February 13, 2020 by Jason Contant
If your client wants to be covered under a professional fees endorsement, must these fees be required by the insurer?
The question was put to the Ontario Superior Court of Justice recently. Ontario Superior Court Justice David Edwards found that, depending on the wording in the policy, professional fees need only be required to prove an insured loss – not required by the insurer – to be covered. Edwards thus sided with a church against its insurance carrier, Intact Insurance Company.
The case arose when a fire broke out in February 2019 on the premises of Welland Brethren in Christ Church, which was insured by Intact. Intact retained EllisDon to prepare a “scope” document and then obtained three quotes – ranging from approximately $1.3 million to $1.9 million – from contractors to perform work.
The church was concerned that it lacked the expertise to critique EllisDon’s scope and wanted to hire professionals to assist them. It retained a professional quantity surveyor, Lakeland Consulting Inc., to assist it in critiquing EllisDon’s scopes; their fees were more than $22,000. Lakeland concluded the appropriate estimate was about $2.3 million.
The church said a policy endorsement extended coverage for those professional fees. Intact disagreed, taking the position that only the fees of professionals that the insurer requires are covered. The church argued before court that, “provided it retains a professional to obtain the particulars that Intact requires, then the insurance policy provides coverage,” as Justice Edwards wrote in Be In Christ Church of Canada O/A Welland Brethren in Christ Church v. Intact Insurance Company, released Dec. 20, 2019.
In interpreting the policy wording, Justice Edwards found that “it is the particulars of the loss that is required by the insurer and not the professional’s services or their fees.”
Under the policy’s Summary of Coverages, “Professional Fees” is listed under a basket section that collectively had a total limit of $500,000 coverage for each occurrence. The critical wording is as follows:
This Form is extended to cover reasonable fees charged by auditors, accountants, lawyers, architects, surveyors, engineers or other professionals retained by the Insured, for the purpose of producing or certifying particulars or details of the Insured’s business and that are required by the Insurer in connection with loss or damage caused to insured property by an insured peril.
This extension only applies to necessary and reasonable fees paid to professionals for producing and certifying any information that may be required by the Insurer in order to arrive at the loss payable under this Form.
This Extension does not include the fees and costs of public adjusters.
Justice Edwards said he had to determine if the provision was ambiguous; and, if so, what is the correct interpretation under the general rules of contract construction?
“I find that the provision is ambiguous,” Edwards ruled. “Read literally, it could mean that it is the fees and not the services of the professionals that are required by Intact that are covered. Read another way, it is the particulars or details of the insured’s business that is required by Intact, and coverage is for fees of professionals retained by the insured to obtain this information.”
The court noted that the church has been paying a premium for this coverage and does not have the expertise to deal with a significant loss such as caused by the fire. “It is reasonable that it expected that this provision provided it with coverage to retain experts to assist in such a situation. It is also reasonable that Intact would expect that the church might require such assistance and for which it purchased insurance coverage and paid a premium to Intact.
“…When one considers the reasonable expectations of the parties and the language of the policy as a whole, I am satisfied that the provision is intended to cover professional fees incurred by the insured…”
Edwards also noted that the third paragraph of the policy provision specifically excludes public adjusters. “Why would they be excluded if the discretion lies with the insurer as to which professionals the insured may retain, and for which there is coverage?” Edwards asked.
He ordered Intact to pay the church $22,588.70 – the fees of the quality surveyor.
Canadian Underwriter has heard that professional fee coverage wordings are fairly standard in the industry, and insurers often taken the position taken by Intact in this case.
Intact was asked for comment on the decision or if they plan to appeal, but said they will not be sharing any details as this is still an open claim.