Nova Scotia court grants motion to determine insurance coverage issue, although facts remain in dispute

Using a new procedural rule designed to expedite proceedings, the Supreme Court of Nova Scotia has allowed an insurance case to proceed to determine “a question of law” – i.e. whether an insurance policy coverage limit was $400,000 or $19 million – even though the plaintiffs and insurers disagree about facts relevant to the question.
In Maritime Steele and Foundries Ltd. v. Economical Mutual Insurance Company, the plaintiff, Maritime Steele, had a fire destroy one of its storage buildings and its contents on May 28, 2010. The foundry valued the lost contents to be worth $3.8 million.
The defendant insurers in the case, The Economical, Wawanesa Mutual Insurance Company, Lloyd’s Underwriters, as well as the insurance broker, Zive Insurance Ltd., noted the building was identified as ‘Location 1-E’ in the Schedule of Commercial Property Insured,’ which forms part of the policy. The insurers say the maximum amount available under the property at that location is $400,000.
Maritime Steele, however, relied on the provisions set out in the Declarations Page of the policy. Under ‘Section 1-Property, Glass, Boiler or Miscellaneous’ of the dec page, coverage under Property of Every Description (POED) is available for just over $19 million. Maritime Steele alleges it is owed the difference between $3.8 million and the $400,000 it received from the insurers.
Maritime Steele presented a motion for an order to proceed under Nova Scotia Civil Procedure Rule 12, which says a party may, “in limited circumstances, seek the determination of a question of law before the rest of the issues in a proceeding are determined, even though the parties disagree about facts relevant to the question.”
The “question of law” in this case would be whether the policy coverage limit was either $400,000 or $19 million.
The insurers opposed the motion, observing, among other things, that the plaintiffs were suing for breach of contract. They submitted the subjective intention of the parties in forming the contract would be part of the factual matrix required to determine the coverage issue.
The Supreme Court of Nova Scotia disagreed, citing 1993 case law in Wingtat Game Bird Packers Ltd. v. Aviva Insurance Company of Canada: “The factual matrix existing at the time the parties enter into the contract may be considered in interpreting the words of the contract, but the words of the contract must not be overwhelmed by a contextual analysis.”
The court went on to note ambiguity related to policy wording was not identified in the motions material or pleadings. It ultimately ruled in favour of proceeding under Rule 12.