Routh Chovaz Insurance Brokers Inc. v. Aviva Insurance Company of Canada

[Indexed as: Routh Chovaz Insurance Brokers Inc. v. Aviva Insurance Co. of Canada]

Ontario Reports Ontario Superior Court of Justice, Dow J. May 25, 2016 131 O.R. (3d) 795 | 2016 ONSC 2567

Case Summary

Insurance — Brokers — Insurance broker mistakenly arranging for automobile insurance on behalf of owner for 2008 vehicle instead of 2010 vehicle which replaced it — Insurer refusing to cover loss and voiding policy when 2010 vehicle was involved in collision — Broker's errors and omissions insurer paying owner's claim and bringing subrogated action to recover that amount from insurer and for declaration that insurer had duty to defend and indemnify in respect of any personal injury claim arising from collision — Action dismissed on motion for summary judgment — Brokerage agreement providing complete defence to claim — Insurer owing no duty of care to broker.

RC, an insurance broker, arranged for automobile insurance with Aviva for a 2008 vehicle instead of the 2010 vehicle with which the owner had replaced it. After the 2010 vehicle was damaged in a collision, Aviva refused to cover the loss, voided the policy and returned the premium to the owner. RC's errors and omissions insurer paid the owner's claim and brought a subrogated action against Aviva to recover that amount and for a declaration that Aviva had a duty to defend and indemnify in respect of any personal injury claim arising from the collision. Aviva brought a motion for summary judgment dismissing the action.

Held, the motion should be granted and the action dismissed.

The brokerage agreement which governed the relationship between RC and Aviva contained terms which were a complete defence to the claim. Moreover, Aviva owed no duty of care to RC to determine the customer/insured's requirements.

Hunt v. Brandie (1998), 38 O.R. (3d) 154, [1998] O.J. No. 506, 107 O.A.C. 152, 1 C.C.L.I. (3d) 197, 36 M.V.R. (3d) 62, 77 A.C.W.S. (3d) 627 (C.A.), distd

Other cases referred to

Boudreau v. Ontario Soccer Assn., [2012] O.J. No. 3619, 2012 ONSC 4461, [2012] I.L.R. I-5319 (S.C.J.); Drader v. Sebastian, [2009] S.J. No. 214, 2009 SKCA 44, [2009] 9 W.W.R. 658, 72 C.C.L.I. (4th) 223, 324 Sask. R. 269, [2009] I.L.R. 1-4828, 176 A.C.W.S. (3d) 910; Hryniak v. Mauldin, [2014] 1 S.C.R. 87, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 51, 2014EXP-319, J.E. 2014-162, EYB 2014-231951, 95 E.T.R. (3d) 1, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 21 B.L.R. (5th) 248, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641, 2014EXP-319, J.E. 2014-162; Insurance Corp. of British Columbia v. Hosseini, [2006] B.C.J. No. 6, 2006 BCCA 4, 262 D.L.R. (4th) 233, 221 B.C.A.C. 94, 49 B.C.L.R. (4th) 250, 31 C.C.L.I. (4th) 157, 146 A.C.W.S. (3d) 354; Ostenda v. Miranda (2012), 113 O.R. (3d) 701, [2012] O.J. No. 6162, 2012 ONSC 7346, [2013] I.L.R. I-5379, 17 C.C.L.I. (5th) 248, 223 A.C.W.S. (3d) 1031 (S.C.J.) [page796]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 14

MOTION for summary action dismissing an action.

Marina Stoeva, for plaintiff. Christopher Reain and Christopher Sctchmer, for defendant.

DOW J.: —

[1] The defendant, Aviva Insurance Company of Canada ("Aviva"), seeks summary judgment dismissing the action by the plaintiff, Routh Chovaz Insurance Brokers Inc. ("Routh Chovaz"), on the basis there is no cause of action. The plaintiff opposes the motion but did not strenuously object to the application of the principles set out in Hryniak v. Mauldin, [2014] 1 S.C.R. 87, 2014 SCC 7.

