ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-381115
DATE: 20131112
BETWEEN:
Paul Bronfman and Judy Bronfman
Plaintiffs
– and –
BFL Canada Risk and Insurance Services Inc.
Defendant
Brian J.E. Brock, Q.C. and Eric J. Adams, for the Plaintiffs
Deborah Berlach, for the Defendant
HEARD: October 1, 2, 3, 4, 5, 9, 10, 11; November 6; December 3, 4, 5, 6, 7, 2012; January 9, 10, 14, 21, 23, 24, 2013
sTEWART J
Nature of the Action
[1] On November 8, 2008, Paul and Judy Bronfman were returning to their home at 40 Burton Road in the exclusive neighbourhood of Forest Hill in the City of Toronto, having just enjoyed a family dinner with Judy’s father.
[2] Upon entering their home they discovered much to their horror that a break-in by thieves had occurred. A 310-pound safe stored in a closet on an upper floor had been removed, jettisoned from a balcony into the garden and spirited away. The safe reportedly contained an array of family mementos and expensive jewellery, plus $50,000.00 in cash.
[3] The police were summoned immediately. Although an investigation ensued of what the police suspected may have been an inside job – that is, a burglary perpetrated by a person or persons who had been in the home and knew the precise location of the safe and nature of its contents – the thieves were never apprehended. Not a single item of the contents of the safe was ever recovered.
[4] The Bronfmans contacted David Goldsmith of BFL Canada Risk and Insurance Services Inc. within hours of this discovery as BFL was their broker for insurance purposes and, in particular, for the placement of insurance on their home, cottage and ancillary property. They were ultimately informed by Goldsmith that their insurance policies included several restrictions - a coverage limit of only $10,000.00 for jewellery under their Private Collection Policy, and limits for coverage of $10,000.00 for jewellery and $1,500.00 for cash under their Homeowners Policy. Accordingly, almost all of these significant losses were not covered by the insurance they had in place.
[5] The Bronfmans have brought this action against BFL, claiming that BFL breached its contract with them and/or was negligent in the provision of its services to them, and that they have suffered damages as a result. In particular, they claim they ought to have been clearly warned about these policy limits for jewellery and advised that additional coverage for this valuable property was available.
[6] Although the evidence in this action was scheduled to take less than two weeks to hear, it ultimately consumed several weeks of court time. Nevertheless, the pertinent facts relating to liability are fairly straightforward. Indeed, the two central issues of the standard of care to be expected of an insurance broker in these circumstances and whether any alleged negligence in that regard actually caused the Plaintiffs’ damages were addressed in the evidence with comparative speed. In contrast, a great deal of court time was spent dealing in laborious fashion with evidence to help determine the value of the stolen jewellery. This exercise was obviously hampered and protracted by the absence of the jewellery itself or any list of the items, invoices or detailed appraisals. Unfortunately, some of this information had been kept in the stolen safe.
[7] The Bronfmans allege this evidentiary problem is due to the failure of Goldsmith, as an employee of BFL, to properly advise them with respect to their insurance needs. Had he done so, proof of loss would have been far more easily determinable as all items of any significant value would have been properly appraised and scheduled and kept in a location separate from these valuables.
[8] BFL denies liability for the Bronfmans’ losses in this case. They say that the Bronfmans were aware of the special limits for coverage on jewellery contained in their insurance policies. No allegation akin to contributory negligence was either specifically pleaded or asserted by BFL at the opening or during the course of the trial proceedings until final submissions were made. Despite this, BFL appears to take the position that as a matter of contract the Bronfmans were required to read their policies and the letters which accompanied them and to bring any questions or concerns to the attention of BFL as their broker, and their failure to do so should result in disentitlement to any recovery or, alternatively, a reduction of damages. BFL also argues that contributory negligence considerations should apply in this case.
Background
[9] Paul is a very successful businessman who, among other things, is CEO/Chairman of William F. White, a company that provides large trucks and heavy equipment for film and television production in North America. He is also the sole shareholder and CEO/Chairman of Comweb, a company which is now valued at close to $100 million.
