Ostenda et al. v. Bahena Miranda et al. [Indexed as: Ostenda v. Bahena Miranda]
113 O.R. (3d) 701
2012 ONSC 7346
Ontario Superior Court of Justice,
Stinson J.
December 24, 2012
Insurance -- Duties of insurer -- Transportation company obtaining fleet motor vehicle insurance policy from insurer with assistance of insurance broker -- Broker not asking for uninsured and underinsured driver coverage -- Insurer conducting its own risk assessment before submitting quotation to company and again before renewing policy -- Risk assessment reports not commenting on absence of uninsured and underinsured driver coverage -- Risk assessments undertaken solely for purpose of underwriting risk and containing disclaimer stating that insurer did not assume any responsibility for discovery, notification or elimination of risks -- Insurer not having duty of care similar to that owed by broker to advise about adequacy of insurance coverage -- Broker not acting as agent for insurer such that insurer was vicariously liable for any breach of duty by broker.
Synergy, a transportation company, obtained a fleet motor vehicle insurance policy from Zurich with the assistance of an insurance broker, JDIMI. JDIMI's submission to Zurich on behalf of Synergy did not include a request for a Family Protection Coverage endorsement (OPCF 44R), which provides uninsured or underinsured coverage. Zurich conducted its own risk assessment before submitting a quotation to Synergy, and conducted similar risk assessments before renewing the policy. In none of its risk assessment reports did Zurich comment upon the fact that Synergy did not have OPCF 44R coverage for its drivers. The plaintiff, who was one of those drivers, was catastrophically injured in a motor vehicle accident involving an uninsured or underinsured driver. Because of the absence of the OPCF 44R endorsement from the fleet motor vehicle insurance policy, the plaintiff had no claim under that policy. The plaintiff sued Zurich, among others, claiming that Zurich had and breached a duty of care to Synergy and to him to warn about the need for and potential risks of not including OPCF 44R coverage in the Zurich policy and, alternatively, that JDIMI had and breached such a duty and Zurich was vicariously liable for the failures of JDIMI. Zurich moved for summary judgment dismissing the action as against it.
Held, the motion should be granted.
There was no evidence whatsoever that Synergy had relied on Zurich to advise it of the risks against which it should be insured or about gaps in its insurance coverage. The risk assessments conducted by Zurich were conducted from the perspective of underwriting the risk. The evidence did not establish that Zurich carried out those assessments in order to become familiar with Synergy's [page702] business and insurance needs in the same fashion as a broker. Moreover, each of the risk assessment reports contained an express disclaimer which stated that Zurich did not assume any responsibility for discovery, notification or elimination of hazards or risks. The circumstances did not support an extension to Zurich of the duty of care owed by a broker to its customer to advise and warrant regarding the adequacy of the customer's insurance coverage. With respect to the alternative theory of liability, the evidence did not support a finding that a relationship of principal and agent existed between Zurich and JDIMI. Accordingly, the plaintiff's claim against Zurich founded on the theory of vicarious liability for the acts of its agent could not succeed.
MOTION by the defendant for summary judgment.
