code upgrades and municipal requirements and provided the building permit plans. In July 2019, at Ms. Marchand’s request, the Interra contract was forwarded. Owing to the corporate transition from Boréale to Promutuel, Ms. Marchand admitted she essentially took no steps in response to that contract: she did not contact Interra, did not visit the site or instruct another professional to do so. Instead, in November 2019, when reconstruction was almost complete, she wrote to Mr. Verronneau stating that the insurer was still waiting on documents “if you decide to rebuild,” warning him about prescription delays and mentioning potential subrogation against an allegedly responsible tenant. The insurer later paid an additional amount (about $15,891.52) for loss of rental income in December 2019, again reserving its position on the timeliness of reconstruction. In March 2020, the trust received what the court described as full building indemnity, including an inflation provision and an amount under Clause 19 H for demolition and loss of rents, totalling $754,194.46. This comprised $651,264.88 for building reconstruction and demolition, $54,371.40 under Clause 19 H (demolition) and $48,558.19 for rental losses. The payment represented replacement-cost coverage subject to policy limits, but did not include separate amounts for “mises aux normes” by-law upgrades. The trust then sought to recover additional sums under various extensions, totalling about $286,732.23, mainly under Clause 19 (legal requirements and related costs), ecological improvements, landscaping and paving. The insurer opposed, alleging untimely document delivery and misrepresentation.

Alleged lack of cooperation and article 2471 C.c.Q.

Promutuel argued that the claim should be denied because the insured failed to collaborate properly, especially by providing supporting invoices only much later, many after February 2022 and almost a year after proceedings were filed. It invoked article 2471 C.c.Q. on the insured’s duty to answer questions, provide documents and facilitate information gathering. The court revisited the principles from Intact Assurances c. Centre Mécatech and Promutuel Assurance Boréale c. McKnight: the duty is one of good-faith, substantial cooperation; imperfect or delayed responses do not in themselves cause forfeiture unless the insurer proves bad faith and resulting prejudice. Assessing the evidence, the judge found that the trust did collaborate. Mr. Verronneau and Ms. Marchand were in frequent contact during the rebuild, even when he was travelling. The delays in compiling a detailed Excel spreadsheet and collecting third-party invoices during the pandemic were credibly explained by telework and dispersed documentation. Key summary information on upgrade themes was sent in January 2021, followed by a package of documents in March 2021. On 24 March 2021, Ms. Marchand herself advised she would not be able to analyse the new material before the limitation date; the insured then filed suit in April 2021. The court further noted that the insurer had long possessed enough information to verify the alleged upgrades: it had the city’s requirements, contact details for municipal officials, the accountant, and the general contractor, and could have ordered site inspections but did not. There was no concealment and no demonstrated prejudice. The allegation of non-cooperation under article 2471 C.c.Q. was therefore rejected.

Alleged false declaration and article 2472 C.c.Q.

Promutuel also contended that the Interra construction contract sent in July 2019 was a false declaration within the meaning of article 2472 C.c.Q., because the actual financial and contractual arrangements had changed and certain terms in the written contract no longer reflected reality. Relying on Court of Appeal guidance in Boiler Inspection c. Moody Industries and subsequent jurisprudence, the judge emphasised that not every inaccuracy is a “mensonge” that triggers forfeiture: the insurer must displace the presumption of good faith, proving a deliberately false assertion intended to deceive and obtain benefits to which the insured is not entitled. In this case, even if the written Interra contract had been modified in practice, the trust’s final claim was based on the real, modified arrangements as evidenced by underlying invoices and not on the literal contract wording. There was no attempt to inflate or double-collect amounts already included in previous payments. The insurer did not establish any fraudulent intent or actual deception. As a result, there was no “déclaration mensongère” under article 2472 C.c.Q., and no forfeiture of coverage.

