Northbridge Commercial Insurance – Federal Court of Appeal finds that zero-rating for fleet insurance could be based on the relative expected claims experience for US accidents

Northbridge issued fleet insurance policies to trucking companies who operated their vehicles in both Canada and the U.S. The Tax Court had found that none of such supplies of insurance were zero-rated under Sched VI, Pt. IX, s. 2(d), which covers insurance under a policy “that relates to risks that are ordinarily situated outside Canada,” on the basis that this wording referenced the ordinary location of the insured vehicles, and there was no evidence on that point – and accordingly confirmed the denial of Northbridge’s related input tax credit claims.

Before allowing Northbridge’s appeal, Webb JA stated:

“[R]isks” means the risk of a claim arising from an accident or other insurable event. To the extent that any insurance policy issued by Northbridge covered such risks that were ordinarily situated in the United States, the supply of such a policy would be a zero-rated supply. The risks would be ordinarily situated in the United States based on the historical data for claims arising from accidents in the United States.

The Tax Court had not considered the evidence relating to this point, and the matter was referred back to it for such consideration.

Neal Armstrong. Summary of Northbridge Commercial Insurance Corporation v. Canada, 2023 FCA 211 under ETA Sched VI, Pt. IX, s. 2(d).