Cases referred to Boudreau v. Ontario Soccer Assn., 2012 ONSC 4461, [2012] O.J. No. 3619, [2012] I.L.R. I-5319 (S.C.J.); Drader v. Sebastian, 2009 SKCA 44, [2009] S.J. No. 214, [2009] 9 W.W.R. 658, 72 C.C.L.I. (4th) 223, 324 Sask. R. 269, 176 A.C.W.S. (3d) 910, [2009] I.L.R. 1-4828; Fine's Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 1977 CanLII 1182 (ON CA), 17 O.R. (2d) 529, [1977] O.J. No. 2435, 81 D.L.R. (3d) 139, 2 B.L.R. 257, [1978] I.L.R. Â1-937 at 894, [1977] 2 A.C.W.S. 1022 (C.A.); Fletcher v. Manitoba Public Insurance Co., 1990 CanLII 59 (SCC), [1990] 3 S.C.R. 191, [1990] S.C.J. No. 121, 74 D.L.R. (4th) 636, 116 N.R. 1, J.E. 90-1652, 71 Man. R. (2d) 81, 44 O.A.C. 81, 1 C.C.L.I. (2d) 1, 5 C.C.L.T. (2d) 1, [1990] I.L.R. Â1-2672 at 10547, 30 M.V.R. (2d) 260, 23 A.C.W.S. (3d) 1248, EYB 1990-67585; Piggott Construction (1969) Ltd. v. Saskatchewan Government Insurance Office, 1985 CanLII 2669 (SK CA), [1985] S.J. No. 165, [1986] 2 W.W.R. 530, 44 Sask. R. 203, 16 C.C.L.I. 204, [1986] I.L.R. Â1-2039 at 7841, 35 A.C.W.S. (2d) 243 (C.A.), consd
Other cases referred to Combined Air Mechanical Services Inc. v. Flesch (2011), 2011 ONCA 764, 108 O.R. (3d) 1, [2011] O.J. No. 5431, 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167, 211 A.C.W.S. (3d) 845, 93 B.L.R. (4th) 1, 10 C.L.R. (4th) 17
Statutes referred to Registered Insurance Brokers Act, R.S.O. 1990, c. R.19 [as am.]
Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 39.03
Authorities referred to Fridman, G.H.L., Canadian Agency Law (Markham, Ont.: LexisNexis, 2009) Snow, Howard, "Liability of Insurance Agents for Failure to Obtain Effective Coverage: Fine's Flowers Ltd. v. General Accident Assurance Co." (1979), 9 Man. L.J. 165
Jerome R. Morse, for plaintiffs/responding parties. Brian G. Sunohara, for defendant/moving party Zurich Insurance. Catherine Keyes, for defendant Jones Deslauriers Insurance Management Inc. No one appears on behalf of the remaining parties. [page703]
[1] STINSON J.: -- This is a motion for summary judgment brought by the defendant Zurich Insurance.
Overview
[2] This litigation has its origin in a motor vehicle accident that occurred on October 23, 2008 in Gurnee, Illinois, U.S.A. According to the statement of claim, on that occasion, the defendant Bahena Miranda was driving a car that struck the plaintiff Jan Ostenda, causing him catastrophic injuries. At the time, Mr. Ostenda was a truck driver employed by a transportation company known as Synergy Transportation System Inc. Zurich had issued a fleet motor vehicle coverage policy to Synergy, and thus Mr. Ostenda was covered by that policy.
[3] Due to the catastrophic nature of his injuries, Mr. Ostenda is likely entitled to a very substantial damage award against the negligent driver, Bahena Miranda. Bahena Miranda, however, has either no or very modest insurance coverage. As a consequence, Mr. Ostenda is unlikely to recover the bulk of any monetary damage award he may achieve in his litigation against Bahena Miranda.
[4] Unlike many standard automobile insurance policies that are issued to private citizens in Ontario, the Zurich policy issued to Synergy did not contain a so-called "Family Protection Coverage endorsement -- OPCF 44R". An OPCF 44R endorsement, when included with an automobile insurance policy in Ontario, provides uninsured or underinsured coverage. Where an injured party is covered by such a policy (including an OPCF 44R endorsement) and he or she is injured through the negligence of an uninsured or underinsured driver, the injured party may recover the balance of their monetary damage award against their own insurer (up to their own policy limits).
[5] Because the Zurich policy issued to Synergy did not include OPCF 44R coverage, Mr. Ostenda has no claim under the policy.
[6] Mr. Ostenda asserts, however, that the Zurich policy should have included OPCF 44R coverage. He has joined as a co-defendant Jones Deslauriers Insurance Management Inc. ("JDIMI"), the insurance broker who assisted Synergy in obtaining the Zurich policy. Mr. Ostenda asserts that, as a broker, JDIMI owed a contractual and tort duty of care to Synergy and to him to advise about the need for and further to obtain underinsurance coverage. He further asserts that JDIMI breached its tort and contractual duties in failing to do so. The statement of claim goes on to assert that Zurich held out JDIMI as its agent [page704] and it is therefore in law responsible for the negligence and breach of contract of JDIMI.
