Words and Phrases - "risks"
Northbridge Commercial Insurance Corporation v. Canada, 2023 FCA 211
The appellant (“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) on the basis that this provision 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 the appeal, Webb JA stated (at paras. 34, 36 and 45):
The risk of a claim arising from an accident (or other insurable event) is linked to a geographic location. An accident (or other insurable event) occurs at a particular location. …
… Since the policies issued by Northbridge in part related to accidents (and other insurable events) that are usually situated outside Canada, the supply of a portion of the policies qualified as a zero-rated supply. …
“[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.
Since the Tax Court had not considered the evidence relating to this point, the matter was referred back to the Tax Court for such consideration.
| Locations of other summaries | Wordcount | |
|---|---|---|
| Tax Topics - Statutory Interpretation - Ordinary Meaning | “risks” interpreted from perspective of insurer | 119 |
Northbridge Commercial Insurance Corporation v. The Queen, 2020 TCC 132, rev'd 2023 FCA 211
The appellant issued fleet insurance policies to trucking companies who operated their vehicles in both Canada and the US. The appellant claimed input tax credits on the basis that 1/3 of its supplies of insurance were zero-rated under Sched VI, Pt. IX, s. 2(d). The 1/3 figure came from its historical analysis that 1/3 of its payouts under the policies it issued respected perils that arose in the U.S. (i.e., the policies to that extent “relate[d] to risks that are ordinarily situated outside Canada.”) The Minister denied those ITCs on the basis that none of such financial services were zero-rated.
Graham J set the stage for his analysis by stating (at para. 21):
Insurance has two components: the object of the insurance and the peril which that object is insured against. If an insurer issues a policy insuring against the theft of a painting, the peril is theft and the object of the insurance is the painting. … If, like the Appellant, an insurer issues automobile insurance, “the insured objects include the owner, driver, and occupants of the motor vehicle, as well as the automobile itself and its contents, whereas the insured perils include accidental loss, damage, injury, or death; legal liability; theft; vandalism; and fire."
He then concluded (at para. 69):
“[R]isks” means the objects of an insurance policy. Paragraph 2(d) treats the supply of an insurance policy as zero-rated to the extent that those objects are ordinarily situated outside Canada. A multi-factor approach should be taken when examining where the objects are ordinarily situated. If a policy insures more than one object, any apportionment of the supply of that policy into exempt and zero-rated parts should occur on an object-by-object basis.
In dismissing the appeal, he stated (at paras 72 and 73):
…The Appellant’s apportionment between exempt and zero-rated was done on a global basis. … [S]ection 2 is a very unique section under which an apportionment happens within a given supply on an object-by-object basis. The Appellant should have made a separate apportionment for each policy on a vehicle-by-vehicle basis for the vehicles covered by that policy.
… I do not have any specific evidence regarding the individual policies in issue, let alone evidence regarding the vehicles covered by those policies. Without this evidence, it is impossible for me to determine whether the supply of any given policy was partly zero-rated. This lack of evidence is a sufficient basis for me to dismiss the appeals and I do so on that basis.
However, in describing how he might have applied s. 2 had the appropriate evidence been before him, he stated (at paras 75, 76, 77, 78, 79):
Assuming that the evidence before me is representative…, I would have found that those policies related to risks that were ordinarily situated in Canada, that the supply of each policy was entirely an exempt supply and that the appeals should therefore be dismissed.
… I would have started my analysis by looking at the objects of the insurance (i.e. the vehicles). I would have focused on both the number of days that each vehicle spent outside Canada and the percentage of the overall kilometers travelled by each vehicle that occurred outside Canada.
I would have found the fact that the vehicles were all insured using the standard insurance terms for Ontario vehicles to be a relevant factor. …
… I would have considered …relevant … the jurisdiction in which the owners of the fleets were based; the location where regular maintenance on the vehicles was conducted; the jurisdiction in which the drivers were licensed; and the location where the vehicles were kept when not in use.
I may also have considered the reason why the vehicles left Canada. …