Podcast: Appealing Briefs

Adam Goldenberg  00:00

Welcome to Appealing Briefs, a podcast with brief updates on cases from Canada's Courts of Appeal. I'm Adam Goldenberg. This episode briefs you on the Supreme Court of Canada's January 2026 judgment in Emond v. Trillium Mutual Insurance Company.

We'll talk about the implications of that decision for the whole of Canada's insurance industry. Before we begin, a brief disclaimer. This podcast contains legal information, not legal advice.

Adam Goldenberg  00:34

Now, let's start with a brief summary. In September 2018, the Emonds had their home insured by Trillium Mutual Insurance Company. In addition to a base policy, they paid for an additional endorsement or supplement for guaranteed rebuilding cost coverage.

Both the base policy and the endorsement had several important clauses. The base policy had a list of exclusions, which made it clear that the policy didn't cover any extra repair or replacement costs caused by the need to comply with a legal requirement. The endorsement said that Trillium would pay to repair or replace the Emonds' house using current building techniques.

Adam Goldenberg 1:19

The endorsement was accompanied by a second list of exclusions, which were mostly the same as those in the base policy, but which didn't mention costs due to legal requirements. The Emonds' house was on the banks of the Ottawa River, which flooded just seven months after the house was insured. The house was deemed a total loss.

Any rebuilding had to follow the development regulations of the Mississippi Valley Conservation Authority, which would make the rebuild more expensive. Trillium argued that the cost of following those regulations was a cost caused by a legal requirement and so the policy didn't cover it. The Emonds argued that the cost of using current building techniques included the cost of following the regulations.

The endorsement they paid for had its own list of exclusions, and that wasn't one of them. Now, the interpretation of insurance contracts has its own body of case law, which partly overlaps with but is not entirely the same as Canadian contract law in general. Insurance contracts are interpreted as set out in the Supreme Court of Canada's decision in a case called Ledcor from about a decade ago.

Adam Goldenberg 2:29

First, the insurer has to show that the damage or loss falls within the initial coverage. Second, the insurer has to show that an exclusion in the applies. And third, the insured has to show that there is an applicable exception to the exclusion.

Courts also approach ambiguities differently. If a term in an insurance policy has multiple reasonable but differing interpretations when read in the context of the policy as a whole, courts consider factors such as the party's reasonable expectations and, “the commercial atmosphere”, in which the agreement was formed. If that doesn't solve the ambiguity, the court applies the contra proferentem rule, choosing the interpretation more favourable to the insured.

This is because most property policies are standard form contracts drafted by the insurer.

The Emonds ultimately lost at the Supreme Court of Canada. A majority of the Court held that it was unambiguous that the endorsement, which covered the cost of using current building techniques, did not modify the base policy in any way, except by extending coverage beyond the amount of the Emonds’ insurance; therefore, the cost of complying with legal requirements was still excluded.  The Court held that the phrase “current building techniques” meant only modern construction methods, not legal requirements. Moreover, although the endorsement appeared next to a second list of exclusions, that was only because some of the possible endorsements covered additional types of property; when it came to the basic cost of repairing or replacing a house, the main list applied.

Adam Goldenberg 4:15

Although the Court had decided that the policy was unambiguous, they also held that the decision would have to be the same even if it were ambiguous. Although the standard principles of insurance contract interpretation dictated that ambiguous phrases had to be resolved in favour of the insured, the Court held that it would be unworkable to ask insurers to ascertain the compliance of every insured property with every applicable legal regime. 

Two judges, however, disagreed. Justice Karakatsanis held that it was ambiguous whether the exclusion covered the costs of complying with legal requirements up to the time the insurance was purchased; Justice Côté, on the other hand, held that it was ambiguous whether the phrase “current building techniques” in the endorsement included the cost of complying with legal requirements. Both judges would have resolved these ambiguities in favour of the Emonds based on standard interpretation principles, and both dissenting judges additionally held that there was nothing unreasonable about asking insurers to assess and cover the additional costs. 

Adam Goldenberg 4:55

So, what does the Emond case mean for how Canadian courts interpret the standard-form contracts that are common to insurers across Canada?

I asked my McCarthy Tétrault colleague Akiva Stern. Akiva is an associate in our litigation group based in Toronto. He represented three intervenors in this appeal in the Supreme Court of Canada. Akiva, thank you very much for joining me.

