Caisse populaire de Maniwaki v. Giroux, [1993] 1 SCR 282

Caisse populaire de Maniwaki v. Giroux, [1993] 1 S.C.R. 282

 

Paulette Giroux and Marcel Mercier                                               Appellants

 

v.

 

Caisse populaire de Maniwaki                                                          Respondent

 

and

 

Assurance‑vie Desjardins                                                                 Respondent

 

and

 

Registrar of Gatineau Registration Division                                   Mis en cause

 

Indexed as:  Caisse populaire de Maniwaki v. Giroux

 

File No.:  22608.

 

1992:  October 13; 1993:  January 21.

 

Present:  La Forest, L'Heureux‑Dubé, Sopinka, Gonthier and Cory JJ.

 

on appeal from the court of appeal for quebec

 

                   Insurance ‑‑ Disability insurance ‑‑ Cessation of disability ‑‑ Burden of proof ‑‑ Payments already made under policy ‑‑ Point at which insurer's payments may be interrupted ‑‑ Civil Code of Lower Canada, art. 1203.

 

                   The appellant Giroux obtained a hypothecary loan from the respondent Caisse populaire.  This loan, which was guaranteed by the appellant Mercier, was accompanied by a life insurance contract issued by the respondent insurance company.  This policy included a guarantee in the event of disability.  Some two years later, a back injury prevented the insured from performing her normal activities and required her to undergo numerous treatments.  The insurer accepted her claim and, pursuant to the policy, paid the Caisse the interest owed on the debt.  The insurer stopped paying interest the following year after the insured refused to provide it with a medical certificate attesting to her condition.  The Caisse brought an action against the appellants for their failure to fulfil their commitments under the deed of hypothec and they brought an action in warranty against the insurer.  The Superior Court allowed the Caisse's action and dismissed the action in warranty.  The trial judge found that the preponderance of the medical evidence indicated that the insured was not suffering from a chronic disability.  He was of the view that the onus of proof was on the insured.  The Court of Appeal dismissed the appellants' appeal.  The only issue in this appeal is the following:  when payments have been made under a disability insurance contract, does the onus shift to the insurer to establish that the insured is no longer disabled before payments may be discontinued?

 

                   Held (L'Heureux‑Dubé J. dissenting):  The appeal should be dismissed.

 

                   Per La Forest, Sopinka, Gonthier and Cory JJ.:  Under the insurance contract, the insured has a contractual obligation to establish his disability in order for the insurer to have an obligation to pay and it is also the insured who is obliged to provide proof of continuing disability at the insurer's request.  The fact that the insurer makes payments establishes simply that it admits the disability and not that it considers it permanent.  The insurer's obligation to pay will terminate under clause 3 of the policy if the medical report provided under clause 9 shows that the insured's condition no longer amounts to a disability.  A refusal by the insured to provide satisfactory proof of continuation of the disability himself or to undergo a medical examination by a physician designated by the insurer constitutes non‑performance of a contractual obligation and the insurer may then cease performing its own obligations.  Cessation of payments by the insurer then rests on the rule of the exception for non‑performance and the insured's physical condition does not come into play.

 

                   The insured's contractual obligation to provide evidence of continuation of the disability must however be distinguished from the burden of proof in a judicial context.  Under the second paragraph of art. 1203 C.C.L.C., it is the person claiming extinction of an obligation who must prove the facts to support the claim.  In this case, the insurer incurred a debt to the insured at the time of the accident by virtue of the occurrence of the risk and the insured then had a claim against the insurer.  The onus is accordingly on the insurer to establish the extinction of its obligation by showing that the disability had ceased.  The change in the insured's condition is a fact which alters the relations between the parties.  Since it is the insurer which alleges the change in situation, it must prove it.

 

                   Although the trial judge erred in imposing the burden of proof on the insured, his conclusions, affirmed by the Court of Appeal, are not in error.  The trial judge did not have the least hesitation as to the evidence presented by both parties' experts establishing the cessation of the disability, without having to consider the burden of proof to make his decision.

 

                   The insurer does not have to prove that the disability has ceased before interrupting payments.  The insurance contract is a bilateral contract.  Under the present policy, the insurer is required to pay the interest to the Caisse in the event that the insured is disabled, and the insured must provide evidence of the continuation of her disability, at the insurer's request.  If the evidence of continuing disability is not "satisfactory" in the eyes of the insurer (clause 9), it may no longer consider the insured to be disabled and cease payments (clause 3).  If there is a dispute as to disability, the insurer cannot be forced to continue the payments until judgment is given.  The court which resolves the dispute will decide whether the disability has ceased and what benefits may be claimed, and if the benefits are insufficient, in light of the court's finding as to the date when the disability ceased, there will be an award accordingly with interest on the arrears, if any.  The right to benefit is dependent on the existence of the disability and not on the date of the judgment resolving the dispute.  Moreover, if the insured does not fulfil her contractual obligation to provide the evidence requested, the insurer may interrupt performance of its obligation under the exception for non‑performance.

