ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-10-395002
DATE: 20130722
B E T W E E N:
THE MIDAS INVESTMENT CORPORATION
Plaintiff
- and -
THE DOMINION OF CANADA GENERAL INSURANCE COMPANY, CANADIAN INSURANCE BROKERAGES INC., and JON ELDRIDGE
Defendants
John Pirie, for the Plaintiff (Responding Party)
Jeffrey McEown, for Defendants Canadian Insurance Brokerages Inc. and Jon Eldridge (Moving Parties)
HEARD: July 3, 2013
Swinton J.:
Overview
[1] The defendants Canadian Insurance Brokerages Inc. and Jon Eldridge (“the Moving Parties”) brought a motion for partial summary judgment, seeking an order that the plaintiff’s action against them be dismissed. For the reasons that follow, I would grant the motion.
Factual Background
[2] The plaintiff suffered an insured loss after the flooding of a commercial building that it owned in Toronto in early 2009. It sued its insurer, The Dominion of Canada General Insurance Company (“Dominion”), for failure to pay the proceeds due to it under an insurance policy. It also sued the Moving Parties, its insurance brokers, for negligence, alleging that they had failed to secure adequate insurance coverage, failed to explain the terms of a co-insurance clause, and failed to give special consideration to the fact that the insured building was a heritage property. The plaintiff now claims $8 million in damages against the Moving Parties.
[3] The Further, Further Amended Statement of Claim (“the Statement of Claim”) states the claim against the Moving Parties on a conditional basis:
- If it is determined that the co-insurance penalty is effective to bar any further claim under the Policy, or in the event the Policy limits are insufficient to properly remediate the Building, the plaintiff states that the Brokerage Defendants are responsible for any such shortfall, in that they were negligent in that they:
(a) Failed to recommend and ensure that the Building was insured for the appropriate value given the terms of the Policy, despite instructions to the contrary;
(b) Failed to advise the plaintiff on the nature and affect [sic] of the co-insurance and/or related provisions; and
(c) Failed to recommend and ensure that the Policy limits were extended upon its renewal to reflect the actual appropriate value of the Building given the terms of the Policy.
[4] It is important to note two key events in the history of this litigation in order to set the context for the present motion for partial summary judgment. When the plaintiff sought to be compensated under the insurance policy, Dominion invoked the co-insurance penalty, which would have drastically limited the coverage under the policy. This led the plaintiff to commence litigation against Dominion and the Moving Parties.
[5] In an order dated June 22, 2011, Corrick J. resolved a motion for partial summary judgment brought by Midas. In her order, made largely on consent, she held that the co-insurance clause of the policy with Dominion was not applicable.
[6] Dominion and the plaintiff also disputed the cost of the repairs. This dispute was resolved by an Umpire under the Insurance Act, R.S.O. 1990, c. I.8 and further court proceedings. The result was a determination that the repair costs for the building would be $2,586,233.02, in addition to what had been paid. That meant that the cost of repairs would not exceed $4 million, the amount of the insurance policy with Dominion.
[7] Once these two issues were resolved, the Moving Parties brought the present motion for partial summary judgment, arguing that there is no genuine issue requiring a trial with respect to the negligence claim against them. Failing success on this motion, they face participation in a long trial scheduled to begin in March, 2015.
The Test on a Motion for Summary Judgment
[8] A court is to grant summary judgment if satisfied that there is no genuine issue requiring a trial with respect to a claim or a defence (Rule 20.04(1)). In coming to a conclusion on a motion for summary judgment, the court may weigh evidence, evaluate the credibility of a deponent or draw any reasonable inference from the evidence, unless it is in the interest of justice that such powers should only be exercised at a trial (Rule 20.04(2.1)). The Court of Appeal has adopted a “full appreciation test” for such motions in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764 at para. 50, asking whether a full appreciation of the evidence and the issues can be achieved by way of summary judgment.
