Ontario Superior Court of Justice

1355632 Ontario Ltd. et al. v. Brister Insurance Brokers Ltd., c.o.b. Brister Group, et al. [Indexed as: 1355632 Ontario Ltd. v. Brister Insurance Brokers Ltd.]

111 O.R. (3d) 74
2012 ONSC 2089

Ontario Superior Court of Justice,
Johnston J.

April 2, 2012

Employment -- Liability of employee -- Plaintiff suing insurer and insurance broker for breach of contract, inducing breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty -- Plaintiff pleading that it had 11- year relationship with broker and relied on him as its agent -- Defendants moving to strike statement of claim against broker on ground that it disclosed no reasonable cause of action as broker was employee of insurer and had no individual duty of care to plaintiff -- Motion dismissed -- Cause of action against broker having some chance of success based on allegations in pleadings.

Insurance -- Brokers -- Plaintiff suing insurer and insurance broker for breach of contract, inducing breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty -- Plaintiff pleading that it had 11-year relationship with broker and relied on him as its agent -- Defendants moving to strike statement of claim against broker on ground that it disclosed no reasonable cause of action as broker was employee of insurer and had no individual duty of care to plaintiff -- Motion dismissed -- Cause of action against broker having some chance of success based on allegations in pleadings. [page75 ]

The plaintiff obtained a commercial insurance policy through H, an insurance broker and employee of the insurer. The plaintiff subsequently brought an action against the insurer and H for damages for breach of contract, inducing breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty. The defendants brought a motion to strike the claim against H on the basis that it disclosed no reasonable cause of action or, alternatively, on the basis that it was frivolous, vexatious or an abuse of process. They argued that H was not a necessary party as the insurer would be vicariously liable for him and that H, as an employee of the insurer, owed no individual duty of care to the plaintiff.

Held, the motion should be dismissed.

The plaintiff pleaded that H was its insurance broker for 11 years, that the policy of insurance was renewed annually after consultation with H and that it relied on H as its agent. The cause of action against H had some chance of success based on those allegations.

MOTION by the defendants to strike the claim against the individual defendant.

Cases referred to
Islington Village Inc. v. Canadian Imperial Bank of Commerce, [1992] O.J. No. 1940, 12 C.P.C. (3d) 331, 35 A.C.W.S. (3d) 644, 1992 CarswellOnt 368 (Gen. Div.) ; Ledingham v. Smith, Court File No. 68909/92 (Gen. Div.), distd
London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 41 (SCC) , [1992] 3 S.C.R. 299, [1992] S.C.J. No. 84, 97 D.L.R. (4th) 261, 143 N.R. 1, [1993] 1 W.W.R. 1, J.E. 92-1650, 18 B.C.A.C. 1, 73 B.C.L.R. (2d) 1, 43 C.C.E.L. 1, 13 C.C.L.T. (2d) 1, 36 A.C.W.S. (3d) 669, consd
Other cases referred to
Shaeen v. Meridian Insurance Group Inc. (2011), 105 O.R. (3d) 375, [2011] O.J. No. 1607, 2011 ONSC 1578 , [2011] I.L.R. I- 5128, 97 C.C.L.I. (4th) 116 (S.C.J.)

Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194 , rules 21, 21.01 , (1) (b), (3) (d)

Marcus Boire, for plaintiffs.
Pasquale Santini, for defendants.

Reasons for Decision

[1] JOHNSTON J.: -- This is a motion by the defendants seeking orders striking out the plaintiff Mary Daw's claim as it discloses no reasonable cause of action and, second, an order striking out the plaintiff's claim against Gord Hawn as it discloses no reasonable cause of action or, alternatively, it is frivolous, vexatious or an abuse of process.

[2] At the outset of the motion, the parties agreed that the plaintiff Mary Daw's claim against the defendants be dismissed without costs. Therefore, the only remaining issue is the defendants' motion to strike the plaintiff's claim against Mr. Gord Hawn. [page76 ] The Facts

[3] The plaintiff 1355632 Ontario Ltd. obtained a commercial insurance policy through the defendant Gord Hawn, an insurance broker and employee of the defendant Brister Group.

[4] The commercial insurance policy was with the Dominion General Insurance Company of Canada and was on the property located at 3552 County Road 26, in the Municipality of Maynard, in the Province of Ontario.

[5] On or about January 23, 2011, the premises were damaged by fire and the plaintiff put forth a claim under its insurance policy for damages arising from the fire.

[6] The plaintiff commenced an action against the defendants for breach of contract, inducing breach of contract, negligence, negligent misrepresentation and breach of fiduciary duty and/or professional duty.

[7] The defendant Mr. Hawn is an insurance broker and provided services to the plaintiff as part of his duties as employee and insurance broker with the Brister Group.