 

                   Per L'Heureux‑Dubé J. (dissenting):  While agreeing with the majority on the merits of the case, in view of the prism through which the trial judge viewed the evidence, the ends of justice would be better served by a rehearing during which the appropriate rules of evidence would be applied.

 

Cases Cited

 

                   Referred to:  Blackstone v. Mutual Life Insurance Co. of New York, [1945] 1 D.L.R. 165.

 

Statutes and Regulations Cited

 

Civil Code of Lower Canada, arts. 1203, 2468 [repl. 1974, c. 70, s. 2], 2472 [idem], 2500 [idem; am. 1979, c. 33, s. 47], 2535 [repl. 1974, c. 70, s. 2].

 

Code of Civil Procedure, R.S.Q., c. C‑25, art. 59.

 

Code Napoléon, art. 1315.

 

Act respecting insurance, R.S.Q., c. A‑32.

 

Authors Cited

 

Baudouin, Jean‑Louis.  Les obligations, 3^e éd. Cowansville:  Yvon Blais, 1989.

 

Baudry‑Lacantinerie, Gabriel.  Traité théorique et pratique de droit civil, t. 3, 3^e éd.  Avec la collaboration de L. Barde.  Paris:  Librairie de la Société du Recueil J.‑B. Sirey, 1908.

 

Bergeron, Jean‑Guy.  Les contrats d'assurance.  Sherbrooke:  SEM Inc., 1989.

 

Bergeron, Jean‑Guy.  "Les problèmes de preuve en droit des assurances" (1992), 22 R.D.U.S. 411.

 

Demolombe, Charles.  Traité des contrats ou des obligations conventionnelles en général, t. 6.  Paris:  Imprimerie générale, 1879.

 

Mignault, Pierre Basile.  Le droit civil canadien, t. 6.  Montréal:  C. Théoret, 1902.

 

Perrot, Roger.  "La charge de la preuve en matière d'assurance" (1961), 32 Rev. gén. ass. terr. 5.

 

Simard Jr., François‑Xavier, et Gabrielle De K. Marceau.  Le droit des assurances terrestres depuis 1976.  Montréal:  Wilson & Lafleur, 1988.

 

Traité de droit civil du Québec, t. 9, par André Nadeau et Léo Ducharme.  Montréal:  Wilson & Lafleur, 1965.

 

                   APPEAL from a judgment of the Quebec Court of Appeal, [1991] R.R.A. 884, affirming a judgment of the Superior Court, [1988] R.J.Q. 430.  Appeal dismissed, L'Heureux‑Dubé J. dissenting.

 

                   Paulette Giroux, in person.

 

                   No one appeared for the appellant Mercier.

 

                   Jean Trépanier, for the respondent Caisse populaire de Maniwaki.

 

                   Gilles de Billy, Q.C., and Odette Jobin‑Laberge, for the respondent l'Assurance‑vie Desjardins.

 

 

//Gonthier J.//

 

                   English version of the judgment of La Forest, Sopinka, Gonthier and Cory JJ. delivered by

 

                   GONTHIER J. ‑‑ The issue to be determined in this case is who, the insurer or the insured, must prove cessation of disability when the insurance company has already made payments under a disability insurance policy.  This Court must also decide at what point, in relation to when the evidence is presented, the payments by the insurance company may be interrupted.

 

I ‑ Facts and Proceedings

 

                   On August 16, 1979, the appellant Giroux obtained a hypothecary loan from one of the respondents, the Caisse populaire de Maniwaki (hereinafter the "Caisse populaire") for the purpose of purchasing a farm where she intended to raise animals, namely horses and goats.  Her husband, Mr. Mercier, guaranteed the loan.

 

                   The loan was accompanied by a life insurance contract issued by the other respondent, Assurance‑vie Desjardins (hereinafter "AVD").  The policy provided, inter alia, for the payment of interest on the principal owing in the event of total disability during the term of the loan.

 

                   The policy contained the following relevant provisions:

 

1 ‑ DEFINITIONS:  . . .

 

1)  TOTAL DISABILITY:  the total incapacity, as certified by a physician, of performing any occupation for remuneration and all normal activities of a person of the same age as a result of an illness or an accident.

 

                                                                   . . .

 

3 ‑ AMOUNT OF INSURANCE

 

When a borrower under age 60 becomes totally disabled after the benefit has become effective and remains so for a continuous period of at least 3 months, the insurer pays to the savings and credit union as of the beginning of the disability the interest on the net debt at the rate in force at the beginning of the total disability, as stipulated in the written agreement between the savings and credit union and its borrower.

 

However, if the total disability is declared permanent by the insurer, the latter pays in advance to the savings and credit union the benefit provided for under the GENERAL PROVISIONS of the policy at the time the total disability is declared permanent by the insurer.

 

The payment of benefits ends automatically on the first of the following events:  when the borrower is no longer totally disabled or when he reaches 65 years of age or when the loan is fully refunded.

