Court File and Parties

COURT FILE NO.: CV13-0534 DATE: March 20, 2017

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: 2015004 ONTARIO INC., DONALD EDMUND BLAIR, TARA LYNN BLAIR, and SHANGRI-LA LODGE & MARINA Plaintiffs (Moving Parties)

– and –

J.G. RIVET INSURANCE BROKERS LIMITED, WENDY PLANTE, NOVEX INSURANCE COMPANY, INTACT INSURANCE COMPANY, NON-MARINE UNDERWRITERS, MEMBERS OF LLOYD’S, LONDON, ENGLAND under Contract BA 1000382, SEAN MURPHY in his quality as Attorney in Canada for the NON-MARINE UNDERWRITERS, MEMBERS OF LLOYD’S LONDON, ENGLAND and THE STANDARD INSURANCE BROKERS LTD. Defendants (Responding Parties)

Counsel: Neville C. Johnston, for the Plaintiffs (Moving Parties) Pasquale Santini, for the Defendants (Responding Parties)

MOTION and CROSS-MOTION HEARD AT BROCKVILLE: February 17, 2017

Ruling on Motion

PEDLAR J.

[1] There are two motions in this action, the first being a motion brought by the plaintiffs (hereinafter referred to as “the Blairs”) for leave to amend their Statement of Claim to include a claim of negligent misrepresentation as against the defendant, The Standard Insurance Brokers Ltd., (hereinafter referred to as “Standard”) to include claims for negligent misrepresentation as well as bad faith with resultant punitive damages. Standard has cross-motioned, to dismiss the plaintiffs’ claim by motion for summary judgment.

[2] Prior to the commencement of submissions, counsel for each party agreed that a separate notice of motion for directions brought by the Blairs would not proceed and that, based on a recent decision of the Ontario Court of Appeal, 147619 Canada Inc. v. Chartrand, [2006] O.J. No. 1877, the motion for leave to amend would be argued first, and separately from, the cross-motion for dismissal by summary judgment, even though some issues are closely related.

[3] Dealing first with the Blairs’ motion to amend their Statement of Claim, as outlined above, the following facts are relevant and many apply to the cross-motion as well.

[4] The Blairs’ claim arises out of a fire which occurred on May 13th, 2011, which destroyed their business premises, contents and equipment, operating as Shangri-La Lodge & Marina, located in the Township of Rideau Lakes at 595 Jones Falls Road, Elgin, Ontario. The Blairs owned that premises and operated a lodge/restaurant as a resort on the Rideau Canal system.

[5] At the time of the fire loss, the Blairs’ lodge, equipment and business were insured under a subscription resort policy of insurance issued by Standard. The insurance policy provided for replacement cost coverage on the lodge and equipment, and for business interruption insurance.

[6] The defendant, Wendy Plante, an insurance broker with J.G. Rivet Insurance Brokers Limited (hereinafter referred to as “Rivet”), was the local insurance agent who arranged the insurance coverage with the Blairs who, prior to the fire, had no direct contact with Standard. Ms. Plante was offering a resort policy which was designed by Standard on behalf of several subscribing insurers named in this action, being Novex, Intact and Lloyd’s, all of which were noted in default of defence on October 2, 2013.

[7] The policy was specifically designed for resorts, with necessary modifications for the unique situation of a resort, which are typically excluded under commercial properties, such as vacancies, inadequate coverage for watercraft and for forest fire expenses.

[8] Standard designed a policy on behalf of the three named insurers, Novex, Intact and Lloyd’s, and then provided it to other independent brokerages to sell, including Rivet, through a distribution and brokerage agreement.

[9] The independent brokers, such as Rivet, did not enter into contracts of insurance on behalf of Standard, but would transmit a prospective insured’s application to Standard and ask it to issue the policy. Standard was, in effect, an intermediary, or middle broker, who developed a package of insurance geared towards resorts with their specific needs. They enlisted the subscribing insurance companies to provide insurance coverage for the described losses. Standard received compensation through a distribution and brokerage agreement.

