Kosmopoulos V. Constitution Insurance Co. of Canada - Background

Background

Mr. Kosmopoulos had a leather goods company for which he was the sole shareholder and director. His lease for the company office was under his own name from when he originally ran the business as a sole proprietor. The insurance on the office, however, was in his own name. His insurance agency knew that he was under the lease and himself but carried on business as a corporation. A fire in a neighbouring lot damaged his office; however, the insurance company refused to cover his damages.

Under the common law, as established by Salomon v. Salomon, corporations are entirely separate entities from those who run it, and thus contracts made by the company cannot apply to anyone but the company itself.

corporation has the capacity and, subject to this Act, the rights, powers and privileges of a natural person."]

At trial the judge held that Mr. Kosmopoulos could not recover damages as owner for the assets of the business as they were owned by the company and not him, but that he could recover as insured because of his insurable interest in the building. This ruling was upheld on appeal, with the court noting that as companies could, thanks to recent laws, have a sole shareholder, Macaura could be restricted to cases involving multiple shareholders.

The issue before the Court was whether the assets of Mr. Kosmopoulos, as shareholder, were covered by the insurance.