 

The savings and credit union must refund to the borrower insured under this benefit the instalments he made during the period extending from the beginning of his total disability up to the date on which the insurer accepts the evidence of total disability.  If not, the savings and credit union must apply the benefits paid by the insurer to the net debt of the borrower.

 

9 ‑ EVIDENCE OF TOTAL DISABILITY

 

When a claim is made, the savings and credit union must provide satisfactory evidence to the insurer regarding the nature of the total disability, the date of birth, the amount and the nature of the loan of the insured borrower.

 

The insurer may, at any time, require that the insured borrower be examined by a physician designated by the insurer.

 

                   On January 1, 1982, the policy was replaced by a new contract which applied to current loans.  The amendments were not significant and pertain more to form than to substance.  Clause 9 of the contract between Ms. Giroux and AVD now read as follows:

 

9 ‑ EVIDENCE OF TOTAL DISABILITY

 

When a claim is made, the borrower must provide the savings and credit union with evidence satisfactory to the insurer of his total disability.

 

The insurer may at any time during the total disability require that the borrower:

 

1)  provide satisfactory proof that he is still totally disabled;

 

2)  be examined by a physician designated by the insurer.

 

                   On May 31, 1981, Ms. Giroux suffered injuries to her back while planting a shrub.  This accident caused pain and suffering, required her to undergo numerous treatments and prevented her from performing her normal activities.

 

                   It seems that at the time Ms. Giroux entered into the contract with AVD she did not realize that the insurance contract included disability coverage.  In fact, it was only in January 1983, when she was talking about the effects of her accident with an employee of the Caisse populaire, that Ms. Giroux learned that she was entitled to disability insurance under her life insurance policy.  It was thus at that time that she made a claim to the respondent AVD, which agreed to compensate her retroactively, as of May 31, 1981.

 

                   On March 14, 1984, AVD stopped paying interest to the Caisse populaire, when Ms. Giroux refused to provide it with a medical certificate attesting to her condition.

 

                   The Caisse populaire brought an action against the appellants as a result of their failure to fulfil their commitments under the deed of hypothec.  The appellants impleaded AVD in warranty.  The Superior Court allowed the Caisse populaire's action and dismissed the action in warranty.

 

                   Ms. Giroux and Mr. Mercier appealed to the Quebec Court of Appeal, which dismissed the appeal and the appellants' application for leave to introduce new evidence.

 

                   Leave to appeal to this Court was granted on December 12, 1991, [1991] 3 S.C.R. viii.

 

II ‑ Judgments of the Courts Below

 

Superior Court, [1988] R.J.Q. 430 (Landry J.)

 

                   The trial judge examined the evidence submitted by the parties.  He noted that the three specialists who had examined the appellant Giroux, a neurologist, an orthopaedic surgeon and a neurosurgeon, had unanimously concluded that she showed no symptoms of disability.  He added (at pp. 435‑36):

 

                   [translation]  The preponderance of the medical evidence is to the effect that the applicant is not suffering from a chronic disability which would prevent her from performing an occupation for remuneration or the activities of a person of her age.  The three experts' reports are categorical on this point.

 

                   The trial judge was of the view that the onus of proof was on the insured; he noted (at p. 436):

 

                   [translation]  The plaintiff in warranty had the burden of establishing on the balance of probabilities that she was suffering from a substantial disability . . .  Based on the evidence as a whole, the court has reached the conclusion that she has not discharged the burden of proof which rested on her.

 

                   The cross demand must therefore be dismissed.

 

Court of Appeal, [1991] R.R.A. 884 (Mailhot, Tourigny and Rousseau‑Houle JJ.A.)

 

                   The Court of Appeal dismissed the appellants' application for leave to introduce new evidence ‑‑ an X‑ray and CT scan report dated July 31, 1989 and the diagnosis of a physiatrist dated November 29, 1989 ‑‑ because (at p. 885):

 

[translation]  . . . [it] does not provide essentially new information, or information which is indispensable and which could not reasonably have been discovered at the time the case was heard at first instance;

 

                   The Court of Appeal concluded at p. 886 that:

 

[traduction]  . . . having regard to the terms of the insurance policy and the medical evidence filed, the trial judge correctly assessed the burden of proof which rested on the appellant;

 

and refused to intervene.

 

III ‑ Issue

 

                   On December 12, 1991, this Court granted the application for leave to appeal on the following question only:

 

Where payments have been made under a disability insurance policy, does the onus shift to the insurer to establish that the insured is no longer disabled before payments may be discontinued?

 

IV ‑ Analysis

 

1.  The Situation of Mr. Mercier and the Caisse populaire

 

                   AVD and the Caisse populaire made several comments concerning the parties involved in the proceedings before this Court.  Although these arguments were not disputed by the appellant Giroux, they require some comment.

 

                   (a)  Mr. Mercier

 

                   Mr. Mercier, the appellant Giroux's husband, had stood as her surety for the hypothecary loan.  Action was brought against him in this capacity by the Caisse populaire after Ms. Giroux failed to make payment.  Ms. Giroux was the only person who contracted with AVD.  Accordingly, there is no legal relationship between the insurance company and the surety.  Mr. Mercier therefore has no right to claim against the company.