[10] As part of the information given to the independent brokers, who were dealing with local customers, Standard provided a one page “Access Roads Replacement Cost Values Chart” (hereinafter referred to as “value chart”), which was distributed to brokers to help determine minimum replacement cost values of lodges for insurance under the Standard resort insurance package. That value chart included minimum levels of replacement cost for lodges described as, “Standard, Deluxe or Luxury”. Standard provided no criteria for classification of lodges under those categories.

[11] The Blairs’ uncontradicted evidence is that they were not aware of the existence of the value chart prior to the fire but relied on Wendy Plante, as their local insurance agent, in agreeing to ensure the lodge itself for a minimum replacement cost of $427,000.

[12] Wendy Plante states that she relied on information and instruction from Donald Blair that the lodge covered between 2,500 and 3,000 square feet and that she was advised by him to insure the lodge as if it were somewhere between standard and deluxe. Based on that information and instructions, she states that she advised him that the lodge likely should be insured for between $450,000 and $500,000. She also claims that she stressed that he should obtain a quotation from local contractors to determine the cost of rebuilding the lodge and that he indicated he would do that.

[13] Her evidence is that Donald Blair instructed her to prepare a policy for $427,000.00 for now. She confirmed that was within the minimum range provided by the Standard policy even if the maximum square footage was allotted to the lodge.

[14] The Blairs both deny that Donald Blair had any dealings or negotiations regarding insurance coverage with Wendy Plante. They claimed that Tara Blair handled all the business matters for the lodge. Tara Blair’s evidence is that she is not sure how the amount of $427,000.00 was arrived at, but that it was the amount agreed upon. She has no recollection of where that amount came from and is clear that she had no knowledge of the existence of the value chart prior to entering into the contract for insurance, or prior to the fire itself.

[15] Wendy Plante’s evidence is that she followed up several times verbally with Donald Blair to see if he had contacted contractors to get an estimate of the replacement cost per square foot of the lodge. The Blairs both deny those conversations took place.

[16] The Blairs confirmed that they had no communication or interactions of any kind with Standard and, at the time of the fire, did not know what role it played in the issuance of the policy, or that Standard even existed. They confirmed that Standard did not make any direct representations of any kind to them with respect to the limits of the lodge’s policy. They did not knowingly rely on them in relation to the same. Neither of the Blairs was clear as to how the figure, $427,000.00, was arrived at.

[17] Following the fire, it became apparent that coverage to replace the lodge itself was far from adequate. The motion record of the Blairs contains an affidavit at Tab 19 and expert’s report at Tab 20, which place the replacement cost of the lodge as of May 13, 2011, at $816,172.00, not including site specific costs, permit and development charges and septic system charges. The total replacement cost claimed by the Blairs, based on the evidence from the contractor, was $876,672.00. The policy had been renewed from February 20, 2011 to February 11, 2012, for replacement cost of the lodge in the sum of $461,900.00, the equipment in the sum of $125,200.00, and for business interruption loss in the sum of $50,000.00, to be shared by the subscribing insurance companies in terms provided in the contract. The fire on May 13, 2011 destroyed the lodge and all contents therein (commercial and personal).

[18] Although not relevant to this motion for amendment of the Statement of Claim, the Blairs are also alleging their coverage for both contents and business interruption was also inadequate. They have, to date, received only $8,484.61 of the $50,000.00 business loss coverage, which they claim exceeds $125,000.00.

[19] An appraisal award dated September 1, 2012, under the Insurance Act, found a replacement cost of $690,990.00 net of HST for the lodge.

