regulated in terms of who can undertake these roles and what functions they can do
if intermediary is acting on behalf of the insurer or whom the insurer is holding out or representing as his agent, insurer may be found liable for his acts
law of intermediaries matters in QC; doesn’t matter in CML
1458. Every person has a duty to honour his contractual undertakings; Where he fails in this duty, he is liable for any bodily, moral or material injury he causes to the other contracting party and is bound to make reparation for the injury; neither he nor the other party may in such a case avoid the rules governing contractual liability by opting for rules that would be more favourable to them.
In CML: law of agency
Even though the person might be called insured in other provinces, the question is for whom is the person acting? Who is the principle: the insured or insurer?
Generally in QC ‘courtier’ is acting for insured, ‘agent’ is acting for insurer
The term ‘broker’ is more ambiguous and debated about side they are on
Mostly the broker is acting for the insured
Also must look at the roles being performed by intermediary
Look for indiciae of authority
We assess whose side the intermediary is on at the moment that we identify what the flaw in the transaction is
Intermediaries – Agent held liable to insured; breach of K and Torts
F: Damages arised to Fine’s flowers from the shut-down of the heating system in the plaintiff's greenhouses. The agent had arranged boiler and machinery coverage with the defendant insurer: Fine’s wanted “full coverage”. No insurance was placed on the water pumps and motors which pumped water from the wells into the storage tank which supplied water to the boilers. The fact was brought to the agent's attention by the insurer (the Ir had offered a different policy to cover the risk of failing water pumps) but it did not consider it necessary to so inform the plaintiff. The heating system failure was due to wear and tear and the loss was not covered by the policy. Furthermore, Fine’s had a relationship with its agent for a very long time.
I: Is the agent’s failure to arrange proper insurance protection against this event make him liable? Is he liable in Torts or K?
Held: Yes. K.
R (Wilson J.A.):
The plaintiff was relying upon the agent to see that he was protected against all foreseeable, insurable risks.
The only risk insured against as far as the heating system in the greenhouses was concerned was damage to the boilers themselves.
If an agent was unable to obtain insurance for his principal in accordance with his instructions, he was under a duty to report this to his principal. He could not stand by and let his principal assume he was covered. Still less could he lead him to believe that he was covered.
Full coverage meant coverage against all foreseeable insurable risks and the risk which the agent failed to protect the plaintiff against was both foreseeable and insurable.
The agent was therefore in breach of its contract and its breach was the cause of the plaintiff's loss. Estey, C.J. would have found the agent liable on the grounds of negligence and breach of equitable duty rather than on the law of contract.
Even though wear and tear would never have been covered, facts reveal that the Ir had sent a letter inquiring whether the additional coverage on motors and pumps required.
So the agent was wrong, because the Agent was acting as the mandatory of Fine. So he breached his mandate to obtain full coverage.
Because of the long-term relationship, he ought to have known that this was a key element of the operation.
He failed to advise Fine’s of the gap in coverage.
Additional point: is there consideration?
Consideration to agent is hidden inside the payment of the premium.
Concurring: (Estey J.):
Finds it more difficult to find a meeting of the minds and determine what the intentions of the parties were.
Failure to report the coverage when it was not present
Also considers 3rd possibility: Equity.
Is there a fiduciary relationship. If yes, then the Agent must act in the best interest of the client.
Remedy: Disgorge the profit.
Ratio: An agent can be personally liable in torts or in contract for the damages sustained by an insured due to the agent’s failure to act properly as the insured’s mandatory or diligently.
Comment:(1) Look a Consolidated Bathurst because the facts are similar. (2) The agent should have known what the client needed. Where there is a mandate, you must look at what was included in the mandate to find Agent’s breach and cause him to be liable for the damages. In the current law, agent is obligated to be aware and know the insured’s business.
Class Notes
Leading case on the personal responsibility of the agent
We understand that representative is acting on the behalf of the insured
Id operates Fine’s Flowers. Had policy for boiler heating system. Has used the agent himself for a long time. Id asks agent to obtain full coverage – an all inclusive policy for any risk of damage. Agent gets policy with exclusion for wear and tear and water pump. Pumps seized up – boilers didn’t have enough water and heat went off in the greenhouse.
Facts reveal that agent knew about limitations and did not informed Id.
Irrespective of whether liability arises out of contractual obligation or tort, there was an on going relationship of longstanding between the insured and the intermediary
The agent, if purchasing insurance on behalf of insured, is required to know the insured’s business or to know what the insured means
Presumption of minimal knowledge
The agent:
Failed to inform himself of what the client needed
Failed to get coverage for what the client requested
Failed to advise client about the coverage he did obtain and the gaps in the coverage
All of the failures went against the special relationship and constituted the liability for the agent
Audio Works v Canadian Northern Shield Insurance Co. 31 C.C.L.I. 240 - CML
Intermediaries – Agents have a duty to provide quality service and advice. Divergence in application and policy must be disclosed to Insured in writing. Applies to both Insurer and Agents (Wagner).