 

                   Moreover, even if this were not the case, Ms. Giroux, who represented herself before this Court, could not plead on behalf of her husband, under the first paragraph of art. 59 of the Code of Civil Procedure, R.S.Q., c. C‑25:

 

                   A person cannot use the name of another to plead, except the Crown through authorized representatives.

 

                   (b)  The Caisse populaire

 

                   The Caisse populaire appropriately pointed out that the only question which this Court must answer is an issue as between the appellant Giroux and the respondent AVD.

 

                   The Superior Court held the claim of the Caisse populaire to be well founded.  This decision is not in issue since the defendants at first instance have always admitted that the moneys were owed to it.  The dispute is therefore solely between Ms. Giroux and AVD and its outcome will determine which one of them will have to make the payments owed to the Caisse populaire.

 

                   The Caisse populaire need not participate in the debate; the rules of the burden of proof do not in any way concern it.

 

2.  Obligations in Respect of Evidence

 

                   While the question put to this Court may appear simple at first sight, it involves a certain ambiguity in respect of the meaning to be given to the verb "establish".  This term may be used in various contexts.  Does this mean the obligation to produce evidence stipulated in the contract or the obligation to establish certain facts?  These obligations do not necessarily involve identical requirements.  In order to determine what evidence the contract requires to be produced, we must examine the contract.  It may provide for the presentation of certain documents to the co‑contracting party, the conveying of a variety of information, and so on.

 

                   Proof of the facts, in particular the disability, must be considered in the light of our rules of law.  The rules governing the burden of proof provide a means for the court to weigh the evidence presented by the parties.

 

                   In this case, the parties are using arguments which are clearly on two quite different levels.  The appellant Giroux is trying to assert her right by invoking the rules relating to the burden of proof, while the respondent AVD is relying primarily on the provisions of the agreement.

 

                   (a)  The Contractual Obligation to Provide Evidence

 

                   (i)  With Respect to the Disability

 

                   Since the contract is the law of the parties, they may to a very large degree commit themselves to obligations of their choice, so long as they are not contrary to good morals or public order.

 

                   The contract between Ms. Giroux and AVD is in perfect compliance with the requirements imposed by art. 2500 C.C.L.C., the first paragraph of which lists the provisions of absolute public order and the second, those of relative public order.

 

                   The obligations set out in the contract between Ms. Giroux and AVD reflect a classic scheme in insurance matters.  Article 2468 C.C.L.C. gives a definition of a contract of insurance which states the primary obligations thereof:

 

                   A contract of insurance is that whereby the insurer undertakes, for a premium or assessment, to make a payment to a policyholder or a third person if an event that is the object of a risk occurs.

 

                   The risk, the event which triggers payment by the insurer, is determined and described contractually by the parties.  The insurance contract is an aleatory contract, that is, when it is signed, as Baudouin says in Les obligations (3rd ed. 1989), at p. 57, [translation] "the parties' benefits are not yet determined, in terms of their extent or measure".

 

                   It is a condition of payment that the risk have occurred.  The obligation of the insurer to pay benefits is in a latent state, so to speak, so long as the insured does not make a claim establishing disability or, more precisely, performance of the obligation is delayed until that time, with effect from the commencement of the disability.

 

                   In the area of insurance of persons, the risk is an event which adversely affects "the life, health [or] physical integrity of the insured", in the words of art. 2472 C.C.L.C.  In the case before us, the risk, that is, the event which triggers the obligation of the insurer, is the disability of the insured.  The contract between Ms. Giroux and AVD defines the risk unequivocally in clause 1, where both disability and the period of disability are defined.

 

                   Clearly, the insurer must be alerted to the occurrence of the event in order to be liable.  Such disclosure by the insured or the policyholder to the insurer is the evidence of the loss.  Professor Bergeron described it as follows in Les contrats d'assurance (1989), at p. 71:

 

                   [translation]  It is this information and supporting documents which the insured or other interested parties must give to the insurer, after the loss, to assert and justify the claim.  Often the insurer will provide appropriate forms.  This obligation must be fulfilled correctly by the insured or any other interested person, or the insurer could be released from its obligation to pay.  This evidence of loss may of course be disputed by the insurer.

 

                   Among the provisions of the Civil Code of Lower Canada applicable to accident and sickness insurance, art. 2535 provides:

 

                   The policyholder must give notification of a loss in writing to the insurer within thirty days.

 

                   The policyholder must also, within ninety days of the loss, send to the insurer all information the latter may reasonably expect as to the circumstances and extent of the loss.

 

                                                                   . . .

 

                   The person who is entitled to the benefit is not prevented from receiving it if he proves that it was impossible for him to act within the delay granted and if the notification is sent to the insurer within one year of the loss.

 

                   This article is of relative public order, that is, the insurer and the insured may agree upon provisions that are more favourable to the insured than those set out in the Code.