[7] The statement of claim further asserts that Zurich was negligent itself by reason of its failure to require JDIMI to inform and advise Synergy and Ostenda of the availability and need to obtain underinsurance coverage.
[8] As a consequence of the foregoing, Mr. Ostenda seeks a declaration that Zurich should indemnify him for his damages arising from the 2008 motor vehicle accident, to the extent that those damages exceed the insurance available from Bahena Miranda.
Background Facts
[9] As noted, Synergy is a transportation company. At the relevant time, it owned and operated approximately 25 or 30 tractor-trailer rigs that provided service to customers in Ontario and the northeastern United States. It was in connection with a delivery job to one of such customers (the defendant United Plastics Inc.) that Mr. Ostenda was involved in the motor vehicle accident in question.
[10] JDIMI is an insurance broker, registered and licensed under the Registered Insurance Brokers Act, R.S.O. 1990, c. R.19. Synergy was a client of JDIMI. In the circumstances described in more detail below, JDIMI was involved in the issuance of the Zurich policy to Synergy.
[11] JDIMI and Zurich had a long-standing business relationship. JDIMI received a 10 per cent commission from Zurich for placing insurance with it. JDIMI did not, however, deal exclusively with Zurich, but rather placed insurance for its clients with various insurers.
[12] Zurich first insured Synergy in 2006. JDIMI was involved in the issuance of that policy. Initially, a JDIMI producer (i.e., salesman) prepared a submission to Zurich in the form of a "transportation package survey" that described the business of Synergy, its current insurance coverage, its revenues, the type of products it transported as well as the type and limits of the insurance coverage Synergy was seeking. Significantly, that initial submission did not include a request for OPCF 44R endorsement coverage.
[13] Having received the submission from JDIMI, Zurich undertook a risk management survey. This involved making its own enquiries regarding the business of Synergy with a view to assessing the risk for underwriting purposes. Having done so, Zurich prepared a risk assessment report, that it submitted to Synergy. That document included the following statement: [page705] "the purpose of my visit was to gather information for underwriting purposes and offer advice that may help to reduce or eliminate accidental losses". The document contained advice for "risk improvement".
[14] In due course, having assessed the risk, Zurich submitted a quotation to JDIMI for the coverage sought by Synergy. In turn, Synergy accepted the quotation and Zurich issued the original policy, for a one-year term.
[15] In 2007, the Zurich policy was renewed, following a similar risk assessment process. In 2008, the Zurich policy was renewed again. Once again, Zurich conducted a risk assessment, "to gather information for underwriting purposes and offer advice that may help to reduce or eliminate accidental losses". Once again, the risk assessment report was submitted to Synergy and it again discussed a number of items of risk to Synergy.
[16] In none of the risk assessment reports that it submitted to Synergy did Zurich mention or comment upon the fact that Synergy was not requesting nor did it have OPCF 44R uninsured or underinsured coverage for its drivers. As mentioned, none of the policies issued by Zurich to Synergy included that coverage. As a result, Mr. Ostenda has no recourse to uninsured or underinsured coverage under the Zurich policy.
[17] Put simply, Mr. Ostenda's claim against Zurich relies on one or both of the following theories: firstly, that Zurich had and breached a duty of care to Synergy and Mr. Ostenda to warn about the need for and potential risks of not including OPCF 44R coverage in the Zurich policy; and secondly, that JDIMI had and breached such a duty and Zurich is vicariously liable for the failures of JDIMI.
Issues and Analysis
[18] As argued before me, this motion for summary judgment raised three issues: (1) Is this case suitable for determination by way of a motion for summary judgment? (2) In relation to the non-inclusion of the OPCF 44R endorsement, does Zurich stand exposed to liability equivalent to that of a brokerage, having regarding to its dealings with Synergy? (3) Is Zurich liable to Ostenda as principal for the mistakes of JDIMI as its agent? [page706] I will deal with each of these issues in turn.