Background

[2] In June 2013, Waqar Zaidi requested Routh Chovaz change the 2008 Mercedes Benz CL-320 it had arranged to be insured with Jevco to the 2010 Mercedes Benz CL-350 Waqar Zaidi had acquired. Routh Chovaz admits it received the request, issued a new motor vehicle liability insurance card (or pink slip) to Waqar Zaidi but failed to process the change with Jevco. When the policy came to be renewed in March 2014, Routh Chovaz arranged for automobile insurance with Aviva on behalf of Waqar Zaidi and bound Aviva to insure the 2008 Mercedes Benz CL-320. The annual premium was $2,073, which was paid by Waqar Zaidi to Aviva.

[3] On October 2, 2014, the Zaidi vehicle rear-ended a Chrysler Pacifica operated by Charaf Basemeh resulting in property damage to the 2010 Mercedes Benz CL-350. The damage was repaired along with a replacement rental expense in the amount of $23,658.31. There is also an exposure to a personal injury claim by the occupants of the Chrysler Pacifica and any passengers in the 2010 Mercedes Benz CL-350, which has yet to materialize.

[4] Aviva took the position it did not cover the loss and voided the policy, refunding Waqar Zaidi the entire policy premium by the end of October 2014. Routh Chovaz errors and omission insurer paid the claim of Waqar Zaidi and now subrogates in the name of Routh Chovaz seeking recovery of this amount from Aviva along with a declaration of Aviva's responsibility to defend and indemnify for any personal injury claims in accordance with [page797] the terms of the policy of automobile insurance Aviva issued with regard to the 2008 Mercedes Benz CL-320.

[5] It is also known that, had Aviva been advised of the proper year and model of the vehicle sought to be insured, Aviva would have insured that vehicle and the additional premium would have been $71. The relationship between Routh Chovaz and Aviva is governed by a brokerage agreement dated June 15, 2011 between Aviva and Prolink Broker Network Inc. ("Prolink"). Prolink is a group of about 40 Ontario and five Alberta insurance brokerage companies (according to Appendix "1" Schedule E to the brokerage agreement). The disclosure statement produced states "Routh Chovaz Insurance Brokers Inc. is an independent insurance broker principally owned by active employees of the company. Prolink Broker Network owns a minority interest". The disclosure statement lists 14 insurers including Aviva whom Routh Chovaz can bind to contracts of insurance and sets out the compensation to the broker for policies written.

Issues

[6] In my view, the issues to be determined is whether Routh Chovaz has a cause of action against Aviva in contact, tort or as declaratory relief (which it put forward either under Rule 14 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 or the legal doctrine of recoupment).

Issue -- Contract

[7] The first contract to consider is the contract of automobile insurance. Routh Chovaz is not a party to that contract and thus it does not apply. Routh Chovaz did not take an assignment of any claim Waqar Zaidi may have had against Aviva and Waqar Zaidi is not the plaintiff in this action. Aviva's position today is the contract of automobile insurance was void given Waqar Zaidi did not have and thus could not insure a 2008 Mercedes Benz CL-320. To that end, it refunded the entire premium to Waqar Zaidi. (It should be noted it provided a choice to Waqar Zaidi, the alternative being Aviva would proceed to cancel the policy given its awareness of the actual factual situation which would not have resulted in a refund of the entire premium.) My conclusion is the contract of automobile insurance does not apply or assist the plaintiff.

[8] The other contract is the brokerage agreement and it contains clauses which, in my view, place the situation outside the case law upon which Routh Chovaz relies. As I understood the submissions of counsel for Routh Chovaz, it primarily relied on the decision in Hunt v. Brandie (1998), 38 O.R. (3d) 154, [1998] O.J. No. 506 (C.A.). [page798] In that matter, the insurance broker, Brandie, improperly issued a policy of snowmobile insurance to the plaintiff, Hunt, binding the insurer, Commercial Union. Brandie, like Routh Chovaz in this situation, had the authority to bind the insurer and did so. When Hunt operated the snowmobile resulting in injuries to another person, Commercial Union was held responsible to defend and indemnify Hunt.