 

                   Clause 8 of the contract corresponds to art. 2535 C.C.L.C.:

 

                   8 ‑ CLAIM

 

All claims must be made in writing to the insurer as soon as it is reasonably possible to do so but not later than 1 year after the beginning of the total disability and must be accompanied by satisfactory evidence of total disability.

 

After the one‑year period, the insurer considers only the year preceding the date on which the claim is received.

 

                   It should be pointed out here that AVD was kindly to Ms. Giroux in that it went well beyond what the contract stipulated, since she had filed her claim at a very late date, nearly twenty months after the accident.  Not only did AVD agree to compensate the insured, but it even paid her retroactively from the date of the accident, and not only for the year just ended, as it could have done under the contract.

 

                   The first paragraph of clause 9 of the contract specifies how information is to be submitted, which is through the Caisse populaire:

 

9 ‑ EVIDENCE OF TOTAL DISABILITY

 

When a claim is made, the borrower must provide the savings and credit union with evidence satisfactory to the insurer of his total disability.

 

                   It is clear on reading these provisions ‑‑ and perfectly logical, moreover ‑‑ that the insured has a contractual obligation to establish his or her disability in order for the insurer to have an obligation to pay.

 

                   The contract contains a provision specifying when the disability terminates:

 

3 ‑ AMOUNT OF INSURANCE

 

                                                                   . . .

 

However, if total disability is declared permanent by the insurer, the latter pays in advance to the savings and credit union the benefits provided under the GENERAL PROVISIONS of the policy at the time the total disability is declared permanent by the insurer.

 

The payment of benefits ends automatically on the first of the following events:  when the borrower is no longer totally disabled or when he reaches 65 years of age or when the loan is fully refunded.

 

                                                                   . . .

 

                   As I characterized the disability earlier as a condition for payment, I am of the view that cessation of the disability, as provided in this clause, must be seen as its antonym, that is, simply as a condition for stopping payment.  Consequently, when the event occurs, the insurer may cease to pay benefits, with no other consequences for the parties or for their contractual relationship.

 

                   (ii)  With Respect to Continuation of the Disability

 

                   There is no doubt that under the contract the insured must provide evidence of the disability.  The question then arises which is at the heart of this case:  once the evidence is provided, is it valid indefinitely?

 

                   The contract provides, in clause 9, a mechanism by which the insurer can control the insured's health status.  The insured may be required to be examined by a physician designated by the insurance company (clause 9, para. 2) and/or to provide evidence himself or herself of his or her disability (clause 9, para. 1) by, inter alia, submitting to the insurer a medical certificate obtained from a physician of his or her choice.

 

                   This opportunity to investigate is perfectly understandable and is based on the reality and diversity of fact situations.  It is quite possible for an individual to become temporarily disabled.  I am thinking, for example, of a person who breaks a limb and who must be immobilized for a period of time.  When the person's physical health is restored and he or she is again able to perform an occupation for remuneration, the conditions set out in the contract no longer exist and so the insurer is no longer required to pay benefits.

 

                   At the other end of the spectrum, in terms of disability, we could imagine much more tragic cases which would prevent the insured from ever resuming any activity for remuneration.  This situation is covered by the second paragraph of clause 3 of the policy, which describes it as a total "permanent" disability.

 

                   There are also situations which fall between these two examples, in which the disability, while not permanent, is lengthy and its duration unpredictable.  The insurance company's obligation to pay is triggered by the occurrence of the event, and in that case it may be admitted that after a certain period of time it would want to verify that the insured still fulfils the necessary conditions for payment of benefits.  It seems that Ms. Giroux's situation falls precisely into this category of intermediate cases.  However, the extent and frequency of the insurer's requests for information must certainly be reasonable.  As Professor Bergeron noted in "Les problèmes de preuve en droit des assurances" (1992), 22 R.D.U.S. 411, at p. 440:  [translation] "It would be unfair to recognize a principle which would permit the insurer to require that the insured provide new evidence of his or her disability, whenever it might choose."  (Emphasis added.)

 

                   The contract between AVD and Ms. Giroux is clear on the question of the evidence to be provided under the contract:  one of the obligations of the insured set out therein is, at the request of the insurance company, to prove that he or she continues to be disabled.  The insurer's obligation to pay will terminate, under clause 3, if the medical report provided under clause 9 ‑‑ and in particular paragraph 1 ‑‑ shows that the insured's condition no longer amounts to a disability.

 

                   What happens if the insured refuses either to provide evidence of continuation of the disability himself or herself, or to undergo a medical examination, or if the evidence is not "satisfactory" to the insurer?  Clearly, that constitutes non‑performance of a contractual obligation.  The co‑contracting party may then cease performing its own obligations.  The insured's physical condition does not come into play here; it may very well be, on the facts, that he or she is still disabled.  Cessation of payments by the insurer rests on the rule of the exception for non‑performance, to which I shall have occasion to return later.