1. Is this case suitable for determination by way of a motion for summary judgment?
[19] As the Court of Appeal for Ontario observed in Combined Air Mechanical Services Inc. v. Flesch (2011), 2011 ONCA 764, at para. 37, the amended rule for summary judgment permits me as a motion judge to decide the plaintiffs' claim against Zurich, if I am satisfied that there is no factual or legal issue raised by the parties that requires a trial for its fair and just resolution. On a motion such as this, I must ask whether the full appreciation of the evidence and issues required to make dispositive findings may be achieved by way of a motion for summary judgment, or can the full appreciation only be achieved by way of a trial? (See Combined Air, at para. 50.)
[20] The record in this case is relatively modest, with limited affidavit evidence and relatively few documents. There are limited contentious factual issues; indeed, most of the evidence relied upon by the responding plaintiffs' was adduced by way of cross-examination of Zurich's witness and the documents identified by him or produced by way of answers to undertakings.
[21] In Combined Air, the Court of Appeal confirmed [at para. 56] the proposition that on a motion for summary judgment "[e]ach side must 'put its best foot forward' with respect to the existence or non-existence of material issues to be tried". In relation to the present motion, which was booked more than nine months before the hearing date, each side had ample opportunity to collect and present the relevant evidence to support its position, whether by way of affidavit, cross-examination or rule 39.03 examination of witnesses [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194].
[22] Having regard to the foregoing principles and, in particular, the relatively modest size of the evidentiary record, I am of the opinion that it would not be unfair to decide this case by way of a motion for summary judgment. I believe that the record before me, together with the submissions of counsel, are such that a trial process is not necessary to allow me to fully appreciate the evidence and the issues posed. I therefore conclude that this is a case that is suitable for determination by way of the motion for summary judgment. [page707]
2. In relation to the non-inclusion of the OPCF 44R endorsement, does Zurich stand exposed to liability equivalent to that of a brokerage, having regarding to its dealings with Synergy?
[23] It is well established that insurance brokers owe a duty to their customers to provide not only information about available coverage, but also to advise about which forms of coverage the costs customers require in order to meet their needs. See Fletcher v. Manitoba Public Insurance Co., 1990 CanLII 59 (SCC), [1990] 3 S.C.R. 191, [1990] S.C.J. No. 121, at para. 54, citing Fine's Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 1977 CanLII 1182 (ON CA), 17 O.R. (2d) 529, [1977] O.J. No. 2435 (C.A.). In Fletcher, the Supreme Court of Canada recorded with approval the following passage from an article by Professor Snow, "Liability of Insurance Agents for Failure to Obtain Effective Coverage: Fine's Flowers Ltd. v. General Accident Assurance Co." (1979), 9 Man. L.J. 165 at 169 as follows [at para. 54]:
Consumers who place their faith in insurance agents holding themselves out as competent and find their faith misplaced, will frequently be able to find recourse against the agent. . . . [T]he extent of the duty owed by an insurance agent, both in placing insurance and in indicating to the insured which risks are covered and which are not, as set out in this case, is a fairly stringent one for the agent.
[24] The Supreme Court concluded (at para. 57 of Fletcher) as follows:
In my view, it is entirely appropriate to hold private insurance agents and brokers to a stringent duty to provide both information and advice to their customers. They are, after all, licensed professionals who specialize in helping clients with risk assessment and in tailoring insurance policies to fit the particular needs of their customers. Their service is highly personalized, concentrating on the specific circumstances of each client. Subtle differences in the forms of coverage available are frequently difficult for the average person to understand. Agents and brokers are trained to understand these differences and to provide individualized insurance advice. It is both reasonable and appropriate to impose upon them a duty not only to convey information but also to provide counsel and advice.
[25] Fletcher involved an extension of the principle established in Fine's Flowers. In Fletcher, the plaintiff was insured under a mandatory automobile insurance scheme by the defendant, the Manitoba Public Insurance Co. ("MPIC"). When securing his own automobile insurance coverage, the plaintiff dealt directly with MPIC and not through an intermediary agent or broker. Although MPIC did offer (for a slightly higher premium) uninsured and underinsured coverage similar to OPCF 44R, MPIC did not make the plaintiff aware of that coverage. The plaintiff [page708] was subsequently involved in a serious accident caused by another driver. The other driver did not carry sufficient liability insurance to pay all of the plaintiff's damages. The plaintiff therefore sued MPIC for the shortfall.
