Executive Summary: Key Legal and Evidentiary Issues

• Prescription was the first ground for dismissal: the insurer argued that a claim filed on November 7, 2024 was time-barred because the water damage occurred on April 20, 2017.
   
• The court held that the insurer’s own October 5, 2020 lawsuit against the condo owner interrupted prescription under article 2899 C.C.Q. rather than suspending it under article 2904 C.C.Q.
   
• Under article 2903 C.C.Q., the three-year period restarted on September 15, 2022, when the Release and Transaction was signed, so the claim was filed in time.
   
• A mutual full and final release in paragraph 8 of that settlement was the insurer’s second ground for dismissal.
   
• Identity of parties, cause and object between the two proceedings led the court to treat the settlement as a bar to the owner’s claim.
   
• Evidence in the record did not support the owner’s contention that it had been paid as a general contractor mandated by the insurer rather than as owner of unit 302.
   

Facts of the case

BBC Construction developed a 30-unit condominium project owned by the Syndicat de la copropriété Solar II, delivered the units in 2012, and kept ownership of unit 302. On April 20, 2017, water damage struck unit 302 and also damaged units 102, 103 and 202. Desjardins Assurances Inc. insured the building under a policy issued in favour of the syndicate and estimated the damage to unit 302 at $16,486.43. Being a general contractor, BBC chose to do its own repairs, while the insurer hired a contractor for the other three units.

The insurer paid BBC $9,013.47 on August 9, 2017. According to the decision, that figure was the depreciated damage amount of $14,013.47 less the policy’s $5,000 water-damage deductible. The deductible was applied to BBC because it was the first party indemnified. By email in October 2017, BBC told the insurer there was a shortfall of $7,472.96.

In a lawsuit filed on October 5, 2020 in the Court of Québec, Regular Division, the insurer sued BBC and its liability insurer, among others, holding BBC responsible for the damage to the other units. It sought reimbursement of $64,944.26 in indemnities, a figure that included the $9,013.47 paid to BBC. That litigation ended with a Release and Transaction signed on September 15, 2022.

BBC filed a small claims action against the insurer on November 7, 2024, seeking $12,472.96. Its claim was calculated as the $16,486.43 estimate, less the $9,013.47 payment, plus the $5,000 deductible that BBC said had been deducted without right. In response, the insurer applied to have the claim dismissed as inadmissible on two grounds and, on April 21, 2026, brought the syndicate into the file by way of forced intervention. Although its building manager confirmed receiving the proceedings and exhibits, the syndicate filed no contestation and did not attend the June 22, 2026 hearing, and the court proceeded in its absence at the parties’ request.

Policy and legislative provisions at issue

The syndicate’s policy set a $5,000 deductible for “loss for damage caused directly or indirectly by water damage.” On the merits, and only in the alternative, the insurer argued that a $2,472.96 deduction for depreciation would have been payable on receipt of an invoice for the work, which does not appear to have been received. It also relied on the policy’s mould exclusion, arguing that $2,500 claimed for mould testing was not recoverable and should be paid by the syndicate.

The settlement resolved two Court of Québec files and identified BBC as “Building Best Condos Inc.” Its defined defendants, BBC, Tai Feng and Intact Compagnie d’assurance, agreed to pay $31,755 to Desjardins, $8,265 to La Personnelle and $3,480 to La Garantie, each amount covering capital, interest, costs and additional indemnity. Paragraph 8 gave all parties, together with their insurers and other related persons, a full and final release of any claims, past, present or future, “based directly or indirectly on the facts alleged in the proceedings” and on the documents filed or communicated in both files. A further clause, paragraph 9, states that the settlement was made without any admission of liability.

On prescription, the court applied article 2925 of the Civil Code of Québec, which sets a three-year period for actions to enforce a personal right or movable real right where no other period is fixed. The court counted this as 1,095 days and added 170 days for the COVID-19 suspension of prescription from March 2020. Article 2899 provides that a judicial demand interrupts prescription, and article 2903 restarts the same period after an interruption. Suspension under article 2904, by contrast, applies only to persons who are in fact unable to act. For the settlement, the court turned to article 2631, which defines a transaction as a contract that prevents or ends a dispute through mutual concessions or reservations, and article 2633, which gives a transaction the authority of res judicata between the parties.

Reasoning and analysis

The insurer bore the burden of proving prescription or the settlement bar, while BBC had to show that its claim was timely and not foreclosed by the settlement. On the first ground, the court rejected the insurer’s position that its 2020 lawsuit had only suspended prescription. Nothing had prevented BBC from suing concurrently with the insurer’s action, so article 2904 did not apply. Instead, the 2020 lawsuit interrupted prescription from October 5, 2020 until the settlement was signed on September 15, 2022, after which the period restarted from zero. Because BBC filed less than three years after September 15, 2022, the prescription argument was dismissed.

The settlement argument succeeded. In the court’s view, its terms were unequivocal, and BBC already knew when it signed that the insurer had allegedly failed to pay it $12,472.96. Both proceedings involved the same parties and rested on the same policy and the same April 20, 2017 water damage, with the insurer’s earlier suit characterized as a legal subrogation claim under that policy. Finding identity of parties, cause and object, the court concluded that BBC’s new claim was based directly or indirectly on facts alleged in the earlier proceeding and fell within the mutual release in paragraph 8.

BBC’s contention that the insurer had paid it as a general contractor mandated by the insurer also failed. According to the exhibits, the payment went to BBC as owner of unit 302, and the court found the contention unsupported by the evidence as a whole.

Ruling and overall outcome

In BBC Construction c. Desjardins Assurances inc., 2026 QCCQ 4656, the Court of Québec, Small Claims Division, granted the application to dismiss and rejected BBC Construction’s claim, leaving Desjardins Assurances Inc. as the successful party. No amount was awarded to the insurer, and given the particular facts of the case, each party was ordered to bear its own legal costs. The decision does not address the insurer’s alternative arguments on depreciation and the mould exclusion, since a hearing on the merits was to be held only if the application to dismiss failed.