ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 53369/11
DATE: 2012/09/13

B E T W E E N:

Mark Newbigging and Erin Newbigging

Luigi De Lisio, for the Respondents

Plaintiffs

(Respondents)

• and -

M. Butler Insurance Brokers Ltd., John Butler, Totten Insurance Group Inc., and Lloyd’s Underwriters

John J. Broderick, for the Appellant

Defendants (Appellant)

HEARD: August 27, 2012 at Welland, Ontario

Maddalena, J.

Introduction

[ 1 ] This is an appeal heard at Welland on the 27 th of August, 2012.

[ 2 ] The appeal is by the defendant, (hereinafter referred to as Appellant), M. Butler Insurance Brokers Ltd., from the Judgment of Deputy Judge K. N. Hagan, pronounced November 1 st , 2011 in the Small Claims Court, awarding damages to the Plaintiffs (hereinafter referred to as Respondent), in the amount of $16,737.87 plus costs.

[ 3 ] The damages were for failure of the Appellant to provide insurance coverage for loss to a dwelling owned by the Respondent which sustained damage while the building was unoccupied. The proceedings have been discontinued against John Butler, Totten Insurance Group Inc., and Lloyd’s Underwriters.

Statement of Agreed Facts

[ 4 ] The following are the agreed facts between the Appellant and the Respondent:

• The Respondent owns a property situated at 11 Almond Street, St. Catharines, Ontario.

• The Respondent used the property as a boarding house for four occupants with jointly shared space.

• The Respondent contacted the Appellant, M. Butler Insurance Brokers Ltd., to arrange insurance coverage for the dwelling. Coverage was arranged through Totten Insurance Group Inc., with Lloyd’s Underwriters.

• Totten Insurance Group issued a policy dated the 12 th of July, 2006 for a one year term. The policy was renewed on an annual basis.

• The final renewal period was July 12, 2008 for a further one year term.

• On June the 10 th , 2009 while the residence was vacant, the Respondent’s property manager discovered water damage in the basement at 11 Almond Street, St. Catharines, Ontario. This water damage had occurred as a result of vandalism to the property while it was vacant.

• In March 2010 the Respondent claimed a total of approximately $31,000 through its insurance policy as the cost of repairs to the property.

• By correspondence dated the 14 th of June 2009, the insurer denied the Respondent’s claim on the basis of the vacancy clause in the insurance policy.

• The Respondent then made a claim against the Appellant, M. Butler Insurance Brokers Ltd., for failure of the agent to properly explain the vacancy provision in the policy to the Respondent.

The Position of the Appellant, M. Butler Insurance Brokers Ltd.

[ 5 ] The denial of coverage under the terms of the policy is based on the vacancy provision in the insurance policy.

[ 6 ] The insurance policy, TGP1721 states under Insured Perils—Coverage A and B, Section 8 as follows: --

Vandalism or Malicious Acts : This peril does not include loss or damage

(a) Caused by you,

(b) Caused by theft or attempted theft,

(c) To glass which forms part of your dwelling,

(d) To outdoor radio and/or television antennae and their attachments.

(e) To satellite receivers and their attachments, unless specified on the Coverage Summary Page (Section IV-Optional Coverage D), nor

(f) Occurring while the building is under construction or vacant even if permission for constructions or vacancy has been given by us.

(g) Caused by your tenant(s), employee(s) or members of the tenant’s household or invited guest(s) of the tenant.

[ 7 ] The Appellant relies further upon a facsimile sent to the Respondent and dated July 10 th , 2006 wherein the Respondent was specifically advised therein, in part,

“…Exclusions for Vandalism by Tenants, Drug Cultivation, Manufacture and Distribution and By-Laws have been added. Coverage is subject to standard policy terms, conditions, exclusions and limitations…”

[ 8 ] The Respondent acknowledged via facsimile sent to the Appellant on July 10, 2006 as follows: “I hereby make application for insurance on the above charges items of property, subject to the Statutory Conditions, Stipulations, Warranties, Exclusions, Limitations, Conditions and Definitions as contained in the policy or endorsement thereon.”