[10] Judy is Paul’s wife. Her father developed a large and prosperous lighting company in the United States and was by her account a man of considerable financial means. Judy grew up surrounded by comfort and luxury. Some of the stolen jewellery had been previously owned by Judy’s mother who had given or bequeathed it to her. Many of the stolen items were generous gifts from Paul.
[11] The Bronfmans live in a very large, expensive home in central Toronto. The home itself covers 20,000 square feet, plus swimming pool and cabana. They own a large comfortable cottage on a lake north of Toronto. They also own an array of expensive luxury cars, boats and other toys consistent with their financial status. Their children attended private schools. They are active socially and philanthropically in their community.
[12] Based upon the evidence presented at trial, I can state at the outset my conclusion that the Bronfmans are very wealthy people who own and enjoy many of the beautiful things that wealth allows. This conclusion will become particularly relevant when addressing the causation arguments advanced on behalf of BFL and the assessment of damages in this case.
[13] Although most of the jewellery in the stolen safe belonged to Judy, she had entrusted all personal insurance matters to Paul to handle with BFL. Judy had no direct contact with anyone at BFL with respect to insurance issues prior to this loss.
[14] BFL is the Canadian subsidiary of a very large international insurance brokerage firm. Goldsmith procured the Bronfmans’ insurance coverage which is relevant to these events.
[15] BFL had been the broker for placement of Paul’s commercial policies relating to the operation of his businesses. The commercial property and liability insurance needs of the activities as carried out by William F. White were many and various. Premiums for this insurance hovered around a quarter of a million dollars per year.
[16] The Bronfmans’ policies on their residence and cottage originally had been handled by Seymour Alper Inc., a brokerage firm with offices in Montreal. Copies of portions of the previous policies of insurance placed by Seymour Alper for the Bronfmans for years 1998 to 2004 were introduced as evidence in these proceedings.
[17] In 1998, Seymour Alper had arranged for 40 Burton Road to be insured by Chubb Insurance Company of Canada for almost $4 million plus contents insurance of close to $2 million. This was described as Deluxe Coverage in the Chubb Masterpiece policy.
[18] Maria Bognar, Personal Lines Manager at Seymour Alper, dealt with the Bronfmans’ personal insurance needs. In her covering letter of April 24, 1998 to Paul which accompanied the policy, Bognar advised that additional insurance could be obtained for “valuable articles – jewellery, furs, silverware, fine arts, collectables, etc. for more than the limits in the policy”. The same provision appears in her covering letter of April 29, 1999.
[19] Watercraft (including boats and a jetski) owned by the Bronfmans for use at their cottage were separately scheduled and an extra premium paid for each. I note this protection refers to physical damage and liability coverage, similar to what one might expect for automobiles.
[20] Valuable Articles Coverage was included in the Bronfmans’ Masterpiece policy for 1999 arranged by Seymour Alper. The Bronfmans also continued to have Deluxe House coverage and Deluxe Contents coverage.
[21] Seymour Alper continued to arrange annual renewals of the Bronfmans’ house and related insurance coverage for 2000 through 2004. In March 31, 2000, a reference to a “Jewellery Coverage Enhancement” appeared in Bognar’s covering letter which accompanied the insurance policy, as follows:
In order to better protect you, we have increased the coverage on your jewellery. We have noticed that following a loss of jewellery by theft or disappearance, the $5,000 limitation included in the contract is often insufficient. It is for this reason that we have added a blanket amount of $10,000.00, and the additional premium of $175. is included in your renewal.
This added coverage offers you the following: • waiver of deductible
• all risk coverage
• world-wide coverage
• $10,000. limit per item
• agreed value
Please feel free to call us about this new protection.
[22] Bognar’s covering letter of March 31, 2000 included the same statement contained in previous letters, i.e., that valuable articles could be insured for “more than the limits in the policy”.
[23] Paul swore that he never specifically discussed this Jewellery Coverage Enhancement with Bognar, nor was he ever made aware by her or anyone else at Seymour Alper that the coverage limits on jewellery in the Jewellery Coverage Enhancement was all that was available in the event of a theft or loss. Rather, he believed that the extensive Deluxe Contents coverage for which he had continued to pay annual premiums also applied to the jewellery and all other valuables in their home.
