Proper Formation Is Fundamental To The Insurance Contract

Most insurance coverage disputes involve policy language that fails to define clearly the respective rights and obligations of the parties. In a recent case, however, the British Columbia Supreme Court needed to take an additional step—it first had to determine which documents comprised the insuring agreement before it could interpret the policy's language. This case, Sunburst Skylights Ltd. v. Lloyd's Underwriters, highlights the importance of establishing that the policy wording is clear and that the insurance contract is properly formed at the outset.

In this case the Court heard that the plaintiff insured three separate business locations under one property insurance policy. The cost of the premium was based on the aggregate or combined value of those three locations. The broker and the insured jointly established values for each of the three locations of insured property. Once these were set, and after the one-year term of the policy started, a previously issued