[20] The Blairs’ specific claims against Standard are spelled out in their Statement of Claim dated May 13, 2013, as follows, beginning at paragraph 27:

“27. The Plaintiffs state that Plante, Rivet and Standard were in breach of contract with the Plaintiffs, particulars of which breaches are as follows:

(a) they used incorrect information in calculating the replacement cost of the Lodge, and the Equipment, and the potential business interruption loss of Shangri-La;

(b) they used faulty methods to calculate the replacement cost of the Lodge, and the Equipment, and the potential business interruption loss of Shangri-La;

(c) they did not advise the Plaintiffs of the facts that they were relying on to calculate the replacement cost of the Lodge, and the Equipment, and the potential business interruption loss of Shangri-La;

(d) they did not arrange for an inspection of the Lodge, and the Equipment, and a review of the financial records of Shangri-La prior to arranging for issuance of the Policy and each annual renewal of same;

(e) they did not make adequate enquiries of the Plaintiffs to obtain the facts necessary to properly determine the replacement cost of the Lodge, and the Equipment, and and the potential business interruption loss of Shangri-La;

(f) in the renewal Policy for the period February 20, 2011 to February 11, 2012, they erroneously estimated the replacement cost of the Lodge to be $461,900.00, and the estimated replacement cost of the Equipment to be $350,000.00, and the potential business interruption loss to be $50,000.00;

(g) they represented to the Plaintiffs that the coverage limits of $461,900.00 on the Lodge, and $125,200.00 for the Equipment, and $50,000.00 potential business interruption loss for Shangri-La were reasonably adequate to protect them against the risk of loss;

(h) they represented to the Plaintiffs that Plante had the experience and expertise to arrange for proper and adequate insurance for the resort property and business of the Plaintiffs, but failed to live up to such representation.

28. Further and in the alternative, the Plaintiffs state that Plante, Rivet and Standard were negligent, particulars of which negligence are as set out in paragraph 27 hereof. If Plante was an employee of Rivet and/or Standard, then Rivet and/or Standard was/were vicariously liable for the negligence of Plante.

29. Further and in the alternative, the Plaintiffs state that Plante, Rivet and Standard were in a fiduciary relationship with the Plaintiffs and that the said Defendants were in breach of their fiduciary duties.

30. As a result of the breach of contract, negligence and/or breach of fiduciary duties by Plante, Rivet and Standard, the Plaintiffs have suffered the following losses:

(a) 2015004 (as a result of inadequate replacement cost $425,000.00 coverage on the Lodge)

(b) Don Blair and Tara Blair (as a result of inadequate $224,800.00 replacement cost coverage on the Equipment)

(c) Don Blair and Tara Blair (re business interruption $ 75,000.00 loss of Shangri-La)

(d) Don Blair and Tara Blair (re complete loss of business) $500,000.00.”

[21] The Amended Statement of Claim sought to be issued is contained in the motion record at Tab 1, Schedule “A”, and contains the following proposed amendments to the original Statement of Claim. The amendments sought to be introduced include the following, with proposed amendments underlined:

“The Plaintiffs claim:

1. (A) as against the Defendants, J.G. Rivet Insurance Brokers Limited, Wendy Plante, and The Standard Insurance Brokers Ltd.:

(a) damages in the sum of $1,724,800.00 for negligence and/or breach of contract in arranging commercial insurance coverage, and/or renewal thereof, in relation to The Standard Resort Insurance Program Master Policy #1461151, Certificate Number 10255 (“the Policy”) for the Plaintiffs, which damages are as follows:

(i) insurance loss from underinsurance on building: $425,000.00

(ii) insurance loss from underinsurance on furnishings, fixtures and equipment (“The Equipment”) $224,800.00

(iii) insurance loss from underinsurance for business interruption: $ 75,000.00

(iv) consequential loss from permanent closure of lodge and restaurant business: $500,000.00

(v) general damages arising from the financial inability to replace the Lodge : $500,000.00

(B) further and in the alternative, as against the Defendant, The Standard Insurance Brokers Ltd .:

(a) damages in the sum of $1,724,800.00 for negligent misrepresentation and/or breach of the implied duty of good faith (i.e. for bad faith); and

(b) aggravated and/or punitive damages in the sum of $1,000,000.00 .”