The Negligence Claim
[9] The plaintiff claims that the Moving Parties were negligent in failing to provide adequate insurance coverage. In Fine’s Flowers Ltd. v. General Accident Assurance Co. (1977), 17 O.R. (2d) 259, the Court of Appeal drew a distinction between two types of cases where an insurance agent owes a duty of care to a client. First, there are cases where the client gives specific instructions to the agent, who then has a duty to exercise reasonable care and skill in obtaining policies in the terms bargained for by the client, or he must inform the client that he is unable to obtain the specific type of insurance (paras. 32-33). Second, there are cases where the client does not give specific instructions and, instead, relies on the agent to see that he is protected against all foreseeable, insurable risks. In that situation, the agent has a duty to inform himself about the client’s business and needs so as to insure the client against foreseeable risks (at para. 35). The Moving Parties submit that because of the nature of their relationship with the plaintiff, the first category applies.
[10] Except for an initial telephone call, all the interactions between the plaintiff and the Moving Parties about insurance needs occurred through emails between the defendant Jon Eldridge and Jackie Farrell, the daughter of Thomas Farrell, the plaintiff’s principal and a resident of Ireland. Those emails show that the client exercised its own judgment in determining the value of the property to be insured, the amount of coverage to be purchased, the terms of the coverage, and the lack of special conditions applicable due to the fact that the property insured was a heritage property.
[11] In response to Mr. Eldridge’s email query whether the building was a heritage property and, if so, were there any special circumstances, Ms. Farrell replied that this was a heritage building, “but there is no special insurance requirements, my Dad got this confirmed when he was there.”
[12] There was some back and forth about the value of the building. When Ms. Farrell expressed concern about possible under-insurance if the building was valued at $3 million, rather than the $4 million Mr. Farrell sought, Mr. Eldridge said he would speak to the underwriter about a “stated amount clause.”
[13] Mr. Eldridge subsequently got back to Ms. Farrell indicating that the underwriter would insure the building for $4 million, but he suggested that “we obtain an estimate of value from a professional, such as your agent” and then adjust the building value. Ms. Farrell replied that her father was happy to go with the coverage suggested. No further mention was made of a valuation of the building, and none was obtained.
[14] The president of the plaintiff is an experienced business man. While he is dyslexic, he nevertheless owns a motor vehicle dealership in Ireland and a construction business, as well as other investment properties. His daughter sought instructions from him which she conveyed to Mr. Eldridge.
[15] John Kavanagh, Secretary-Treasurer of the plaintiff and a Certified Management Accountant, also reviewed both the original policy provided by Dominion in March 2007 and the renewal policy a year later. The policy contained a warning statement on the front page that the policy contained a clause that may limit the amount payable. Mr. Kavanagh stated on discovery that he had experience dealing with insurance issues related to commercial property and was satisfied that the policy provided the coverages detailed explicitly in the policy.
[16] While the plaintiff pleaded that the brokers were advised the property was a heritage property and they had to ensure appropriate coverage to restore it, the email exchange contradicts this pleading. Similarly, the plaintiff pleads that the brokers were instructed to ensure the building was not under-insured, including arranging an appraisal if they thought it necessary. Again, the email exchange does not support this statement.
[17] In my view, there are no issues of fact that require a trial to determine the liability of the Moving Parties. First, there are no issues of credibility that require a trial. It is apparent from the email evidence, as supplemented by the Kavanagh discovery, that the plaintiff did not rely on the Moving Parties for advice on its insurance needs, but rather gave specific instructions from Mr. Farrell through Ms. Farrell. This is not a case that falls within the second scenario described in Fine’s Flowers, above, where the client was relying on the expertise of the broker to help identify the insurance needs for his business.
[18] Second, the plaintiff has put forward no expert evidence to raise a triable issue with respect to the breach of the standard of care of an insurance agent. While counsel submitted that expert evidence would not be required to establish negligence, in my view, such evidence is required.
[19] Third, in order to establish liability at trial in negligence, the plaintiff would have to prove loss caused by the negligence of the Moving Parties. It is not enough to show a breach of the standard of care to succeed in negligence; the plaintiff must also show that the breach caused its loss. Given the outcome of the co-insurance motion and the ruling on the cost of the repairs, I see no basis to hold the Moving Parties liable in negligence. The plaintiff has pleaded in paragraph 40 of the present Statement of Claim that the Moving Parties should be liable for the shortfall because of inadequate insurance coverage. Given the earlier steps in this proceeding described above, there is no evidence of any shortfall caused by the Moving Parties.