[8] The plaintiff served and filed an amended statement of claim.

The Issue

[9] The issue is: (a) Should the plaintiff's claim against Mr. Hawn be struck on the basis that it discloses no reasonable cause of action? (b) Alternatively, should the claim against Mr. Hawn be stayed or dismissed as it is frivolous, vexatious or an abuse of process?

Law and Argument

[10] Rule 21.01(1) (b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that a party may move before a judge to strike out a pleading on the ground that it discloses no reasonable cause of action.

[11] Rule 21.01(3) (d) of the Rules of Civil Procedure provides that a defendant may move to have an action stayed or dismissed on the ground that the action is frivolous or vexatious or is otherwise an abuse of the process of the court, and the judge may make an order or grant judgment accordingly.

[12] It is the position of the defendants that Mr. Hawn was acting in his capacity as an employee of, and insurance broker with, Brister Group when dealing with the plaintiff. Therefore, [page77 ]"Brister is vicariously liable for him, he is not a necessary party, and he (Hawn) should not be named as a party to this action."

[13] In the statement of defence, the defendants state that the plaintiff initially insured the premises through the defendants with Dominion Insurance Company in or around the year 2000.

[14] Further, they state that on a yearly basis prior to the fire on January 23, 2011, the defendant Gord Hawn annually met with the plaintiff's representative, Ms. Mary Daw, and reviewed the insurance coverages available under the policy.

[15] The defendants further state that in July 2010, the defendant Gord Hawn met with Mary Daw to discuss the coverages available under the police for the year immediately prior to the occurrence of the fire. The defendants plead that Mr. Hawn specifically discussed with Mary Daw (the plaintiff's representative) the coverages available relating to the limits under the policy. He specifically advised her of the difference between the replacement cost value limits versus the actual cost value limits.

[16] The plaintiff was advised that if she wished to increase coverage available under the policy to ensure replacement of the building at replacement cost, the limits of the policy would be required to increase from $282,700 to $450,000, which would result in an increase of the premium required to be paid by the plaintiff.

[17] The defendants further plead para. 9 of the statement of defence to amended statement of claim, "The annual meetings and the services provided by Hawn were part of his duties as an employee of and insurance broker with Brister. Hawn was, at all material times, acting in the course of his employment with Brister and was, acting on behalf of and with the authority of Brister."

[18] The defendants argue that if Mr. Hawn is liable in negligence against the plaintiff, he was at all times acting in his course of employment with the defendant Brister Insurance Brokers Ltd. and, as such, Brister Insurance Brokers Ltd. would be vicariously liable for any tort committed by its employee. As such, the defendants argue that Mr. Hawn owed no individual duty of care to the plaintiffs under the circumstances of this case and, as such, there is no reasonable cause of action against Mr. Hawn and, further, that the plaintiff's claim is frivolous or vexatious and/or an abuse of the process of the court.

[19] The defendants cite a number of authorities to support this proposition, including Shaeen v. Meridian Insurance Group Inc. (2011), 105 O.R. (3d) 375, [2011] O.J. No. 1607, 2011 ONSC 1578 (S.C.J.) ; [page78 ]Ledingham v. Smith, Court File No. 68909/92 (Gen. Div.); and Islington Village Inc. v. Canadian Imperial Bank of Commerce, [1992] O.J. No. 1940, 1992 CarswellOnt 368 (Gen. Div.) .

[20] In Ledingham, supra, the defendant commenced a motion similar to the motion to the case at bar involving claim against Dr. Smith in his own right. Dr. Smith was an officer of the company. The court in that case granted the motion and dismissed the action against Dr. Smith. On pp. 7 and 8, Chadwick J. states as follows:

The only evidence which appears to be before me and which is not in dispute, is that Dr. Smith was an officer of the corporation which manufactured, marketed and wholesaled the drug in question. Other than that, there is no allegation of any other special duty or activity by Dr. Smith which would establish a special relationship between the plaintiffs and Dr. Smith.

On that basis, the plaintiffs have failed to meet the test in Carey Canada Inc. v. George Ernest Hunt establishing that the statement of claim discloses a reasonable cause of action against the defendant.

[21] The defendants argue in support of its position of La Forest J. in London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 41 (SCC) , [1992] 3 S.C.R. 299, [1992] S.C.J. No. 84. La Forest J. found [at para. 152] that the tort in question committed by the individual employees "related to the contract [between the plaintiff and defendant corporation] and any reliance by the plaintiff on Vanwinkel and Brassart [the two individual employees] was not reasonable". La Forest J. would have dismissed the action against the employees. In coming to his conclusion, La Forest J. stated, at para. 151 of his decision:

The first question to be resolved is whether the tort alleged against the employee is an independent tort or a tort related to a contract between the employer and the plaintiff. In answering this question, it is legitimate to consider the scope of the contract, the nature of the employee's conduct and the nature of the plaintiff's interest. If the alleged tort is independent, the employee is liable to the plaintiff if the elements of the tort action are proved. The liability of the company to the plaintiff is determined under the ordinary rules applicable to cases of vicarious liability. If the tort is related to the contract, the next question to be resolved is whether any reliance by the plaintiff on the employee was reasonable. The question here is whether the plaintiff reasonably relied on the eventual legal responsibility of the defendants under the circumstances.