[24] In 2004 Paul decided that it would make sense for all of his insurance needs, including those related to his home and cottage, to be handled by one insurance broker in Toronto. He turned to BFL for this purpose.
[25] BFL’s promotional material tendered as evidence at trial underscores its breadth and strength in providing insurance advice and solutions to commercial enterprises. Among the services BFL offers to clients is Risk Management. In its brochure, BFL states that it “understands that a sound risk management program is derived from an organization’s philosophy towards risk and its objectives in terms of risk retention”.
[26] In that regard, BFL acknowledges in that same brochure that it is the broker’s role:
• To be alert to any issue affecting the client’s risk profile;
• To offer services aligned with the corporate philosophy and in support of the achievement of both insurance/risk management and business objectives and priorities;
• To provide proactive insight, vision and advice aimed at reducing the client’s total cost of risk.
[27] When BFL took over as broker for the Bronfmans’ homeowner policies, Paul sent a Broker’s Letter of Authorization to their then insurer AIG, commonly known as American Home, dated May 25, 2004. The wording of that letter had been supplied to Paul by Goldsmith. The letter states as follows:
This confirms that effective immediately, I have appointed B.F. LORENZETTI & Associates (ONTARIO) Inc. (“BFL”) as my exclusive Insurance Broker with respect to my insurance policies. This appointment rescinds all previous appointments and the authority contained herein shall remain in full force until cancelled in writing.
BFL is hereby authorized to negotiate directly with any interested company as respects to changes in existing insurance policies and in closing, changing, increasing or canceling insurance carried under temporary binders or cover notes. I understand however, that they will not share responsibility for any deficiencies in the insurance program to which this letter applied until they have had a reasonable opportunity to make a review and to provide us with their recommendations.
This letter also constitutes your authority to furnish BFL representatives with all information they may request as it pertains to our insurance contracts, rates, rating schedules, surveys, reserves, retentions and all other financial data they may wish to obtain for their study of my present and future requirements in connection with the insurance to which this letter applies.
[28] On January 18, 2005, Paul received copies of two endorsements to the Bronfmans’ insurance policies along with a covering letter from Goldsmith which stated:
All documentation has now been received from American Home and we will be contacting you shortly to review the present coverage for both the house and cottage prior to the anniversary date of April 1st.
[29] Goldsmith did not meet with the Bronfmans or undertake the promised review and discussion with them concerning their home insurance needs.
[30] Under cover of a letter dated March 24, 2005, Goldsmith sent copies of the 2005 policies to Paul. Goldsmith’s covering letter contained the following information:
The anniversary date of your personal home policies fall due on April 1st and I am pleased to enclose the following for the coming year.
2218537 – Home, cottage and four boats
2106108 – Jewellery Floater, miscellaneous (ATV, Kayak, Canoe)
1697264 – Excess personal liability $3,000,000 above underlying of
$1,000,000
Policy No: 22118537 for your home and cottage the limit was increased by 4% with corresponding premium.
One watercraft, the Seadoo had a premium increase of 2% (liability) all others remained with the same premium.
Policy No: 2106108, remained with the same coverage with no premium increase.
Policy No: 1697264, the premium increased by 10% for the additional liability on the new boat, no rate increase.
Although you decided not to make a claim for the water damage, I do hope that you and Judy were satisfied by the response and service provided by the America Home adjusters.
Please review the documents and of course call me if you have any questions.
[31] The documents provided by Goldsmith to the Bronfmans at that time included a Declaration Page for the Private Collection policy which referred to Blanket Items, including jewellery, as having a limit of coverage of $10,000.00. Contents coverage for 40 Burton Road, however, was noted as being $2,428,733.00.
[32] The only other written communication from Goldsmith was a letter of June 16, 2005 recommending that the Bronfmans continue with AIG as their insurer due to the lower cost of premiums and Goldsmith’s view that AIG was the best carrier for their type of risk.
[33] For each of the years 2006 through 2008, similar policies with similar covering letters were received by Paul from Goldsmith. During that same time, sizeable annual premiums were paid by the Bronfmans for the coverage obtained.