 

                   Accordingly, in the context of the performance of the contract, the appellant Giroux's arguments must be rejected.  Clearly the onus is on the insured to present evidence of continuation of her disability to her co‑contracting party, and not on the insurer to establish cessation of the disability.

 

                   In closing on this question of proof in the context of performance of contractual obligations, I note that the contract between AVD and Ms. Giroux is silent on the question of a breach of clause 9 by the insured.  While this is not strictly necessary, because of the principles of our law of contracts, agreements in the area of insurance could be more explicit in this respect.  The insured is in fact a consumer ‑‑ of a particular type of product ‑‑ and as such needs to be fully informed and protected.  This is, moreover, the reason which motivated the legislature to enact new provisions in this area, in the Act respecting insurance, R.S.Q., c. A‑32 (formerly S.Q. 1974, c. 70), which came into force on October 20, 1976.  According to Simard and De K. Marceau, Le droit des assurances terrestres depuis 1976 (1988), at p. 9:

 

[translation]  The objective of the legislature . . . arose from the need to correct the balance of power which had been established between the insurer and the insured, based on market forces.

 

                                                                   . . .

 

                   The approach adopted therefore exhibited a bias toward the insurance consumer, by limiting unilateral action by the insurer.

 

                   Some insurance policies contain a contractual provision specifying a presumption of disability if the disability lasts more than a certain period of time.  This was the case in Blackstone v. Mutual Life Insurance Co. of New York, [1945] 1 D.L.R. 165 (Ont. H.C.), to which the respondent AVD referred on several occasions.  Where there is such a clause, the disability exists until the insurer proves otherwise.  This is not the situation here and the fact that AVD made payments establishes simply that it admitted the disability and not that it considered it permanent.

 

                   (b)  The Obligation to Prove the Disability

 

                   Where there is a dispute, which party has the onus of proof?  In this case, the occurrence of a disability is not in issue.  The point in issue is the continuation of the disability and the leave to appeal relates to the onus of proof in these circumstances.

 

                   (i)Article 1203 of the Civil Code of Lower Canada and Art. 1315 of the Code Napoléon

 

                   The general rule in respect of evidence in legal proceedings is set out in art. 1203 of the Civil Code of Lower Canada:

 

                   The party who claims the performance of an obligation must prove it.

 

                   On the other hand he who alleges facts in avoidance or extinction of the obligation must prove them; subject nevertheless to the special rules declared in this chapter.

 

                   In Le droit civil canadien (1902), vol. 6, at pp. 3‑4, Mignault explains the basis of the first paragraph as follows:

 

                   [translation]  The principle, of which it states only the consequence, is that the party who asserts a fact contrary to the normal and usual state of affairs, or to an established situation, must prove it.  The presumption is always the normal and usual existence of things, and the party who enjoys the benefit of this presumption is exempt, so long as it exists, from any proof.  For example, the independence of individuals from each other is the normal and usual situation; accordingly, a party who claims that someone else is bound to him or her, in other words, has contracted an obligation toward him or her, vinculum juris, must prove that fact, which is regarded as exceptional.

 

                   Once a party has established to the satisfaction of the judge, under the first paragraph of art. 1203, that there is a legal obligation between him or her and another person, then since that situation has become legally established it is, in the eyes of the court, the normal state of affairs.  Accordingly, the party which considers that the normal state of affairs has changed, that the obligation no longer exists, must in turn persuade the court.  This is what the second paragraph of that article states.

 

                   In France, the Civil Code contains the same provision as our art. 1203, with some slight variation:

 

                   He who claims execution of an obligation must prove it.

 

                   Reciprocally, he who claims to be released must prove payment or the fact which has produced the extinction of his obligation.

 

(Translated by John H. Crabb, The French Civil Code (1977).)

 

                   The commentary by Demolombe, Traité des contrats ou des obligations conventionnelles en général (1879), vol. 6, at pp. 184‑85, is highly pertinent:

 

                   [translation]  From the point of view of reason, and logic, it is obviously the party who claims to introduce something new and change the present situation who must bear the burden of proof.  The presumption is that the present situation, the currently established situation, on both sides, is consistent with the truth.  One of the parties asserts the contrary.  Let that party prove it!  This is required by the great principle of equality before the law. . . .  Thus it is the status quo which must be the rule between them [the parties] for assigning the burden in the case.  [Emphasis added; italics in original.]

 

                   Later, Demolombe remarked, at pp. 192‑93:

 

                   [translation]  The solution we have just applied to our first question:  Who must prove?  also virtually implies the solution to the question of: What must be proved.

 

                   Under article 1315, what the original plaintiff must prove is the existence of the obligation.

 

                   And what the defendant must prove, having in turn become plaintiff in his exception, is the extinction of the obligation.

 

                                                                   . . .

 

In short, to preserve the formula we have proposed . . ., the party who claims to change the other party's established situation must, if we may put it this way, flush out that party from that situation, so that it can only preserve its position there by itself providing evidence of such a nature as to destroy the evidence supplied against it.  [Italics in original.]