Akiva Stern 5:20

Thanks for having me, Adam.

Adam Goldenberg 5:22

So, Emond is going to be the new leading case on interpreting ambiguities in insurance contracts. How is this going to affect the way that insurance underwriters, in particular, draft insurance policies going forward?

Akiva Stern 5:36

One of the things that this case brings to the table in terms of enhancing Ledcor is that it speaks to this generally advisable order, which we know from Ledcor back in 2016, the proper way to read an insurance contract and the unique nature of how an insurance contract is built. It's kind of like BEDMAS. You have to do it in the right order, otherwise you get the wrong equation.

But since Ledcor, there's been a lot of commentary on, well, how do we use this generally advisable order in conjunction with reading general contract interpretation principles? So, ordinary and grammatical meaning, even in the context of an insurance contract, has been interpreted to have a consumer protection element to it.

So, you don't just read it like a very smart, complex insurance underwriter, but you look at what the average person applying for insurance might take away from the language of coverage. And so, what this case does is it reconciles all that. It reinforces this generally advisable order from Ledcor, but it says, importantly, that even when taking in mind consumer protection considerations, the general ordinary meeting shouldn't upend this general advisable order. For example, if the average person interpreting the contract would mean that a provision in an insurance contract is read in isolation. And so, what I think you can expect from insurance companies going forward is that they will be a little bit more cognizant about adding definitions to resolve ambiguities in certain sections of the contract, but then also making it a little bit clearer how the different components of the contract fit together, being a little bit more clear about whether exclusions apply if they're elsewhere in the policy, and tying things together to make sense.

Adam Goldenberg 7:25

So, how does that reflect the submissions that you and our colleagues made on behalf of the interveners whom you represented in the Supreme Court?

Akiva Stern 7:33

So, we had the pleasure of representing a consortium of interveners, including the Canadian and Ontario Mutual Insurance Associations and a reinsurer. And through their insight, we gave submissions on the importance of this generally advisable order. It is a unique way of interpreting a contract that is different from a commercial contract.

And it asked the court not only to consider how this plays a very important role, but then also takes into account the reasonable expectations of the drafters. After all, they're the ones putting this all together, and then maybe 10 years from now, a court is telling them how they intended the contract to be. So, I think it's very important to gain their perspective on how this all plays out.

Adam Goldenberg 8:21

What's the bottom line of the majority's decision, and how, if at all, do you see the dissents informing the way this area of the law will continue to develop, and the way in which underwriters will do their jobs in years ahead?

Akiva Stern 8:34

So, I think, ultimately, the majority got it right. They protected this important interpretation mechanism of the generally advisable order. They ultimately found no ambiguity in the contract. And that makes sense when you read the contract as a whole, keeping in mind the unique nature of exclusions and extensions in the context of an insurance contract.

The dissents, though, are important because they are a shot over the bow, in the sense, to future cases. The first dissent is important because it maintained this consumer protection lens, and it reminded us that where there are ambiguities, they should be held in favour of the policyholder, particularly where the insurance company is drafting a standard form policy that they get almost entire authorship over.

Akiva Stern 09:20

And then the second dissent is important because it tells us that a bad policy won't be saved by the generally advisable order. And so it's still important that insurance companies turn their mind to how all these components of insurance policy fit together so that they make sense and not just hide behind that just because of the majority decision.

Adam Goldenberg 09:43

Akiva, thank you so much for your time today.

Akiva Stern 09:46

Thanks, Adam.

Adam Goldenberg 09:48

Akiva Stern is an associate in McCarthy Tétrault Litigation group based in Toronto. Thanks to Jacob McNair, an articling student in our Toronto office, for his work on this episode.

We hope you found this brief appealing. Thanks for listening.

Adam Goldenberg  00:00

Welcome to Appealing Briefs, a podcast with brief updates on cases from Canada's courts of appeal. I'm Adam Goldenberg. In 2017, pit wall instability caused a rock slide at a copper mine in Chile. The mine was owned by Lundin Mining Corporation, a public company that's listed on the TSX.

Adam Goldenberg  00:25

After the rock slide, the company disclosed what had happened, but not right away. Once it made that disclosure, its stock price fell by 16%. One of Lundin's investors commenced a lawsuit against the company under Ontario's securities legislation. It alleged that Lundin had failed to make timely disclosure of a material change in its business operations or capital, and I'll tell you why those words are important in a moment.