[26] The Supreme Court of Canada held that as a government-owned insurer selling compulsory insurance directly to vehicle owners, MPIC had a duty to advise its customers of the existence, nature and extent of underinsured motorist coverage. The court held that the public insurer had the responsibility of seeing that its customers received sufficient information to make intelligent decisions as to how much risk they were prepared to bear. The court concluded that MPIC breached that duty and ruled in favour of the plaintiff.
[27] In the present case, a broker (JDIMI) was involved on behalf of insured. Presumably (although the issue of the liability of JDIMI is not before me), it had the duties imposed upon the broker as recognized in Fine's Flowers. JDIMI submitted Synergy's application for insurance to Zurich. JDIMI spelled out in the application the specific coverage sought and did not include OPCF 44R uninsured and underinsured coverage in the application. The coverage that was offered by Zurich and the policy it ultimately issued were consistent with that requested by JDIMI, in that they did not reference or include OPCF 44R coverage.
[28] As noted previously, after it received the application from JDIMI, Zurich conducted its own risk assessment of Synergy's operations, and it did so in relation to subsequent policy renewals. In the course of those risk assessments, Zurich representatives interacted with Synergy's personnel and prepared and supplied to Synergy risk assessment reports. The plaintiffs submit that this interaction and, in particular, Zurich's involvement and advising Synergy regarding risks were such as to impose a duty upon Zurich to warn and counsel Synergy regarding potential gaps in its insurance coverage. Accordingly, the plaintiffs submit, Zurich stands exposes in the same fashion as a broker under the Fine's Flowers principle. At the very least, they submit, the question regarding the extent of Zurich's advisory involvement and the reliance placed upon it by Synergy in this regard are genuine issues that require resolution following a trial.
[29] Zurich submits that it had no such obligation. It points, firstly, to the involvement of JDIMI, a sophisticated and experienced insurance broker acting for a sizable transportation company. Having regard to the fact that Synergy was represented by a broker, it is to be expected and is reasonable that Zurich would [page709] rely on the broker to explore and counsel the customer regarding the coverages it required. In other words, although in Fletcher such a duty was cast upon the insurer itself, that was a situation in which there was no intermediary who had the responsibilities of a broker. Fletcher is therefore distinguishable from the present case.
[30] Zurich also relies on case law to support its position. In Drader v. Sebastian, 2009 SKCA 44, [2009] S.J. No. 214, [2009] 9 W.W.R. 658, the Court of Appeal for Saskatchewan dealt with a claim in negligence against an insurer arising from inadequate coverage under the policy it issued. In that case, the Court of Appeal held (at para. 29):
. . . is there a duty on the insurer (i.e., its underwriters) when it receives the application for insurance from a broker on behalf of a homeowner to conduct its own review of the needs, wishes or desires of the applicant? In my view (absent a specific request by the broker, which the insurer agrees to undertake), there is no such general duty on the insurer.
The court continued (at para. 47):
I have found no cases where a broker's breach of the duty of care for failing to procure the appropriate insurance for the customer has been extended to recognize an independent duty owed by the insurer (who receives the application for insurance from the broker) to the customer to procure the appropriate insurance for the customer.
[31] Drader was followed by my colleague Lofchik J. in Boudreau v. Ontario Soccer Assn., 2012 ONSC 4461, [2012] O.J. No. 3619 (S.C.J.) (at para. 25) as follows:
When dealing with an experienced broker, the insurer owes no personal duty directly to the insured; the insurer's only obligation to the insured is to issue a policy in accordance with the application submitted. In the present case Chubb's [the insurer's] only obligation to [the insured] was to issue a policy in accordance with the terms requested by [the insured's] broker [citing Drader].
At para. 26, Lofchik J. continues as follows:
The statement of claim baldly asserts that [the insurer] entered into an "advisory role to the [insured]". Bald assertions in the statement of claim are not evidence. The statement of claim further pleads that [the insurer] knew or ought to have known that the limits of the policy were "woefully inadequate". The undisputed evidence establishes that the limits of coverage were primarily influenced by the premium the [insured] wanted to pay for such coverage. In fact, the policy increased the coverage previously provided by the expiring policy for the same annual premium.
