Broker E&O defence lawyers can breathe a sigh of relief.
Plaintiffs in auto insurance cases must still prove that a broker’s failure to offer optional accident benefits actually caused their clients harm, the Ontario Court of Appeal recently ruled, upholding a longstanding principle of law.
Case law is littered with examples in which brokers are found to be negligent for not offering optional insurance benefits to their clients. Nevertheless, the negligent brokers win the case, because their clients can’t show the negligence affected their decision. For example, if a broker neglected to offer accident benefits to a client, the client isn’t harmed if it can be shown that he or she would have rejected the benefits anyway.
A recent case, Zefferino v. Meloche Monnex Insurance Company (a direct writer), challenged that longstanding legal principle. (continued)#pb#
In a motor vehicle accident on May 27, 2005, the plaintiff, Nicola Zefferino, suffered personal injuries that prevented him from gainful employment. Under the standard policy terms, Zefferino received the statutory minimum income replacement benefit of $400 per week.
He argued at trial that Meloche Monnex Insurance didn’t offer him optional income replacement benefits. Had they been offered, he would have qualified him for $1,000 per week. Meloche’s negligence left him under-insured, he told the court.
The Ontario Superior Court didn’t buy the argument. Zefferino appealed the decision to the Ontario Appeal Court.
“[Zefferino] submits that on a claim arising out of insurance broker negligence, the plaintiff need not prove that the acts or omissions of the insurer caused the loss,” the court judgment said. “In her very helpful submissions, [Zefferino’s lawyer Jane Poproski] argues that the insured need only show that the insurer had a duty to inform the insured, that it breached its duty of care and that there was a gap in coverage.”
The sophistication of insurance contracts means the usual requirement to establish that the broker’s negligence caused the plaintiff harm is waived, Poproski argued before the Court of Appeal.
But the Appeal Court found otherwise, saying the trial judge’s findings of fact include whether or not Meloche’s negligence actually caused the client harm.
“He found as a fact, after assessing the evidence in a procedure agreed to by [Zefferino], that [Zefferino] would not have purchased the additional insurance,” the Appeal Court ruled. “In our view, the trial judge carefully reviewed the relevant facts and reached a conclusion that was open to him.
“He noted that [Zefferino] had never before purchased anything other than basic automobile insurance coverage and that according to the insurer’s records, [Zefferino]’s wife indicated that optional coverage was declined because there was no need.
“[The trial judge] also drew, permissibly in our view, an adverse inference against [Zefferino] because his wife, who dealt with [Meloche Monnex] representatives, provided no evidence about her dealings with those respondents.”