[20] The plaintiff takes issue with the affidavit evidence provided by the Moving Parties for this motion, because the affidavits were sworn by a member of the law firm defending them. While the lack of affidavit evidence from a party with direct knowledge of the facts in issue has been a reason for the rejection of a motion for summary judgment (Bank of Montreal v. He, [2008] O.J. No. 1090 (S.C.J.) at para. 49), the key evidence about the exchange between the plaintiff and the brokerage is found in the emails attached to the affidavit, and those emails speak for themselves. Further support for the Moving Parties’ position is found in Mr. Kavanagh’s discovery. In the present case, the key evidence was before me.
[21] The plaintiff also argues that the Moving Parties should not be let out of this action before trial, because their failure to provide proper insurance coverage contributed to this litigation and has cost the plaintiff legal fees. This appears to be an argument for costs from the Moving Parties. I note that such a loss is not the loss pleaded in the Statement of Claim, which claims damages arising from inadequate coverage. In any event, costs of the action are not an element of liability that requires a trial between these parties. Rather costs are awarded, in the discretion of the trial judge, based on the various factors in Rule 57.01 of the Rules of Civil Procedure after the trial. Here, should the plaintiff succeed at trial, it can seek its costs from Dominion.
[22] As there is no genuine issue of fact requiring a trial, this is an appropriate case to award summary judgment and to dismiss the action against the Moving Parties.
[23] I agree with the submission of the Moving Parties that the affidavit filed by Mr. Farrell seems to indicate that he, too, thinks there are no genuine issues requiring a trial with respect to their liability. He states in paragraph 2 of that affidavit that the issue to be determined on this motion is “whether costs are payable in the action to date, and this motion, and if so by whom.” He also states (at para. 6) that the Moving Parties’ “belated summary judgment motion … is unnecessary at this stage.”
[24] Accordingly, I would grant the motion and order the action dismissed as against the Moving Parties.
Costs
[25] The Moving Parties also seek costs of the motion and the action on a substantial indemnity basis, because they argue they should never have been made parties.
[26] While the Moving Parties may have a reasonable expectation of being awarded costs of the motion and the action, I am not satisfied that the plaintiff’s conduct warrants a punitive award of costs. At the time the action was commenced, the plaintiff was concerned that the coverage placed was inadequate, and it sued the broker defendants in the event the coverage was inadequate and left them with a shortfall. That was an exercise of judgment about the appropriate parties and does not merit sanction.
[27] Mr. Farrell, in his affidavit, takes issue with any award of costs for this motion for summary judgment. He takes the position that the motion should have been brought earlier, although he also acknowledges that had the motion been brought earlier, there would have been triable issues with respect to the brokers’ liability because of the uncertainty about the co-insurance clause and the cost of repairs.
[28] The Moving Parties very reasonably brought this motion for summary judgment at this stage of the proceedings. Once the co-insurance and cost of repairs issues were determined, there were no longer triable issues concerning their liability. At that point, it was reasonable to seek a dismissal of the action through a motion for summary judgment, rather than proceed to a lengthy trial.
[29] I would be inclined to award costs of this motion on a partial indemnity basis. However, there may have been offers to settle or other circumstances of which I am unaware that would affect an award of costs. If the parties cannot agree on costs, the Moving Parties may make brief written submissions within 14 days of the release of this decision. The plaintiff shall have 14 days to reply.
Swinton J.
Released: July 22, 2013
COURT FILE NO.: CV-10-395002
DATE: 20130722
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
THE MIDAS INVESTMENT CORPORATION
Plaintiff
- and -
THE DOMINION OF CANADA GENERAL INSURANCE COMPANY, CANADIAN INSURANCE BROKERAGES INC., and JON ELDRIDGE
Defendants
REASONS FOR JUDGMENT
Swinton J.
Released: July 22, 2013