Adam Goldenberg  00:52

Should the lawsuit be allowed to proceed? That was the question that went to the Supreme Court of Canada in Lundin Mining Corporation against Markowich. And in the court's November 2025 judgment, the answer was yes. This was the first securities law case to reach the Supreme Court in a decade, and this episode briefs you on the court's decision, and on what it means for investors and for public companies in Canada.

Adam Goldenberg  01:18

Before we begin, a brief disclaimer. This episode contains legal information, not legal advice. Now, let's start with a brief primer on securities law, and in particular, on a public company's ongoing reporting obligations under the Ontario Securities Act.

Adam Goldenberg  01:36

Section 75 sub 1 of the Securities Act requires reporting issuers, in other words, public companies, to make timely disclosure of any material change in their business operations or capital. This requirement aims to give investors a fair opportunity to make investment decisions on the basis of timely and accurate information.

Adam Goldenberg  01:57

But here's where things get a bit complicated, at least if you're not a securities lawyer. In a public company of any size or complexity, stuff happens all the time. But not everything needs to be disclosed right away. Only material changes do. So what makes a change material, requiring prompt disclosure?

Adam Goldenberg  02:17

According to the Securities Act, the question is whether the event, the stuff, would reasonably be expected to have a significant effect on the market price or value of the company's security.

Adam Goldenberg  02:31

If a change in the company's business, operations, or capital would reasonably be expected to have a significant effect on the value of a stock or other security, even if not on its price, then it is a material change, and it must be disclosed within 10 days under Section 75 Sub 1 of the Securities Act. If an issuer fails to report a material change, then they will have breached their ongoing disclosure obligations under the Act.

Adam Goldenberg  02:57

Investors who traded in the company's securities during that window of time between when the change happened and when the company disclosed it may have a claim against the company under the Securities Act.

Adam Goldenberg 03:09

That's the type of claim that was brought against Lundin Mining in the Markowich case. It's called a secondary market misrepresentation claim, and an investor who wants to bring this type of claim must first obtain permission from the court to do so. That's because the Ontario legislature has determined that companies and their current shareholders shouldn't be put to the expense of defending against claims that don't have some merit and that weren't brought in good faith.

Adam Goldenberg  03:34

To obtain leave to proceed, as it's called, an investor must first persuade the court that there is a reasonable or realistic chance that their proposed claim will prevail at a trial, and that must be based on a plausible analysis of the legislation and on some credible evidence. Now, let's talk about what exactly happened in the Lundin Mining case.

Adam Goldenberg  03:57

The rock slide at the mine in Chile led to a partial shutdown and a reduction in the company's production forecast by 20% for the following year. Lundin disclosed that these developments had occurred, but it only did so a month after the rock slide in its regular periodic updates. The day after it made that disclosure, as I said before, the company's share price, well, slid by 16%. A proposed claim under the Securities Act followed.

Adam Goldenberg  04:27

By an 8-1 majority, the Supreme Court of Canada ruled that leave to proceed should be granted, the claim should be allowed to continue toward trial. The court concluded that there was a reasonable chance that the plaintiff-investor, Mr. Markowich, could prove at a trial that the pit wall instability and the rock slide had amounted to a material change that ought to have been disclosed sooner than it was.

Adam Goldenberg  04:51

In reaching this conclusion, the court interpreted the term material change in the Securities Act broadly and flexibly. The court emphasized that the terms change, business, and operations were intentionally left without definitions in the statute. This, according to the majority, means that these terms should not be read narrowly.

Adam Goldenberg  05:13

According to the majority, a change is, well, a change. Any internal development at a company, not just a major transformation or a fundamental shift. And whether a change is material, according to the court, does not depend on how significant the change itself is, but rather on whether the change could reasonably be expected to significantly affect the market price or value of the company's securities.

Adam Goldenberg  05:40

Even an operational disruption, like a partial shutdown of a copper mine, for example, could plausibly be a material change if proven at trial. That, according to the majority, was enough to justify granting leave to proceed in the Lundin mining case. So, what does the Supreme Court's decision mean for Canadian investors and public issuers?

Adam Goldenberg  06:02

I asked my McCarthy Tétrault colleagues, Owais Ahmed and Valérie Lord. Owais is a partner and the co-head of securities litigation at our Firm. He's based in Vancouver. Valérie is a senior litigation associate based in Toronto who represented an intervener before the Supreme Court of Canada in the Lundin Mining case.