Key policy terms and extensions at issue

The dispute turned heavily on the interpretation and application of several specific clauses in the 4342-03 and 4342-02 endorsements added to the commercial property form 5305-03. First, Clause 1 of Form 4342-03 extended coverage, up to $10,000 per loss, to direct damage to trees, shrubs, lawns and natural plants on the insured premises, including debris removal. The court stressed the requirement of “dommages directement occasionnés” by a covered peril and the policy’s definition of “sinistre” as an event causing damage directly. Second, Clause 13 provided “améliorations écologiques” coverage: where insured property was damaged or destroyed by a covered loss, the indemnity could be increased—up to 10% of the building and contents indemnity, capped at $50,000—to reflect the use of environmentally responsible materials or energy-saving installations in repair or replacement. Third, Clause 15 extended building coverage, up to $25,000 per loss, to damage from a covered peril affecting driveways, sidewalks and parking areas on the insured premises. Fourth, and most importantly, Clause 19 of Form 4342-03 set out a basket of “garanties supplémentaires,” with a global limit of $250,000 per loss, including: Clause 19 E (legal provisions on construction and zoning), covering the cost of demolishing undamaged portions of a building and extra costs of repair or reconstruction necessary to comply with current laws and by-laws; Clause 19 H (debris removal); and Clause 19 K (honoraires des vérificateurs – biens), reimbursing fees of certain professionals—accountants, architects, lawyers, engineers and appraisers—incurred at the insurer’s request to produce or certify documents used to determine the indemnity. The base building coverage was already paid on a replacement-cost (“valeur à neuf”) basis, defined as the least expensive of repair or replacement with new property of like nature and quality or, if unavailable, equivalent property performing the same function, without deduction for depreciation. This definition was critical in distinguishing what had already been captured in the building indemnity from true “mises aux normes” or additional costs solely triggered by current legal requirements.

Disputed upgrade heads of claim

The trust’s post-indemnity claim of about $286,732.23 (before tax) covered four broad categories: landscaping and natural vegetation; ecological improvements; pavements, sidewalks and parking; and a large package of by-law-driven upgrade costs under Clause 19 E, H and K. On landscaping, the court denied recovery under Clause 1. The judge accepted the insurer’s expert evidence that there was no direct fire damage to the trees and shrubs and noted that Google Earth photos and the expert’s on-scene observations contradicted Mr. Verronneau’s more expansive description of burnt vegetation. Some trees may have been scorched or removed during excavation, but that did not satisfy the requirement of damage “directly” caused by the fire. The $10,000 limit was in any event reached and no further amount was warranted. As for ecological improvements, the trust sought the maximum $50,000 (plus indexation) largely for the cost of installing semi-buried refuse and recycling containers and for the new stormwater management system. The court found that the semi-buried containers did not qualify under Clause 13. While they were environmentally responsible, the policy language presupposed replacement of damaged insured property with “greener” equivalents. Here, there was no proper proof of the price of replacement wheeled bins (the pre-loss solution), and the insured had in fact chosen a different configuration, partly to preserve parking spaces. Nor did the evidence establish that the city had legally required semi-buried containers; rather, the trust had withdrawn a request for a zoning variance on bins in exchange for authorisation of an extra dwelling unit. Professional fees linked to servitudes and design for those containers also fell outside Clause 19 K because they were not incurred at the insurer’s request. By contrast, the court accepted that the stormwater retention basins and related works were clearly mandated by the zoning by-law, which required on-site drainage and favoured retention structures or similar devices before water reached the municipal system. These costs were therefore allowed, but not under Clause 13; instead, they were covered as “mises aux normes” under Clause 19 E, i.e., increased reconstruction expenses caused by compliance with current legal standards. The court embraced the insured’s expert architect’s view that associated concrete borders formed an integral part of the drainage system and should be included, rejecting the insurer’s more restrictive evaluation.

Pavements, parking and prior demolition payments

Regarding Clause 15 (pavements/sidewalks/parking), Fiducie Verronneau claimed about $20,457.21 for entirely re-doing parking at the rear—fresh asphalt, curbs and line-marking—because the front parking had to be eliminated and the building moved forward. The insurer’s expert argued that its earlier demolition/reconstruction payment had already contemplated some repair of paved areas necessitated by the building’s removal and that only a portion of the additional costs was attributable to the relocation and municipal alignment requirement. The court accepted this reasoning in part, finding that the insurer had already paid for basic restoration and that only the additional incremental amount caused by the zoning-imposed relocation fell under Clause 15. It therefore allowed only $5,319.20 plus 43% tax under this clause, deducting the portion already effectively indemnified in the building payment. A similar exercise was undertaken for the rear foundation. Promutuel argued that the existing slab could have been reused and that substantial amounts for its demolition had already been paid under building coverage. The judge preferred the evidence of the architect and the trust’s evaluator, who explained that rebuilding on the old slab would have required engineering input, significant reinforcing and insulation against frost, thus being more expensive and less appropriate, especially given the mandated relocation. The court also noted that some excavation served to create a new basement not previously present and split the costs accordingly, allowing only the half genuinely attributable to mandatory upgrades. The resulting sum of $24,385.74 plus 43% tax was accepted as a Clause 19 E “mises aux normes” expense, over and above the amounts already paid.

