A recent court case involving a brokerage and a landscaping company has once again put the spotlight on who is responsible for providing accurate insurance replacement costs.
Veert Landscaping Inc. and Veert Rentals Inc. alleged Ranger Insurance Brokers Ltd. failed to provide adequate insurance for Veert’s commercial buildings and contents, which were damaged in a fire in July 2002.
After hearing the case, a Manitoba court ruled in favour of Ranger Insurance Brokers Ltd.
The brokerage provided insured limits of $250,000 for the main shop of the business and $40,000 for the contents. Documents filed by the adjuster at trial showed the cost to rebuild the damaged shop would be more than $482,000, exceeding policy limits.
The owner of the landscaping business, Paul Veert, who was involved in the construction of the main shop along with the workforce of Veert Landscaping, argued that he had asked his broker and friend, Blaine Rhymer, to increase the insurance limits of his main shop to $350,000 and the contents beyond $40,000. According to Veert, Rhymer said the lower values would be fine, so Veert signed off on the lower limits.
However, the Manitoba Court of Queen’s Bench sided with Rhymer. “Mr. Veert’s account of what occurred makes no sense. Why would Mr. Rhymer dissuade him from insuring to a greater value when Mr. Ryhmer would benefit from earning a greater commission?”
In finding for Rhymer and his brokerage, the court ruled that it was sensible for Rhymer to rely on his client to provide accurate insurance replacement costs – especially when the policyholder had a hand in the construction of the building and the purchase of its contents.
“It seems unlikely that [Veert] would have determined the values of the contractors equipment and then defer to Mr. Rhymer on the insurance limits for the main shop and contents, particularly when he, and not Mr. Rhymer, was the person most familiar with these costs,” the court found. “He was the general contractor for the main shop and used Veert Landscaping labour. He was the person who purchased the contents. Why would he rely on Mr. Rhymer in these circumstances?”
