In the recent case Routh Chovaz Insurance Brokers Inc. v. Aviva Insurance Company of Canada, 2016 ONSC 2567, the court granted summary judgment to Aviva, dismissing an action brought by an insurance broker.
The case concerned the insurance policy of a Mercedes. In June 2013, Waqar Zaidi requested that his broker, Routh Chovaz, change the coverage he had arranged with Jevco from the 2008 Mercedes Benz CL-320 to the 2010 Mercedes Benz CL-350 he had recently purchased. Routh Chovaz received the request and issued a new motor vehicle liability slip to Mr. Zaidi but did not confirm the change with Jevco.
When the policy was up for renewal in March 2014, Routh Chovaz arranged for coverage with Aviva on behalf of Mr. Zaidi in respect of the 2008 Mercedes Benz, again failing to remedy the coverage to reflect the fact that the vehicle was a different year and model.
In October 2014, Mr. Zaidi rear-ended another vehicle, resulting in damage to the 2010 Mercedes as well as exposure to a personal injury claim by the occupants of the other vehicle.
Aviva took the position that it did not cover the loss and voided the policy, returning the premiums paid to Mr. Zaidi. The Errors and Omissions Insurer of Routh Chovaz paid the property damage claim of Mr. Zaidi and commenced a subrogated claim against Aviva for the property damage amount and also a declaration that Aviva must defend and indemnify for any personal injury damages in accordance with the policy issues in respect of the 2008 Mercedes.
It was accepted by Aviva that it would have insured the vehicle had they been advised of the proper year and model of the vehicle. The additional premium would have been $71.
The issue before the court on this motion for summary judgment was whether Routh Chovaz had a cause of action against Aviva in contract, tort, or declaratory relief.
The relationship between Routh Chovaz and Aviva was governed by a Brokerage Agreement. The court determined that the Brokerage Agreement provided a complete defence to the claim by Routh Chovaz against Aviva.
Notably, section 10.1 stated “Each Company shall indemnify and hold the Brokerage harmless from and against all costs, expenses, claims, suits, demands or actions (the “Actions”) including reasonable legal fees and expenses of investigation and defence incidental thereto, arising as a direct result of its negligent acts or omissions, to the extent that the Brokerage has not caused, contributed or compounded to such liability by its own acts or omissions.
Furthermore, section 10.3 stated “The Brokerage shall indemnify and hold each Company harmless from and against all Actions, including reasonable legal fees and expenses of investigation and defence incidental thereto, arising as a direct result of the negligent acts or omissions of the Brokerage, to the extent that the Company has not caused or contributed to such liability by its own acts or omissions.”
The court then considered whether a duty of care was owed by Aviva to Routh Chovaz and whether that duty was breached.
The court referenced the decision in Boudreau v. Ontario Soccer Assn., 2012 ONSC 4461, in which the court held that, when dealing with an experienced broker, the insurer does not owe a personal duty directly to the insured. The insurer’s only obligation is to issue a policy in accordance with the application submitted by the broker.
The court also cited the decision of Ostenda v Miranda, 2012 ONSC 7346, and highlighted the fact that “insurance brokers are a regulated industry with codes of conduct and obligations. If the law imposed a duty on the insurer to determine the customer-insured’s requirements, duplication of effort would result, presumably at the expense of the consumer-insured.” As such, the court held that a duty should not be imposed on Aviva in these circumstances.
Routh Chovaz submitted that it had a right to indemnity and or reimbursement as a just and reasonable remedy. It cited the British Columbia Court of Appeal decision Insurance Corp. of British Columbia v Hosseini, 2006 BCCA 4 which held that where an “agent has been negligent in its dealing with an insured, the insurer will not be entitled to indemnity as against the agent, except for the premium if the risk would have been accepted in any event.” Routh Chovaz submitted that Aviva would have insured the vehicle had they been advised of the proper year and model of the vehicle.
The court ruled that this position was contradicted by the terms set out in the Brokerage Agreement, specifically 10.1 and 10.3 referenced above. The court noted that Mr. Zaidi was indemnified for his property damage losses by the errors and omissions insurer and commented that, were it to ignore the terms of the Brokerage Agreement, there would be little basis or need for Routh Chovaz to carry errors and omissions insurance.
Accordingly, the court granted Aviva summary judgement.
This decision affirmed the importance of contractual provisions relating to obligations and liabilities of the broker and insurer. Furthermore, it provides clarity as to whether an insurer must determine the requirements of the customer-insured. It stands for the principle that the insurer will fulfill its duty by issuing a policy which satisfies the application submitted by the broker.