[22] The defendants in the case at bar rely on this line of reasoning to support its position that the facts in this case disclose no reasonable cause of action against the individual employee, Mr. Hawn. [page79 ] Analysis and Ruling

[23] For the reasons that follow, I find that the defendants have failed in their motion to establish pursuant to Rule 21 of the Rules of Civil Procedure that there is no reasonable cause of action against the defendant Mr. Hawn or, alternatively, that the claim against Mr. Hawn is frivolous or vexatious or otherwise an abuse of the process of the court.

[24] In my view, Ledingham, supra, is distinguishable from the case at bar. In that case, the plaintiff did not take issue with the general proposition that no action "lies against Dr. Smith, unless it is alleged that he was acting outside the scope of his authority and was acting unlawfully". This is not the situation before me.

[25] Further, in Ledingham, supra, there was no allegation of any special duty or activity by Dr. Smith, which would establish a special relationship between the plaintiffs and Dr. Smith.

[26] In the case at bar, the amended statement of claim pleads that Mr. Hawn was the insurance broker to the plaintiff for 11 years. The policy of insurance was renewed each year by Mary Daw, as the plaintiff's representative, after consultation with Mr. Hawn. While the plaintiff does not plead the words, "special relationship", the factual underpinning of the relationship is plead, specifically the fact that Mr. Hawn was the insurance broker dealing with the plaintiff's representative for 11 years.

[27] I further find the decision in Islington, supra, is distinguishable. At para. 9, Macdonald J. states as follows:

A close examination of the pleadings emphasizes that the essence of the relationship which gives rise to the claim comes from the alleged breach of contract between the plaintiffs and the bank. It would be unreasonable to conclude that the relationship of the individual defendants (employees) to the bank is anything more than the role of an agent performing normal duties attendant with that employer/employee relationship. Again, in my view, the pleadings of the case at bar specifically plead the existence of an ongoing relationship between the plaintiff and Mr. Hawn, that it was longstanding and that they relied on Mr. Hawn as their agent.

[28] The majority in London Drugs Ltd., supra, found that the individual employees of the corporation owed a duty of care to the plaintiff. The defendants in the case at bar argue that the majority did not devote much attention in the lengthy judgment to the issue of the employees' liability or duty of care to the plaintiffs, who were customers of the defendant corporation. Nevertheless, a majority found that the employees did owe a duty of care in the circumstance. [page80 ]

[29] At paras. 185 and 186 of London Drugs Ltd., supra, Iacobucci J. states in his ruling at follows:

Having said this, I wish simply to add what has already become evident by my conclusion. There is no general rule in Canada to the effect that an employee acting in the course of his or her employment and performing the "very essence" of his or her employer's contractual obligations with a customer does not owe a duty of care, whether one labels it "independent" or otherwise, to the employer's customer. Our law of negligence has long since moved away from a category approach when dealing with duties of care. It is now well established that the question of whether a duty of care arises will depend on the circumstances of each particular case, not on pre-determined categories and blanket rules as to who is, and who is not, under a duty to exercise reasonable care. There may well be cases where, having regard to the particular circumstances involved, an employee will not owe a duty of care to his or her employer's customer. Indeed, the respondents have provided this Court with a series of decisions where this conclusion appears to have been reached[.]

However, this does not mean that this is the necessary result in all factual situations. Abstaining from commenting on the conclusions reached in the cases cited, I find nothing in any of them, nor have I found anything else, which supports the type of blanket rule advocated by the respondents. At best, these decisions simply confirm that the question of whether a duty of care arises between an employee and his or her employer's customer depends on the circumstances of each particular case. The mere fact that the employee is performing the "very essence" of a contract between the plaintiff and his or her employer does not, in itself, necessarily preclude a conclusion that a duty of care was present.

[30] Keeping in mind this is a motion pursuant to rule 21.01 , I conclude that the cause of action against Mr. Hawn has some chance of success based on the allegations in the pleadings, based upon the annual review and 11-year relationship. The test is not whether Mr. Hawn will be found liable.

Conclusion

[31] For the foregoing reasons, on consent, I dismiss the plaintiff's claim by Mary Daw against the defendants and I dismiss the defendants' motion striking out the claim against the defendant Mr. Hawn.

Motion dismissed.