[22] Further amendments requested begin at paragraph 27 of the proposed Statement of Claim as follows:

“27. The plaintiffs state that Plante, Rivet and Standard were in breach of contract with the plaintiffs, particulars of which breaches are as follows:

(a) they failed to adequately review, understand and/or determine the insurance needs of their clients, the Blairs ;

(b) they failed to obtain critical information in, and in relation to, the Blair’s application for insurance, and therefore facilitated the process of an incomplete application for insurance ;

(c) they failed to take any, or adequate, steps to assist the Blairs in determining the adequacy of insurance coverage on the Lodge and/or the Equipment and/or business interruption loss ;

(d) they failed to advise the Blairs properly or at all of the various types and/or amounts of insurance that the Blairs needed ;

(e) they failed to assist or advise the Blairs as to adequate insurance protection for their property and/or business ;

(f) they failed to provide the requisite information to the insurers, which failure resulted in gaps of, and deficiency in coverage ;

(g) they used incorrect information in calculating the replacement cost of the Lodge, and the Equipment, and the potential business interruption loss of Shangri-La;

(h) they used faulty methods to calculate the replacement cost of the Lodge and the Equipment, and the potential business interruption loss of Shangri-La;

(i) they did not advise the Plaintiffs of the facts that they were relying on to calculate the replacement cost of the Lodge, and the Equipment, and the potential business interruption loss of Shangri-La;

(j) they did not arrange for an inspection of the Lodge, and the Equipment, and a review of the financial records of Shangri-La prior to arranging for issuance of the Policy and each annual renewal of same;

(k) they did not make adequate enquiries of the Plaintiffs to obtain the facts necessary to properly determine the replacement cost of the Lodge, and the Equipment, and the potential business interruption loss of Shangri-La;

(l) they utilized a shoddy and incorrect chart prepared by Standard to determine the minimum replacement value of the Lodge ;

(m) they applied “per square foot” figures taken from the chart prepared by Standard to determine replacement cost value of the Lodge without even a cursory inspection of the Lodge ;

(n) they held out to the Blairs the incorrect data from the chart prepared by Standard as an authoritative tool for determining the replacement cost value of the Lodge ;

(o) in the renewal Policy for the period February 20, 2011 to February 11, 2012, they erroneously estimated the replacement cost of the Lodge to be $461,900.00, and the estimated replacement cost of the Equipment to be $125,200.00 , and the potential business interruption loss to be $50,000.00;

(p) contrary to the industry standard of treating a renewal policy as a new policy, they used annually a renewal policy to the Blairs without any input whatsoever from the Blairs ;

(q) they failed to disclose to the Blairs the limitations of the insurance protection in the Policy and each renewal thereof issued to the Blairs ;

(r) they represented to the Plaintiffs that the coverage limits of $461,900.00 on the Lodge, and $125,200.00 for the Equipment and $50,000.00 potential business interruption loss for Shangri-La were reasonably adequate to protect them against the risk of loss;

(s) they represented to the Plaintiffs that Plante had the experience and the expertise to arrange for proper and adequate insurance for the resort property and business of the Plaintiffs, but failed to live up to such representation;

(t) they failed to provide competent guidance required by their self-regulatory body, Registered Insurance Brokers of Ontario, to their insured .

28. Further and in the alternative, the plaintiffs state that Plante, Rivet and Standard were negligent, particulars of which negligence are as set out in paragraph 27 hereof. If Plante was an employee of Rivet and/or Standard, then Rivet and/or Standard was/were vicariously liable for the negligence of Plante.