[32] The principal authority relied upon by the plaintiffs in response is Piggott Construction (1969) Ltd. v. Saskatchewan Government Insurance Office, 1985 CanLII 2669 (SK CA), [1985] S.J. No. 165, [1986] 2 W.W.R. 530 (C.A.). That case involved a claim by an insurer [page710] against the defendant government insurer for breach of contract on the theory that the insurer failed to issue a policy that provided for the indemnity the customer had sought. In that case, the customer was represented by an agent; liability was imposed upon the insurer nevertheless. From my review of that case, however, it turned on the question of agency. In effect, the court held that the broker had acted as agent for the insurer when committing to the customer that certain coverage would be provided. As such, the insurer as principal was bound by the commitment made by the insurance broker, its agent. This case, therefore, does not stand for the proposition that liability extends past the broker to the insurer on a duty of care theory as in Fine's Flowers.
[33] To the extent there is any legal authority that addresses the point I am required to decide, it supports the position of Zurich. Both the Saskatchewan Court of Appeal in Drader and the Superior Court of Justice in Boudreau support Zurich's position. Drader cites no authority for the conclusion it reaches, but rather points to an absence of authority for the contrary position to support its conclusion.
[34] In Fine's Flowers, Wilson J.A. noted [at para. 31] that the findings of fact made by the trial judge were crucial to the outcome of the appeal. In that case, the trial judge found that "the relationship between the [insured] and [the insurance broker] imposed a special duty of care on [the insurance broker] when advising the [insured] as to insurance coverage and obtaining such coverage for him and that [the insurance broker] fell short in this duty".
[35] Justice Wilson went on to note as follows [at paras. 34-35]:
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 not have the requisite 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. (Citations omitted) [page711]
[36] It may thus be seen that Wilson J.A. was motivated to impose liability on the insurance broker who, in effect, had undertaken in performing his service for the customer, to familiarize himself with the customer's business and risks for the purpose of giving advice to the customer regarding the coverage the customer should obtain. Having performed that service and having received the instructions from the customer, the broker completes his service for the customer by seeking out and presenting quotes for the requested coverage. While the fee for doing so may ultimately be forthcoming by way of a commission paid by the insurer as a percentage of premium paid by the customer, there can be no doubt that the broker's main duties are to the customer.
[37] To extend the principle in Fine's Flowers to the present case would require the court to accept that Zurich was performing the same function as the broker and accordingly had the same duties. The extension of that principle, however, would require the court to accept that the customer looked to the insurer and placed reliance upon it in the same fashion as the customer in Fine's Flowers did in its broker, and further that the insurer knowingly and willingly undertook the responsibilities of a broker in the same fashion. In my view, the evidence in the present case fails to establish either premise.
[38] First, there is no evidence whatsoever from Synergy, the customer that dealt with both JDIMI and Zurich. The only affidavit filed by the plaintiff was that of Mr. Ostenda himself. In relation to the issue in question, Mr. Ostenda's evidence was as follows:
The Zurich policy reveals that Jones Deslauriers Insurance Management Inc. was the insurance broker to obtain the Zurich policy for Synergy Transportation System Inc., the owner of the vehicle under my control. Zurich may have or could have advised the broker of the coverage options at the time the Zurich policy was renewed or of the potential need for underinsurance coverage. I received no advice as to the availability or advisability of obtaining underinsurance coverage on the tractor trailer owned by Synergy, nor that my underinsurance coverage on my RBC policy may not respond without underinsurance on the Synergy tractor trailer. Had I been so advised, I would have insisted on underinsurance coverage on the Zurich policy as I wanted the same protection I had on my personal vehicle on the Synergy tractor trailer. I had no involvement in obtaining the Zurich policy. I was to pay Synergy $300 per month for the insurance policy.