[9] What the decision does not deal with (and may have been the basis for the existence and terms) of the brokerage agreement are the following clauses:

2.6 The Brokerage is an independent contractor, not an employee of the Company, and subject to the terms of this Agreement, shall have exclusive control of its time, the conduct of its business and the selection of companies it represents;

8.1 Except as otherwise provided below, the policyholder shall be regarded as a client of the Brokerage. Policy Information pertaining to the Policy sold by the Brokerage on behalf of each Company shall be and remain the property of the Brokerage;

10.1 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;

10.3 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.

[10] Given the facts detailed above and the contractual terms between the parties, I conclude the contract between the litigants provides a complete defence to the claim by Routh Chovaz against Aviva in the circumstances.

Issue -- Tort

[11] Was there any duty of care owed by Aviva to Routh Chovaz and was it breached? The parties both relied on Drader v. Sebastian, [2009] S.J. No. 214, 2009 SKCA 44, where the Saskatchewan Court of Appeal set aside the finding by the trial judge of a duty (and 50 per cent liability) on the third party insurer. In that case, the agent placed insurance between the [page799] plaintiff/insured and insurer which did not cover the loss which occurred (that is, damage and loss to a Swarovski collection of crystal figurines).

[12] Both parties rely on the text, Insurance Law in Canada, which states should a "customer be denied a claim because an agent . . . has failed to transmit information properly to the insurer, s/he may be able to turn instead to the intermediary for redress. On the other hand, an insurer might find itself bound to pay a claim by a customer it would not have insured in the first place had it known facts that were not passed on." Aviva relies on the first phrase and Routh Chovaz relies on the latter pointing to the fact Aviva would have insured the 2010 Mercedes Benz CL-350 if told but would have charged an additional $71 premium. This decision has been relied on in Ontario by Justice Lofchik in Boudreau v. Ontario Soccer Assn., [2012] O.J. No. 3619, 2012 ONSC 4461 (S.C.J.), where, at para. 25, he states, "When dealing with an experienced broker, the insurer owes no personal duty directly to the insured; the insurers only obligation to the insured is to issue a policy in accordance with the application submitted."

[13] I was also directed to Ostenda v. Miranda (2012), 113 O.R. (3d) 701, [2012] O.J. No. 6162, 2012 ONSC 7346 (S.C.J.), where Justice Stinson logically points out (in paras. 44-48) that insurance brokers are a regulated industry with codes of conduct and obligations. They assess customers' insurance needs and obtain policies to meet the insured's needs for which the broker is paid. 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 a result, I agree and hold that there should not be a duty imposed on Aviva in these circumstances and thus no duty was breached.

Issue -- Recoupment

[14] This is an equitable remedy sought alternatively as part of the common law and akin to restitution or, alternatively, under the declaratory power of this court with Rule 14 providing examples. It was the submission of Routh Chovaz that apart from claims in contract or negligence, it had a right to indemnity and/or reimbursement as a just and reasonable remedy. The decision of Insurance Corp. of British Columbia v. Hosseini, [2006] B.C.J. No. 6, 2006 BCCA 4 was relied on and the statement (in para. 32) that where an "agent has been negligent in its dealings with an insured, the insurer will not be entitled to [page800] indemnity as against the agent, except for the premium if the risk would have been accepted in any event".

[15] While there is an attraction to this submission, in my view, it is dealt with and contradicted by the terms set out in the brokerage agreement. I am reinforced in this conclusion by the fact the litigants acknowledge Waqar Zaidi was indemnified for his loss by the errors and omission insurer of Routh Chovaz. Were this submission to succeed, in my view, it would mean the terms of the brokerage agreement are to be ignored, and there would be little basis or need for Routh Chovaz to have errors and omissions insurance.

Conclusion

[16] As a result, the defendant is successful and the action against it is dismissed.

Costs

[17] At the conclusion of these submissions, counsel discussed and advised they had reached an agreement that the successful party should be entitled to costs in the amount of $13,000, inclusive of fees, HST and disbursements, and that this amount be payable forthwith. I agree with this proposal and it is so ordered.

Motion granted; action dismissed.

End of Document