[ 9 ] This was acknowledged by the Respondent and sent back to the Appellant on July 10 th , 2006.

[ 10 ] According to the Appellant, the Respondent’s lack of knowledge with respect to the vacancy provision in the insurance policy was entirely as a result of the Respondent’s failure to read the insurance policy. Thus the Appellant argues the Respondent was willfully blind with respect to the policy and this does not exempt the Respondent from the limitations under the policy.

[ 11 ] The Appellant states that the Respondent was provided with all information regarding the policy including all terms, conditions, exclusions, and limitations. These were all clearly outlined in the policy and the Respondent would have known about these if the Respondent had read the policy.

[ 12 ] The Appellant states that the trial Judge made errors in fact and in law in coming to his conclusion. The Appellant states the trial judge’s approach was flawed and the trial judge misconstrued the facts. Further the trial judge did not property consider the evidence that the Respondent was willfully blind, did not read the policy given to him and did not read what he signed. The trial judge failed to consider that the Respondent believed the policy had no limitations which is clearly “beyond belief”.

[ 13 ] Thus the trial judged failed to consider that the Respondent should have known the insurance policy contained limitations and one of those was the vacancy provision.

[ 14 ] The trial judge also erred by concluding that the Respondent relied on his long-term friend, the Appellant, when in reality the Appellant states that he was only an acquaintance of the Respondent.

The Position of the Respondent

[ 15 ] The Respondent admitted that he did not read the policy and was not aware of the vacancy exclusion in the policy.

[ 16 ] The Respondent states that he relied on the Appellant’s expertise when purchasing the policy and was not told about the vacancy exclusion.

[ 17 ] The Appellant never met with the Respondent to review the terms of the policy. The Respondent acknowledged being sent the policy which was acknowledged, signed and returned but not read.

[ 18 ] The Respondent states that the Appellant knew this was a new policy for him in that the only policy owned prior was a home owner’s policy. Yet, despite this, the Appellant never reviewed the policy exclusions with the Respondents although, the Appellant knew the coverage was for a boarding house and that there would be leases with students at the boarding house.

[ 19 ] The Respondent takes the position that he relied on the expertise of the Appellant. The Appellant did not properly advise the Respondent or bring to the Respondent’s attention, the vacancy exclusion in the policy and thus the Appellant is liable for damages.

[ 20 ] The Respondent states that the trial judge correctly concluded that the Appellant is responsible, under these circumstances, for the Respondent’s loss.

Standard Of Review

[ 21 ] The Standard of Review for this Appeal is as set out in the case of Jarlian Construction Inc., v Waterloo (City), 2008 (ON SCDC) .

[ 22 ] There the court stated as follows:

“The rule with respect to the review of a trial judge’s findings, is that an appellate court is free to replace the opinion of the trial judge with its own. Thus, the standard of review on a question of law is that of correctness. The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a palpable and overriding error. Where the trier of fact has considered all the evidence that the law requires him or her to consider and still comes to the wrong conclusion, then this amounts to an error of mixed law and fact and is subject to a more stringent standard of review than for the findings of fact.”

[ 23 ] This standard of review was also set out in the case of Tuchenhagen v Mondoux , 2011 ONSC 5398 , 107 O.R. (3d) 675 . Here the court confirmed the principles as annunciated in Housen v Nikolaisen, 2002 SCC 33 , [2002] 2 S.C.R., 235 and those principles are as follows:--“the standard of review on a question of law is that of correctness” and an appellate court is free to substitute its own opinion for that of the trial judge (para.8); -“[t]he standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a ‘palpable and overriding error’” (para.10);-The standard of review on questions of mixed law and fact “lie along a spectrum…where the legal principle is not readily extricable, then the matter is one of mixed law and fact’ and is subject to a more stringent standard…where the issue on appeal involves the trial judge’s interpretation of the evidence as a whole, it should not be overturned absent palpable and overriding error’ (para.36).”

[ 24 ] Therefore, absent an error in law, a palpable and overriding error on a factual matter, the trial judge’s decision is entitled to considerable deference.