[39] No affidavit was filed by representative of Synergy nor was a rule 39.03 examination conducted of a witness from that company. There is no evidence of the reliance, if any, placed by Synergy on Zurich in relation to the scope of coverage it decided to procure. While it may be possible to infer (although I am not [page712] required to do so for the present purposes) that Synergy placed such reliance on JDIMI (as the case law suggests is accepted), the evidence does not support that conclusion in relation to Zurich.
[40] It is true that Zurich conducted its own risk assessments of the business of Synergy and that it supplied Synergy with risk assessment reports. It is important to put those matters in context, however. Since it was being asked to underwrite the risk, Zurich had to make its own assessment of the potential for claims being made and paid in relation to the coverage sought. The basis upon which it conducted its assessments, therefore, was from the perspective of underwriting the risk. The evidence does not establish that Zurich undertook this effort in order to become familiar with the business and insurance needs of Synergy in the same fashion as a broker, i.e., to advise the customer as to its insurance requirements; rather, it set out to assess the risks from an underwriting standpoint.
[41] It is true that in the risk assessment reports that it supplied to Synergy, Zurich included recommendations and advice to Synergy regarding steps that Synergy could take to reduce its exposure to claims. In my view, however, the purpose of Zurich doing so was to reduce the potential for claims on the policies and in turn to reduce Synergy's long-term insurance costs.
[42] It is also important to note that each of the risk assessment reports contains an express disclaimer on the front page that includes the following terms:
This Report is based on conditions and practices observed at the time of our inspection and information obtained from your management and other sources. It does not purport to list all hazards or to indicate that other hazards do not exist. Inspections and recommendations made by Zurich are advisory. Any decision on measures to be taken, as well as their implementation and control, shall be your sole obligation and responsibility. No representation is made that compliance with any or all recommendations guarantees the fulfillment of any legal obligation, or render your facilities, products or services free of hazard or risks. By delivery of this Report, Zurich does not assume any responsibility for discovery, notification or elimination of hazards or risks. . . . . .
Neither Zurich nor its representatives shall be liable, either directly or indirectly, for any loss, damage, (whether special, direct, from a consequential or otherwise), injury or costs suffered or incurred by you or any other person arising or alleged to have arisen out of any act, error, omission or negligence of Zurich or its representatives in connection with or occasioned by this report. (Emphasis added) [page713]
[43] It is thus plain that, although Zurich did become familiar with the operations of Synergy, it expressly disclaimed any legal liability arising from that effort. This reinforces my view that, unlike the efforts imposed upon and undertaken by a broker to become knowledgeable about the business of a customer for purposes of advising regarding the scope of required insurance coverage, Zurich's purpose in doing so was with a view to understanding the risk that it was underwriting. To the extent it offered advice or recommendations to the insured, such advice or recommendations did not extend to addressing the scope of insurance coverage required and any advice given was expressly provided on a "no liability basis".
[44] Accordingly, on the factual record in this case, I find lacking the factual underpinning that gave rise to liability in Fine's Flowers. The relationship between Synergy and Zurich was not, in my view, analogous to the one between Fine's Flowers and its broker. There is no evidence of reliance having been placed by Synergy on Zurich to advise it regarding the scope of its insurance requirements; moreover, any advice given to Synergy by Zurich was expressly provided on a "no liability" basis. Thus, on the facts in this case, I see no basis for imposing liability against Zurich on this theory.
[45] From a public policy perspective, I reach the same conclusion. Professional insurance brokers are a regulated industry with codes of conduct and specific obligations. They perform specific services, including assessing customers' insurance needs, preparing and advising with respect to applications for insurance coverage and procuring insurance policies for the customer. For so doing, they are compensated, frequently on the basis of a commission paid by the insurer as a percentage of the policy premium. That commission income covers the costs of the services provided by the broker.
[46] If the law were to impose upon insurers a similar duty to that undertaken by brokers -- to explore and advise regarding a customer's insurance requirements -- considerable duplication of effort would result. In effect, insurers would be required to perform virtually the same function as brokers. The result would be a duplication of effort and expense that would inevitably be passed on to the customer, thereby increasing the costs of insurance coverage.
