CANADA Law and Practice Contributed by: Chris McKibbin, Avi Sharabi, Alex Valova and Douglas Treilhard, Stieber Berlach LLP
ways that enhance transparency and efficiency, while also building trust and reliability. 4.2 Policy Wordings and Interpretation Developments The Supreme Court of Canada has adopted principles of insurance contract interpretation outlined below. • The primary interpretive principle is that when the policy language is unambiguous, the court should give effect to the clear language by reading the contract as a whole. • When the insurance policy language is ambiguous, courts rely on general rules of contract construc- tion. For example, courts should prefer interpre- tations that are consistent with the reasonable expectations of the parties, so long as such an interpretation can be supported by the text of the policy. Courts should avoid interpretations that produce unrealistic outcomes or were not contem- plated by the parties when the policy was made. Additionally, courts strive for consistent interpre- tation across similar insurance policies. These construction rules resolve ambiguity, not create it where none exists. • Only when these rules of construction fail to resolve the ambiguity will courts construe the policy contra proferentem — against the insurer. One corollary of the contra proferentem rule is that courts interpret coverage provisions broadly and exclusion clauses narrowly. Notably, there is no presumptive rule that insurance policies are always to be construed contra profer- entem, notwithstanding that some courts have char- acterised them as contracts of adhesion. No special rules govern the interpretation of endorse- ments or riders; they must be read consistently and harmoniously with the policy as a whole. An endorse- ment or rider which expands a specific grant of cover- age does not automatically nullify a clear and unam- biguous exclusion found elsewhere in the base policy wording. Canadian courts, including the Supreme Court of Canada, have been circumspect in applying the “nul- lification of coverage” rule. As applied in Canada, the
nullification rule prevents insurance contracts from being construed to defeat the very coverage the policy provides, thereby defeating the objective of the insur- ance contract and rendering it nugatory. 4.3 Cyber and Technology-Related Coverage Issues Key disputes arising in relation to cyber risks and technology failures include: • the availability, scope and valuation of business interruption losses for direct network interruptions; • the availability, scope and valuation of business interruption losses where losses are attributable to widespread IT vendor or cloud provider outages (ie, systemic cyber risks), rather than direct net- work interruptions; • the scope of privacy-related wrongful acts (a chal- lenge which has led some insurers to tailor the definition of privacy breach to delineate the spe- cific statutory and common-law bases of potential insured liability that the insurer agrees to cover); • adjusting and quantifying losses where coverage is arguably available under more than one insuring agreement; and • as discussed in more detail in 4.9 Financial Lines Coverage Trends , many cyber insurers have incorporated first-party social engineering fraud, computer fraud and funds transfer fraud coverages into cyber liability offerings, leading to instances of overlapping coverage with financial institution and crime coverages. Driven by events such as the 2024 CrowdStrike out- age and Canada’s own Rogers outage in 2022, some insurers have stepped forward to offer systemic cyber risk coverage. These widespread disruptions have given carriers a baseline to price that risk. Coverage litigation has been driven by contentions that a loss triggers more than one insuring agreement. In one 2025 Ontario decision, the insured was target- ed by a ransomware attack and sought indemnity for expenses including the purchase of 140 replacement laptops to prevent reinfection of its repaired network. The insurer contended that the loss was subject to a CAD3 million retention under a Ransomware Sub- limit Endorsement, while the insured contended that
48 I NSURANCE L I T IGATI O N 2026
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