[34] The policies purchased through BFL from AIG continued to provide for insurance coverage on the Bronfmans’ home and cottage and their contents. Boats and water craft likewise continued to be specifically scheduled and additional premium adjustments therefore were calculated.
[35] BFL was compensated for its services by means of a commission structure which varied depending on the kinds of coverage placed and the premiums charged.
[36] Paul stated that throughout this entire time he believed that their contents insurance also applied to any jewellery in their home. He testified that he paid little or no attention to the covering letters he received with the policies, viewing them as generic form letters and relying on Goldsmith to alert him to any problems or gaps in their coverage.
[37] When the Bronfmans sought to recover compensation for their losses resulting from the theft of their jewellery, their claim was denied by AIG except for the limit of $20,000.00 under their policies. This payment represented only a tiny fraction of the actual value of the stolen jewellery.
[38] On March 30, 2009, and despite the controversy that had been raised between them as a result of the robbery, Goldsmith sent renewal policies to the Bronfmans. The covering letter which accompanied their policies on this occasion was significantly more detailed and informative than any of his previous covering letters.
[39] In particular, Goldsmith’s letter of March 30, 2009 delivered after the robbery contained specific information and instructions, with relevant portions bolded, as follows:
Your home policy contains terms, limitations, conditions and exclusions which could affect a claims settlement. To ensure your policy provides adequate coverage to suit your needs and to prevent unpleasant surprises should a loss occur, we ask that you review your policy and in particular review:
The limit of insurance on your dwelling, contents, private collection, and umbrella;
The various coverage’s (sic) provided;
Special Limits of Insurance – currently the maximum amount that your policy will pay under Special limits of insurance for Jewellery: is $10,000.; Furs $5,000.; Trailers: $5,000.; Watercraft $5,000.; Stamps and Coins Collections $5,000, … etc.; and,
The exclusions,
[40] Goldsmith’s covering letter also stated:
It is a good idea to take an active inventory of the contents of your property and to update it regularly with a list of new acquisitions. In the event of a loss, your biggest challenge may be remembering everything that you have in your home. Rather than relying on memory, today’s camcorders and digital cameras can simplify and streamline the process, providing vital information in visual format that can support your own memory. In addition, an inventory will assist you to establish the replacement cost of your personal property.
If the Special Limits of Insurance on unscheduled items such as jewellery, fur, business property, and watercraft are not adequate, they may be increased by scheduling these items separately under a Valuable Articles Form. Some of the benefits for insuring these items separately are:
• Addition of accidental breakage for fragile articles (not covered automatically under contents cover)
• No deductible applies unless indicated
• In the event of a claim your claims free discount is not affected
For more information on how to insure your valuables, please contact us.
[41] Further, Goldsmith’s covering letter reminded the Bronfmans that:
Our letter is intended to highlight items which may affect your coverage. We recommend that you take time to refer to your policy wording. Also, please be advised that in order to safeguard your insurance coverage and comply with policy conditions, you have an obligation to inform your Insurer of any change which affects the nature of the risk as you have originally declared it to the Insurer. Therefore, in order to comply with your insurance policy conditions, please notify our office of any such material change so that we may notify your insurer accordingly.
[42] The Bronfmans switched insurance brokers. Their new broker arranged for comprehensive and extensive insurance coverage for the Bronfmans home, cottage, jewellery and other valuables for which the Bronfmans have paid alleging substantial annual premiums. Additional items of jewellery acquired since 2010 and being of very substantial value have been regularly appraised, scheduled and insured by adding them to the policy.
[43] The Bronfmans have sued BFL, alleging breach of contract and negligence.
Issues
A. Did BFL breach its contract with the Bronfmans or either of them and/or fail to maintain the standard of care to be expected of a reasonably prudent insurance broker in the circumstances?
B. If the answer to Issue “A” is “Yes”, did such failure cause the Bronfmans’ damages?
C. Were the Bronfmans contributorily negligent and, if so, to what extent?
D. What is the proper assessment of the Bronfmans’ damages?
(Complete remainder of judgment and Schedule A text reproduced exactly as provided above.)