Facts: The insured was in the business of providing audio-sound equipment to various venues. The insured's audio-sound equipment was damaged while in transit to such a venue during a motor vehicle rollover. The defendant insurer, Canadian Northern Shield Insurance Company ("CNS"), refused to indemnify the insured for the loss on the basis that the policy did not cover this type of risk. The insured had sought insurance coverage for its audio-sound equipment on and off premises and while "in transit", and for replacement cost coverage. Bosko / LDM represent the Id. McL / Wagner represent the Ir. D Both sets of intermediaries engage in negligent acts.
Issue: Are the insured’s covered for in-transit risks? If so, who is liable for coverage?
Held: Yes. Insurer’s agent, insurer, and the insured’s agent.
Reasoning:
The insured’s agent Wagner did not advise the insured's insurance agents that the CNS policy would not include "in transit" coverage or replacement cost coverage.
On the basis of common law, the insured and its agent were entitled to rely on the insurer and its agent to provide the insurance coverage for which the insured had applied, unless the insurer advised, in writing, of the material differences between the application for insurance and the policy. In failing to do so, the insurer and its agent breached the duty of care owed to the insured.
Since it is a multi-risk policy and not a fire insurance policy, there was no statutory requirement to inform the insured in writing about a material change in the policy. However, based on the jurisprudence relied upon by the plaintiff, the insurer owed a duty of care to the insured in the circumstances of this case and the insured and its agent were entitled to rely on the insurer and its agent to provide the insurance coverage for which it had applied, unless the insurer advised, in writing, of the material differences between the application for insurance and the policy.
CNS, as principal, was vicariously liable for the negligence and breach of contractual obligations of its agents to the plaintiff's agents, and hence to the plaintiff.
Also the language of the policy with respect to whether the policy included "in transit" coverage was ambiguous and confusing. As such, the Court concluded that the ambiguity should be interpreted in favour of the insured, and that the CNS policy included "in transit" coverage contra proferentem
In addition, the insured's insurance agents were also personally liable in failing to adequately read the policy and advise the insured of the lesser coverage (re: replacement value v. cash value).
Agent tries to say: Ir, you didn’t check up on me so it’s your fault that I didn’t notify of the divergence. Ct does not consider this. Agent cannot fail to do its job and then claim a failure to supervise.
Lastly, the insured was not contributorily negligent in failing to read the policy of insurance as it was entitled to rely upon the expertise and advice of its agents and to assume that it would receive the coverage for which it had applied.
Ratio: (1) Robitaille rule is upheld in the CML. (2) Insurer is liable for the negligence or breach of contractual obligations of its agents. (3) Negligence on the part of the insured’s agent can also make him liable. (4) Ambiguity resolved through contra proferentem (5) Failure to supervise insurer’s agent not valid defense by insurer agent (6) Insured is entitled to rely upon its agent and thus will not be held contributorily negligent for failure to read policies (slightly different in QC).
Class Notes
You have presence of agent acting for the insured, and an agent acting for the insurer and they both ‘goof up’
Representative of the insured lost his license…
You have a combination of a Hadley Shipping situation, you had a situation of intermediary mess up, you also have some interesting reflection on the classification issue (KP Holdings)
Person acting for the insured can’t oppose a statement by saying the insured failed to act diligently
2504. No transaction made without the consent of the insurer may be set up against him.
We’re under liability insurance here
Doesn’t really apply to subrogation because of case
But if this is done, it does not mean that the coverage is eliminated between the insurer and insured
Allstate cie d’assurance c. General Accident cie d’assurance[2001] R.J.Q. 10 (CA) - CVL
Subrogation – CCQ 2474, 2501 – subrogation prevents recourse against members of the household
Facts: Damage to father’s house caused by son, who is insured. Father’s insurance pays indemnity, and then this insurer sues his son (person causing the damage who has a separate insurer) under CcQ 2501.
Issue: Can Allstate Insurance bring a claim against the insurer of a third party who is a member of the household of their insured?
Held: No.
Reasoning:
In QC, the right of subrogation is denied against all persons close to the insured. In addition, if the legislator per CcQ 2472 wanted to avoid proceedings between family members, this action risks failing the objective of the legislator as in the proceedings, family members will likely be testifying for adverse parties. For example, a father would be called to expose the faults committed by his son, while the son could claim having acted in an irreproachable way. We’ll essentially be doing indirectly what the legislator wanted to avoid directly.
CcQ 2474 declares that there is no subrogation in these types of situations – the right is never born, it does not exist and it is not just the recourse that has been paralyzed. CcQ 2501 is dependant on the existence of a right of action against responsible third parties. It is an recourse which presupposes a link in rights between the victim and third parties (but since right is never born, can’t be used!).
Ratio: (1) The insurer can never be subrogated into the rights of the insured against persons who are members of the household of the insured even if the action would be against that individual’s insurance company. (2) Not only is recourse just not allowed, the right never comes into existence. (3) The obligation of the legislator in drafting CCQ 2474 was likely to avoid all conflict and proceedings between family members.
Comment:
2474. The insurer is subrogated to the rights of the insured against the person responsible for the loss, up to the amount of indemnity paid. The insurer may be fully or partly released from his obligation towards the insured where, owing to any act of the insured, he cannot be so subrogated. The insurer may never be subrogated against persons who are members of the household of the insured. 2501. An injured third person may bring an action directly against the insured or against the insurer, or against both. The option chosen in that regard by the injured third person does not deprive him of his other recourses.