Technical trades, utility relocation and architectural integration

The court then assessed a cluster of mechanical, electrical and other trade-related invoices that Promutuel had agreed could be compensable if they were in truth code-driven upgrades rather than betterments. These included plumbing work by Plomberie Bentech, electrical work by Les Entreprises Serge Fortin and Conception Électrique 2000 (with a deduction for purely temporary supply arrangements), and the cost of relocating Hydro-Québec overhead lines and securing the site. The insurer had objected to the Hydro-Québec invoice as a basic building expense, but the judge held that the line relocation was a direct consequence of the building’s displacement demanded by municipal authorities and therefore fell squarely within Clause 19 E. In total, the court found that $48,852.34 plus 43% tax represented genuine “mises aux normes” to meet updated construction and safety requirements. Another contested head was “intégration architecturale” under the PIIA. The trust sought reimbursement for masonry, stonework, flower boxes and façade treatments intended to ensure the reconstructed building fit the heritage streetscape. Promutuel criticised the supporting invoices as insufficiently detailed and partly already captured in the base reconstruction price. Relying on the architect’s testimony and the approved architectural plans, which specifically showed the decorative elements required for PIIA approval, the court accepted that these costs were properly attributable to PIIA-driven integration and allowed $7,786 plus 43% tax as additional Clause 19 E by-law compliance expenses.

Management fees, profit margins and professional fees

A significant monetary issue concerned the trust’s attempt to add 10% management fees and 10% profit on top of numerous subcontractor invoices, reflecting work supposedly done by 3096, its related construction company. The insurer’s expert opined that pre-pandemic market norms were more modest (about 8% for management and 3% for profit), and highlighted that the insurer had already paid a flat amount to Interra (about $75,000) for project management and profit as part of the building indemnity. The court took an even stricter view: it found that 3096 had no RBQ licence, had not acted as general contractor, and that the subcontractors invoiced the trust directly. There was no distinct, written project management contract between 3096 and the trust. The judge therefore treated the claimed management/profit mark-ups as an attempt to layer new percentages on top of sums already indemnified through Interra’s forfait. These add-on percentages were disallowed entirely. Finally, the court examined professional fees sought under Clause 19 K. The trust had engaged Groupe GPS Gestion ProAssuré to assist in estimating damages, verifying invoices and addressing the upgrade component of the claim. Crucially, the evidence showed that these services were requested by the insurer’s own adjuster, Mr. Dulude, as part of information gathering. Since Clause 19 K covers reasonable professional fees incurred at the insurer’s request to prepare or certify documentation for determining the indemnity, the court concluded that $15,000 plus 43% tax was payable under this head. By contrast, other professional fees, such as notarial work to create servitudes for semi-buried containers and certain design services for those containers, were not recoverable under Clause 19 K because they were not requested by the insurer and fell outside the qualifying categories or heads of coverage.

Outcome and financial consequences

After sifting through each head of claim and offsetting amounts already effectively indemnified in the earlier building and demolition payments, the Superior Court concluded that Fiducie Verronneau had discharged its burden of proof on entitlement to further indemnity under the policy’s extensions, except for the items specifically rejected (notably tree/landscape damage, ecological coverage for semi-buried containers and additional management/profit mark-ups). The defences based on alleged lack of cooperation and alleged misrepresentation failed for want of proof of bad faith, intent to deceive or actual prejudice to the insurer. The judgment therefore allowed the amended action, condemned Promutuel Alta to pay Fiducie Verronneau $132,527.63 plus 43% applicable taxes, together with interest and additional indemnity from 15 February 2022 and an award of costs including expert fees, while noting that the exact final total for taxes, interest, additional indemnity and costs could not be precisely quantified in the reasons themselves.