Law and Analysis

[ 25 ] The trial judge made some clear findings of fact and in this regard the trial judge is entitled to considerable deference, absent to some palpable and overriding error on a factual matter.

[ 26 ] The trial judge found as a fact:

• The Respondent looked to the Appellant to provide coverage for a rooming house. The agent (Appellant) advised that this required a special rental policy.

• The agent did not advise the Respondent of exclusions regarding the vacancy in the policy.

• The agent failed to explain the policy to the Respondent.

• The Respondent failed to read the policy and did not ask any questions regarding it. Further the Respondent was not told anything about the policy because he did not ask.

• The Respondent relied on the agent. The agent made specific recommendations about a specialized rental policy for the rooming house and thus had an obligation and duty to advise of the specific exclusions under the policy.

• The Respondent was not aware of the vacancy provision in the policy. No discussions took place about the vacancy limitations regarding the policy.

[ 27 ] I am not persuaded that in coming to these factual conclusions, the trial judge made a palpable and overriding error based on the circumstances of this case.

[ 28 ] With respect to the law, the trial judge carefully considered the case of Fine’s Flowers Ltd., et al. v General Accident Insurance Co., of Canada et al. (1979) 1977 , 17 O.R. (2d) 529 , Ontario Court of Appeal.

[ 29 ] The trial judge correctly applied the law with respect to the facts before him and concluded, as in Fine’s Flowers supra as follows:

“In many instances, an insurance agent will be asked to obtain a specific type of coverage and his duty in those circumstances will be to use a reasonable degree of skill and care in doing so or, if he is unable to do so, “to inform the principal promptly in order to prevent him from suffering loss through relying upon the successful completion of the transaction by the agent”.

…”But there are other cases, and in my view this is one of them, in which the client gives no such specific instructions but rather relies upon his agent to see that he is protected and, if the agent agrees to do business with him on those terms, then he cannot afterwards, when an uninsured loss arises, shrug off the responsibility he has assumed. If this requires him to inform himself about his client’s business in order to assess the foreseeable risks and insure his client against them, then this he must do. It goes without saying that an agent who does have the requisite site skills to understand the nature of his client’s business and assess the risks that should be insured against should not be offering this kind of service.”…I do not think this is too high a standard to impose upon an agent who knows that his client is relying upon him to see that he is protected against all foreseeable, insurable risks.”

[ 30 ] The trial judge found that the Respondent relied on the Appellant to ensure coverage. The Appellant failed to advise about the vacancy exclusion in the policy, and thus, the Appellant is responsible even though the Respondent did not ask questions or read the policy.

[ 31 ] The trial judge correctly found in law that the agent breached his obligation in not telling the Respondent that at any time the premises were vacant, there would be no coverage under the policy.

[ 32 ] The trial judge thus correctly concluded…I do find that the defendant did breach his obligation in not telling the Plaintiff that at any time this place was vacant, under the definition, that there would be limitations to coverage. It put the Plaintiff at risk of having the place vacant…I do find the loss is directly related to the failure to meet the obligation of the insurance agent to let him know about the vacancy gaps in the policy…

[ 33 ] The decision of the trial judge is detailed and comprehensive and correctly applies the current state of the law to the facts therein.

[ 34 ] From a careful consideration of the reasons of the trial judge, I conclude the trial judge made no error in law, no error in fact or on questions of mixed law and fact.

Orders Made

[ 35 ] The Appeal is dismissed.

[ 36 ] Unless otherwise agreed, parties may make written submissions as to costs. The submissions are limited to three pages. The Respondent’s submissions are due by September 21 st and the Appellant’s by the 28 th .

T. Maddalena

Released: September 13, 2012

COURT FILE NO.: 53369/11
DATE: 2012/09/13

ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: Mark Newbigging and Erin Newbigging Plaintiffs (Respondents) - and – Mr. Butler Insurance Brokers Ltd., John Butler, Totten Insurance Group Inc., and Lloyd’s Underwriters Defendants (Appellant) REASONS FOR JUDGMENT T. Maddalena

Released: September 13, 2012