 

                   From the court's point of view, when the parties appear before it, the normal, natural situation, the status quo, is independence, the absence of any legal relationship.  If the judge is persuaded, by the arguments of one party, that a right has arisen, this condition of legal dependence becomes the established situation, the status quo.  Because no right, once it arises, can be extinguished or altered by itself, except by prescription or expiry, the defendant must therefore disclose to the court the event which altered the status quo.

 

                   In Traité théorique et pratique de droit civil (3rd ed. 1908), vol. 3, at p. 421, Baudry‑Lacantinerie stated that [translation] ". . . the established situation must enjoy the same prerogatives as the natural situation:  it is presumed to continue to exist".

 

                   In Traité de droit civil du Québec (1965), vol. 9, at p. 79, Nadeau and Ducharme commented:

 

                   [translation]  It is not only rights which, once their existence has been established, are deemed to continue as they are; this presumption applies to all situations of fact or law.

 

                   The primary bearing of arts. 1315 of the Code Napoléon and 1203 C.C.L.C. lies in the impact of the burden of proof: the uncertainty and doubt which subsist once evidence has been adduced must necessarily be resolved against the party which has the burden of such proof.  As Professor Perrot notes in "La charge de la preuve en matière d'assurance" (1961), 32 Rev. gén. ass. terr. 5, at pp. 7‑8:

 

[translation]  . . . the practical issue of how to assign the burden of proof arises only in those situations where the process of weighing the evidence has produced no result.  Then and only then is it essential to resolve the problem, so that, practically, the judge does not ask, first, which of the two parties has the burden of proof, and then how that proof should be made; the judge first hears all the evidence placed before him or her by the two parties equally, and only if none of that evidence appears to the judge to be decisive does he or she consider the issue of how to assign the burden of proof, so as to designate which of the two parties will be believed on the basis of its mere assertion.

 

                   (ii)  Application of the Second Paragraph of Art. 1203

 

                   In this case, both parties rely on art. 1203 C.C.L.C.  AVD argues that the appellant Giroux must meet the burden imposed by the first paragraph of art. 1203 since, according to AVD, she is seeking performance of an obligation which would require the insurer to continue to pay interest in the event of total disability.

 

                   The appellant Giroux for her part submits that this is a case in which the respondent AVD is arguing that its obligation has been extinguished and that, under the second paragraph of art. 1203, it has the burden of proof.

 

                   On May 31, 1981, at the time of the accident, AVD incurred a debt to Ms. Giroux under the insurance contract by virtue of the occurrence of the risk.  It is clear that from that date until March 14, 1984, Ms. Giroux had a claim against the insurance company.  In my opinion, the change in the insured's condition is a fact which alters the relations between the parties.  The party which alleges the change in the situation must prove it.  As Bergeron, "Les problèmes de preuve en droit des assurances", supra, stated at p. 422:

 

[translation]  . . . if . . . there is evidence of eligibility, does an entirely natural presumption not arise therefrom that the insured is eligible for benefits until proved otherwise?

 

                   In short, since the date of the accident, the status quo, the established, "normal" relationship between the parties, is Ms. Giroux's position as a creditor and AVD's status as a debtor.  It is clearly the insurer, and not the insured, which wishes to change the present situation.  If the insurance company wishes to terminate the payments it is making, in the words of Demolombe, supra, at p. 184:  "Let that party prove it".  It is the second paragraph of art. 1203 which must be applied here.

 

                   In my opinion, the trial judge erred when he stated (at p. 435):

 

                   [translation]  With respect, the court accordingly concludes on this point that the plaintiff in warranty has the burden of establishing, on a balance of probabilities, that contrary to what is asserted by the insurer, her disability still subsists.

 

                   (c)Consequences of Applying the Second Paragraph of Art. 1203 to This Case

 

                   The appellant Giroux is correct to argue that, in the circumstances, it was up to AVD to prove to the court that the insured was no longer disabled.  Unfortunately, despite all the sympathy we may feel for Ms. Giroux, the trial judge's findings are nonetheless not in error.  Even if he had correctly attributed the burden of proof, the outcome of the trial would not have been different.  If the judge had had any lingering doubt after the evidence was presented, the doubt would have had to be resolved against the insurer.  He did not have the least hesitation as to the evidence presented by both parties' experts establishing the cessation of the disability, without having to consider the burden of proof to make his decision (at pp. 435-36):

 

                   [translation]  The preponderance of the medical evidence is to the effect that the applicant is not suffering from a chronic disability which would prevent her from performing an occupation for remuneration or the activities of a person of her age.  The three experts' reports are categorical on this point.  Moreover, it is apparent that the physicians who signed medical reports at the request of Ms. Giroux relied in part on inaccurate information which was contradicted by the X‑rays.  [Emphasis added.]

 

3.  Point at Which Cessation of Payments by the Insurer Occurs

 

                   The appellant Giroux argues that the insurer must prove the cessation of the disability before the cessation of payments.  In other words, she submits that if there is a dispute between the insured and the insurer on the question of disability, the insurer must continue the payments until judgment is given.