Adam Goldenberg / Owais Ahmed / Valérie Lord   06:22

Owais, Valérie, thank you both very much for joining me. Great to be here. Thanks for having us, Adam. Owais, let me start with you. Has there been a material change to the interpretation of the term material change? I don't think so, Adam. I don't view this case as a significant change in the law. This case was an opportunity for the Supreme Court of Canada to provide evidence

Owais Ahmed  06:46

further clarity and precision or otherwise provide guidance to issuers trying to meet their disclosure obligations. I don't think it really did that. It could have, for example, provided guidance to the market with respect to what is meant by business, operations, or capital. And I'm referring, obviously, to the definition of a material change, those three terms that

Owais Ahmed  07:10

show up in the definition. It could have provided clarity with respect to what those mean, and the court purposely did not. It purposely did not, and the court instead concluded that those terms are purposely broad, that their meaning should not be limited by dictionary definitions, and

Owais Ahmed  07:30

And the reason being that these are terms that are going to apply for a whole variety of different businesses in different industries in different circumstances. And so there's good reason not to define those terms and to leave them as they are.

Owais Ahmed  07:46

But the result of that for issuers making public disclosure decisions is there's not a whole lot of guidance coming out of this decision. They're going to continue to have to make judgment calls based on their common sense and the overriding principle that where there is doubt, better to disclose. For that reason, I don't view this case as representing a big change. There's one other point I'd make on that, which is,

Owais Ahmed  08:13

The court also had an opportunity to provide clarity on what is a change? What does that mean? We all know that the distinction between a material fact and a material change is, was there a change in the business operations and capital of the company? It's an important distinction, but the Supreme Court of Canada disagreed with the Mosen's judge that a change has to have a particular significance to the company in question.

Owais Ahmed 08:41

And instead, it said that the Ontario Court of Appeal got it right when it said, a change is a change. That was a quote from the Ontario Court of Appeal and the Supreme Court of Canada said they got it right.

Owais Ahmed 08:52

But that doesn't leave us with much guidance. If a change is not tied to any particular significance, then there is a concern about, well, what's the difference between a change and a material fact? And that sort of feeds into the dissent in this case. That's really the concern that arises out of the dissent. I just make this one further point, is that for most Canadian issuers,

Owais Ahmed  09:17

listed on the TSX, whether the senior or the venture exchange, this distinction between material fact and material change doesn't have a whole lot of practical significance anyway. And the reason for that is the exchange itself requires that any material information be disclosed forthwith. And material information is defined to include both material fact and material change.

Owais Ahmed / Adam Goldenberg / Valérie Lord  09:44

And so the exchange has already collapsed the definition. So that's an important factor to keep in mind for Canadian issuers. Interesting. Now, Valérie, the Supreme Court takes a broad interpretation of the word change and says that really it's the materiality threshold that's going to do the work in determining whether disclosure has to be made right away.

Adam Goldenberg / Valérie Lord   10:07

What does that mean in terms of the leave test for a securities class action under Part 23.1 of Ontario's Securities Act and comparable legislation? Yeah, so the test for leave under Section 138.8 of the Securities Act has always said that there's two requirements for plaintiffs bringing these types of cases, that the action has to be brought in good faith and

Valérie Lord  10:31

And that there has to be a reasonable possibility that the action will be resolved at trial in favor of the plaintiff.

Valérie Lord  10:39

The Supreme Court in Lundin offered this sort of much needed clarification that indeed the plaintiffs must offer both a plausible analysis of the applicable legislation and some credible evidence. And really, all that means is to say is that the plaintiff has to apply the correct interpretation of this of the statute.

Valérie Lord / Adam Goldenberg   11:01

And so it means that the plaintiffs will continue to need to put their best foot forward in terms of marshalling credible evidence at the certification stage. And there won't be this lower bar at certification. It's really going to be what's your best evidence, both at certification as it would be presented on a trial at the merits. Valérie, Owais, thank you so much for taking the time to speak with me today. Thank you for having us. Thanks, Adam.

Adam Goldenberg  11:28

Owais Ahmed is co-head of securities litigation at McCarthy Tétrault, and Valérie Lord is a senior litigation associate. Thanks to Logan Dillon, an articling student in our Toronto office, for his work on this episode. We hope you found this brief appealing. Thanks for listening.