A brokerage’s three-step process to inform a client about optional income replacement benefits did indeed meet the standard duty of care a broker owes to a client, a court has confirmed.
James Godina sued Tripemco Burlinton Insurance Group Limited, alleging that the brokerage had failed to advise him properly about the purchase of optional income replacement benefits.
Godina had dealt with Tripemco for auto insurance coverage between 1999 and 2004. At that time, the standard minimum amount of income replacement benefits was $400 per week. Optional coverage for purchase was available at levels of $600, $800 and $1000 per week, if the insured earned sufficient income to qualify.
Godina did not purchase the optional coverage and was permanently disabled in a serious accident in December 2004. At the time of the accident, Godina earned enough income to be able to purchase optional benefits.
Godina found out at the time of the accident that his income would have qualified him for the optional $600 benefit level.
Relying on the Statutory Accident Benefits Schedule (SABS), Godina said Tripemco should have requested information about his financial circumstances at his last policy renewal in June 2004 prior to the December 2004 accident. Then it should have used his income to make an assessment of his needs and offer the income replacement benefits.
He argued that the brokerage owned him a strict duty of care as outlined in the SABS: “Every insurer shall offer the following optional benefits: [...] optional income replacement benefit [...].”
But this requirement applies to insurers, not brokers, the court found.
“As to the plaintiff’s argument that s. 27 of the SABS imposes a strict statutory duty, I note that the statutory duty is specifically on insurers,” the Ontario Superior Court of Justice ruled. “Tripemco is an insurance broker and does not fall within the definition of ‘insurer’ found in the Insurance Act.
“It is not reasonable that a standard of care should be imposed on an insurance broker based solely on a statutory duty applicable to insurers without specific authority for doing so.”
Furthermore, the court found, Tripemco did indeed meet its duty of care to inform Godina about income replacement benefits.
For example, the brokerage had sent out a renewal notice form letter in April 2004, in which it recommended that Godina increase his accident benefits coverage “to suit [his] individual needs.”
In addition, brokerage representatives testified that anytime they dealt with Godina, “they followed their invariable practice of explaining the optional benefits and asking whether the basic benefits would be sufficient in the event of injury,” the court found.
Once a broker has explained the coverage and inquired about whether the minimum amount would be adequate in the event of an accident and subsequent disability, if a client declines the coverage, there is no continuing obligation to make further recommendations or to quote the additional premium.
“I am satisfied that the defendant fulfilled its duty to inform the plaintiff about the availability and advisability of optional coverage through its explanation of the available minimum coverage, the calculation of how benefits are paid and its inquiry about whether the plaintiff’s current coverage would be adequate,” the Ontario Superior Court ruled.