 

                   This argument has no basis in law.

 

                   The insurance contract is a bilateral contract.  The insurer and the insured assume mutual obligations.  Here, the insurer is required to pay the interest to the Caisse populaire in the event that the insured is disabled and the insured must provide evidence of the continuation of her disability, on the request of the insurer.  These two obligations are, as Baudouin, supra, states at p. 54, [translation] "interdependent and not simply juxtaposed".  The insurer's obligation to pay benefits exists only to the extent the appellant Giroux is disabled.  If the insured proves that she continues to be disabled, under the terms of the contract, the insurer shall continue to pay the interest owing.

 

                   It may be that an insured will reply to the insurer's request concerning the continuation of the disability by providing it with a medical certificate or by submitting to the examination provided for in clause 9 of the contract.  This evidence may not be "satisfactory" in the eyes of the insurer, however, and, consequently, it may no longer consider the insured to be disabled.  In that case, under the actual terms set out in clause 3 of the contract, it is entitled to cease paying benefits.  If there is a dispute between the parties in this regard, it must be resolved by a judgment, which will decide whether the disability has ceased and what benefits may be claimed.  If the benefits are insufficient, in light of the court's finding as to the date when the disability ceased, there will be an award accordingly with interest on the arrears, if any.  This is the only penalty for delay in meeting a monetary obligation.  The right to benefits is dependent on the existence of the disability and not on the date of the judgment resolving a dispute in this regard.

 

                   Moreover, if the insured does not fulfil his or her contractual obligation to provide the evidence requested, the insurer may interrupt performance of its obligation, under the exceptio non adimpleti contractus or exception for non‑performance.  While the appellant Giroux may have rebelled against this principle, Baudouin, supra, explains it as follows, at p. 278:

 

[translation]  According to the tradition in the case law, fairness and good faith seem to lie at the root of any legal explanation on the subject.  . . .  To some extent, allowing a creditor to refuse to perform the mutual obligation amounts to allowing it to take the law into its own hands, by using this pressure tactic on its debtor to force the debtor to live up to its promise.  It is logical, however, as a preventive measure for dealing with [the] refusal or negligence [of the co‑contracting party], to allow the contracting party the right to withhold or defer performance of its own obligation.

 

                   The author adds, at p. 280, that the exception for non‑performance [translation] "permits . . . the performance of the obligation of the contracting party who invokes it to be stayed".  When each of the parties stands its ground, the dispute is generally brought before the courts.  Matters, relations between the parties, remain frozen in the state they were in when the dispute arose.  The parties cannot be forced to comply provisionally so long as no judgment has been rendered.

 

V ‑ Conclusion

 

                   The appellant Giroux's question must be answered in the affirmative as regards the onus of proof.  On the issue of the time when payments stop, on the other hand, her arguments must be rejected.

 

                   In the circumstances, however, the conclusions of the trial judge and those of the Court of Appeal affirming them are not in error.

 

                   Accordingly, the appeal should be dismissed, without costs.

 

//L'Heureux‑Dubé J.//

 

                   The following are the reasons delivered by

 

                   L'Heureux‑Dubé J. (dissenting) ‑‑ I entirely agree with Justice Gonthier's reasons on the merits of the case.  In particular, I consider that it is the insured who is obliged, in the context of an insurance contract such as the one at issue here, to provide the insurer with proof of continuing disability.  However, this contractual obligation must be distinguished from the burden of proof in a judicial context.  Under the second paragraph of art. 1203 C.C.L.C., the onus is on the insurer to establish the extinction of its obligation by showing on a balance of probabilities that the disability has ceased.

 

                   Where I disagree is with the outcome of the appeal.  The trial judge placed the burden of proof on the shoulders of the insured:

 

                   [translation]  With respect, the court accordingly concludes on this point that the plaintiff in warranty has the burden of establishing, on a balance of probabilities, that contrary to what is asserted by the insurer, disability still subsists.  It is for the person alleging the existence of an obligation to prove it.  There is no principle of law on the basis of which an exception to this rule could be made in the present circumstances.

 

([1988] R.J.Q. 430, at p. 435.)

 

                   In view of the prism through which the trial judge viewed the evidence, I cannot conclude, as my colleague has done, that the outcome of the trial would have been the same if the judge had correctly assigned the burden of proof.  In such circumstances, I consider that the ends of justice would be better served by a rehearing during which the appropriate rules of evidence would be applied.

 

                   For this reason, I would allow the appeal with costs and refer the matter back to the Superior Court so that the case can be heard taking account of the appropriate burden of proof.

 

                   Appeal dismissed, L'Heureux‑Dubé J. dissenting.

 

                   Solicitor for the respondent Caisse populaire de Maniwaki:  Jean Trépanier, Maniwaki.

 

                   Solicitors for the respondent Assurance‑vie Desjardins:  Lavery, de Billy, Québec.