[47] It is logical that, in order to assess the risks that it underwrites, an insurer has to develop some level of familiarity with the customer and its operations. It may well be that in the course of doing so, the insurer will become aware of certain aspects of the customer's business practices and its insurance [page714] coverage. The purpose of doing so, however, should not be confused with the responsibility imposed upon a broker whose duty is to become familiar with such matters for purposes of giving proper coverage advice to the customer.
[48] I therefore hold that the Fine's Flowers' principle should not, on the facts of this case, be extended to impose liability for breach of duty on Zurich as insurer to Synergy or Mr. Ostenda.
3. Is Zurich liable to Ostenda as principal for the mistakes of JDIMI as its agent?
[49] Under this alternative theory of liability, the plaintiff argues that Zurich should be held vicariously liable for the failure of JDIMI to give proper advice and obtain correct coverage for Synergy and Mr. Ostenda. Once again, the plaintiff relies on Piggott Construction, where the insurer was held liable on the ground that the broker's acts in dealing with the customer were performed as agent for the insurer. In that case, however, the broker held an agency appointment from the insurer. The court held that an oral contract of insurance came into being as a result of undertakings made by the broker on behalf of the insurer.
[50] In Canadian Agency Law (Markham, Ont.: LexisNexis, 2009), Professor Fridman suggests (at p. 4) the following definition of agency:
Agency is the relationship that exists between two persons when one, called the agent, is considered in law to represent the other, called the principal, in such a way as to be able to affect the principal's legal position in respect of strangers through the relationship by the making of contracts or the disposition of property.
[51] In my respectful view, the evidence in the present case falls well short of establishing that JDIMI had legal authority to represent Zurich so as to affect Zurich's legal position. At best, JDIMI served as the intermediary or courier by which the request for insurance was submitted by Synergy and Zurich's quotation was delivered in reply. There is no evidence that JDIMI had authority to bind Zurich in relation to this risk or to countersign the policy. Rather, this was a policy issued by Zurich and not by JDIMI.
[52] In the circumstances, I conclude that the evidence does not support a finding that a relationship of principal and agency existed between Zurich and JDIMI. Accordingly, the plaintiffs' claim against Zurich founded on the theory of vicarious liability for the acts of its agent cannot succeed. [page715]
Conclusion and Disposition
[53] Based on the evidence presented in this motion for summary judgment, I conclude that the policy issued by Zurich did not include OPCF 44R underinsured coverage. As a result, there is no genuine issue requiring a trial in respect of that aspect of the plaintiffs' claim.
[54] I further conclude, based upon an analysis of the evidence and the law, that this case does not support an extension to Zurich of the duty of care owed by a broker to its customer to advise and warrant regarding the adequacy of customer's insurance coverage. I therefore conclude that there is no genuine issue requiring a trial in relation to that aspect of the plaintiffs' claim.
[55] Finally, on the evidence in this record, there is no proper basis for finding that JDIMI acted as agent for Zurich such that vicarious liability might be visited upon Zurich for any breaches of duty by JDIMI. There is no genuine issue that requires a trial to resolve that question.
[56] In light of the conclusions I have reached, the motion of the defendant Zurich to dismiss the action as against it is granted.
[57] In relation to costs, if the parties cannot agree, they may make written submissions as follows: (a) The defendant Zurich shall serve its bill of costs on the plaintiffs, accompanied by written submissions within 15 days of the release of these reasons. (b) The plaintiffs shall serve their response on the defendants within 15 days thereafter. (c) The defendant shall serve its reply, if any, within ten days thereafter. (d) In all cases, the written submissions shall be limited to three pages, plus bills of costs. I expressly invite counsel for the plaintiffs to submit the bill of costs they would have tendered on the defendant if they had been successful in resisting the motion. (e) These submissions shall address liability and quantum for the action and the motion for summary judgment. (f) I direct that counsel for the defendant Zurich shall collect copies of all parties' submissions and arrange to have that package delivered to me in care of judges' administration, room 170 at 361 University as soon as the final [page716] exchange of materials has been completed. To be clear, no materials should be filed individually: rather, counsel for the defendant will assemble a single package for delivery as described above.
Motion granted.