29. Further and in the alternative, Standard is liable to the Plaintiffs for negligent representation, the particulars of which are as follows :

(a) At all material times, the Plaintiffs and Standard were in a special relationship ;

(b) Standard prepared a one-page document entitled “Road Access Figures for Ontario Locations” dated February 25, 2008 (“the Standard Valuation Chart”) which contained data intended by Standard to be relied upon by its brokers and their insured and prospective insured to calculate the minimum replacement cost of a lodge and other resort buildings for insurance coverage under the Standard Resort Insurance Program ;

(c) Standard distributed the Standard Valuation chart to its brokers, including Rivet and Plante, with the intention that the data from the Standard Valuation Chart be used and relied upon to determine minimum replacement cost as per paragraph 29(b) hereof ;

(d) Plante expressly represented data from the Standard Valuation Chart to the Plaintiffs as the basis for calculating the minimum replacement cost of the Lodge ;

(e) The Plaintiffs reasonably relied upon the information conveyed to them by Plante as taken from the Standard Valuation Chart ;

(f) The information contained in the Standard Valuation Chart was inaccurate and misleading ;

(g) Standard was negligent in the preparation and distribution of the inaccurate and misleading information contained in the Standard Valuation Chart ;

(h) As a result of their reliance on the information contained in the Standard Valuation Chart, the Plaintiffs suffered the damages outlined in paragraph 35 hereon .

30 . Standard owed a duty of care to the Plaintiffs by virtue of the special relationship that existed between Standard and the Plaintiffs. Firstly, Standard was in a direct contractual relationship with the Plaintiffs, as the Policy and renewals thereof were issued directly by Standard to the Plaintiffs, and Standard collected the premiums paid by the Plaintiffs in relation to the Policy and renewals thereof. Further and in the alternative, the special relationship between Standard and the Plaintiffs arose from the proximity and reasonable foreseeability arising from the fact that Standard created, prepared and distributed the Standard Valuation Chart with the express intention that the Standard Valuation Chart be relied upon by prospective insured resort owners and by its resort owners (including the Plaintiffs) in determining minimum replacement costs and Standard knew or ought to have known that prospective insured resort owners and its insured resort owners (including the Plaintiffs) would rely upon the data contained in the Standard Valuation Chart .

31 . Standard knew or ought to have known that prospective insured resort owners and its insured resort owners (including the Plaintiffs) would rely upon the accuracy and reliability of the data contained in the Standard Valuation Chart .

32. Standard was negligent in the preparation and distribution of the Standard Valuation Chart, and Standard knew or ought to have known that the inaccurate data contained therein would cause its prospective insured resort owners and/or its insured resort owners (including the Plaintiffs) who relied on such data to suffer such damages, including the damages in fact suffered by the Plaintiffs, which damages were proximate and reasonably foreseeable .

33 . Standard’s duty of care to the Blairs included the duty to act in good faith toward the Blairs as prospective insured resort owners in their issuance of the Policy and as insured resort owners in annual renewals of the Policy. Standard prepared and distributed the Standard Road Access Charts with a wanton and reckless disregard as to whether or not the data therein was true or inaccurate, with the intention of keeping premiums low and thereby remaining competitive. The conduct of Standard in detrimentally affecting the insurance coverage of the Plaintiffs under the Policy underwritten by Standard and issued by Standard to the Plaintiffs constituted bad faith on the part of Standard. Such conduct on the part of Standard was reckless, cavalier, egregious and reprehensible and warrants sanction by an award of aggravated and/or punitive damages .

34. Further and in the alternative, the Plaintiffs state that Plante, Rivet and Standard were in a fiduciary relationship with the Plaintiffs and that the said Defendants were in breach of their fiduciary duties.

