Canada’s Supreme Court last week allowed nine Quebec insurers to proceed in three subrogation cases against the Quebec government related to the 1996 Saguenay floods—even though the actions were first launched more than 28 years ago.

Quebec’s Superior Court dismissed the insurers’ legal actions in 2022, deeming the insurers’ failure to move forward with the files for such a long period as “unreasonable and excessive.”

Quebec’s Court of Appeal overturned this ruling in June 2024, saying the laws cited by the lower court did not apply at the time, in part because the parties did not agree on how to proceed with the cases. The Appeal Court also gave weight to the complexity of the cases and found the Quebec government equally complicit in the long delay.

“…It was necessary to examine all the circumstances of the [insurers’] Abitibi-Price and Cascades [subrogation] cases to determine whether the preliminary dismissal of the applications in those cases was an appropriate remedy, particularly in view of the contribution that the [Quebec government parties] appear to have made to the procrastination that they denounced in extremis, more than a decade after they had been able to raise the issue of the time bar.

“This examination left no other choice but to agree with the [insurers], which entails the dismissal of the [Quebec government’s] motion to dismiss the [insurers’] appeal. Rigorous management at first instance should allow these proceedings, which have already lasted too long, to be brought to an end within a reasonable time.”

In 1996, more than eight feet of water flooded parts of Chicoutimi and La Baie in Quebec, killing 10 people and levelling an entire neighbourhood, completely destroying 488 homes and damaging another 1,230. At the time, insured damages estimates were in the $1.5-billion range.

Nine insurers — Zurich, Affiliated, AIG Insurance Company of Canada, Aviva Canada, FM Global, Lloyd’s, Intact, Allianz Global, and Westport — all collectively paid more than $100 million in commercial claims related to the flooding in Saguenay, Que., in 1996.

“After compensating the insured companies, the insurers each brought, between 1997 and 1999, an action in subrogation against the applicants — the Attorney General of Quebec (AGQ) and the Société québécoise des infrastructures (SQI),” the Supreme Court summarizes in its decision Mar. 7. “Following a long period of inactivity, during which [Quebec’s] Code of Civil Procedure underwent two significant reforms, the AGQ and the SQI filed an application to have the presumed discontinuance of the insurers’ lawsuits confirmed. “

In siding with the Quebec government, the Superior Court blasted the delay in its decision.

“A review of the delays incurred clearly shows that they are indefensible in light of the evidence submitted,” the lower court judge ruled in 2022. “More than 20 years have passed without the mere production of a defence being required…

“The court has no doubt that a great deal of work may have been done in discussions, negotiations and research of all kinds, but nothing justifies or explains the absence of useful procedures over such a long period. This delay is manifestly unreasonable and excessive. It is not justified in law or in fact.”

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The insurers successfully appealed the decision at the Appeal Court, which took a different direction. It noted the context of the delays, which included ongoing class action litigation, as well as the highly complex nature of the research and evidence the insurers were required to do.

Such research included several hydraulic dam studies, retaining geological experts on the failure of a pumping station during the flood, a study of the intermediate contributions of the Rivière-aux-Sables and the Chicoutimi Rivers to the water overflow, a series of numerous alternative simulations of the management of the July 1996 flood, and obtaining meteorological opinions about the extent of the rainfall, among other things.

The Appeal Court determined the law governing the situation in 2016 required the two sides to  “agree to proceed according to the new rules” in place at the time. However, “a certain confusion appears to have reigned in the minds of all the parties as to what should guide them in the conduct of the proceedings,” the Appeal Court stated. “Thus, well before 2016, they were already uncertain about their respective obligations regarding the conduct of the proceedings in progress.

“The unsuccessful efforts made by some of the [insurers’] lawyers with the [Quebec government] respondents between 2004 and 2008 to establish a timetable, and the lack of reaction from the latter, confirm that the parties never managed to ‘agree to proceed according to the new rules.’”

What’s more, even though the laws in place allowed the Quebec government to move ahead and try to dismiss the proceedings for delay as early as 2003, it did not do so until 2019.

“This immediately raises the question of what their justification could be for waiting so long – approximately 33 months in the case of Abitibi-Price and Cascades [legal action], approximately 64 months in the case of [the] Alcan [legal action] – before reacting,” the Appeal Court found.

“…In the very particular circumstances of the case, it is difficult to resist the conclusion that the initiative taken by the [Quebec government] in May 2019, then in October 2021, constituted a major turnaround, a way of unilaterally and without trial liquidating a dispute that had been in preparation for a long time in full view of all those concerned.”

The Appeal court thus allowed the insurers’ motion, which the Supreme Court upheld, moving the matter back to the Quebec Superior Court.

 

Feature image courtesy of iStock.com/Zffoto