35. As a result of the breach of contract, negligence, negligent misrepresentation, bad faith and/or breach of fiduciary duties by, or on the part of , Plante, Rivet and Standard, the plaintiffs have suffered the following losses:

(a) 2015004 (as a result of inadequate replacement cost $425,000.00 coverage on the Lodge)

(b) Don Blair and Tara Blair (as a result of inadequate $224,800.00 replacement cost coverage on the Equipment)

(c) Don Blair and Tara Blair (re business interruption $ 75,000.00 loss of Shangri-La)

(d) Don Blair and Tara Blair (re complete loss of business) $500,000.00

(e) Don Blair and Tara Blair (re general damages arising $500,000.00 from the financial inability to replace the Lodge)

36 . The Plaintiffs state the following facts in relation to discoverability under the Limitations Act in relation to negligent misrepresentation and bad faith on the part of Standard :

(a) On the examination for discovery of Plante held on December 10, 2015, Plante testified inter alia that the Standard Valuation Chart had been prepared and distributed to her by Standard with the expressed intention that the data contained therein be used to establish minimum replacement costs; and that she had used the data contained in the Standard Valuation Chart for the purpose of determining with the Plaintiffs the minimum replacement cost of the lodge ;

(b) On the examination for discovery of Gord McCool on behalf of Standard held on May 12, 2016, the said Gord McCool testified inter alia that he had prepared the Standard Valuation Chart with the express intention that the data contained therein be relied upon for determining minimum replacement cost values for insurance under the Standard Resort Insurance Program ; and

(c) The Plaintiffs received an expert report dated July 22, 2016 from insurance expert Todd Rissel which dealt inter alia with the standard of care among insurance companies and brokers in the insurance industry in determining replacement cost values; and concluded that the data contained in the Standard Valuation Chart was grossly inaccurate and fell far short of the standard in the industry .

37. The Plaintiffs plead that they did not know, and could not reasonably have known, whether they had a cause of action for negligent misrepresentation and/or bad faith and the damages flowing therefrom against Standard until they received the Expert Report of Todd Rissel on or about July 22, 2016, and, consequently, the limitation period under the Limitations Act with respect to their cause of action for negligent misrepresentation and/or bad faith against Standard and the damages flowing therefrom did not begin to run until the said date .

38. The Plaintiffs state that Novex, Intact, Lloyd’s and Standard were in breach of the contract of insurance with the Plaintiffs, particulars of which are as follows:

39. The following is a summary of the amounts owing by the Defendants Novex, Intact, Lloyd’s and Standard to the Plaintiffs under the Policy:

(a) owed by Novex/Intact/Lloyd’s to Don Blair and Tara $ 41,515.39 Blair (re balance of business interruption loss re Shangri-La)

(b) owed by Novex/ Intact /Lloyd’s to Don Blair and $150,000.00 Tara Blair (re extended coverage items under the Policy)

As at the date hereof, Novex and Lloyd’s have not paid the full amounts due to the Plaintiffs under the extended coverage items. Full particulars of this claim are not available as of the date hereof, but will be provided to Novex and Lloyd’s and their counsel prior to trial.

40. The conduct of Novex, Intact, Lloyd’s and Standard has been egregious, cavalier, dilatory and incompassionate in the processing of the claims of the Plaintiffs, including adjusting and making payments re such claims. They have caused significant stress, indignity and inconvenience to Don, Tara and their children, for which conduct the Plaintiffs claim aggravated and/or punitive damages.

41. The plaintiffs plead and rely upon the provisions of the Insurance Act, R.S.O. 1990, c.I.8; the Registered Insurance Brokers Act, R.S.O. 1980, c.R.19; the Negligence Act, R.S.O. 1990, c.N.1, and the Limitations Act, 2002, S.O. 2002, c.24, Sch.B, sections 4 and 5(1).”

[23] The Blairs received an expert report from insurance valuation expert, Todd Rissel, dated July 22, 2016, which stated that the one page value chart used by Standard was grossly inadequate for its intended purpose. That expert report goes on to state that there was neither truth nor foundation to it; that it misled users; and that Standard would have known, or should have known, of the risk to its insureds of using the data therein.

[24] The Blairs evidence is that they did not discover the facts to support their claim against Standard for negligent misrepresentation and bad faith based on their reliance on the information in the value chart, which they claim is misleading and inaccurate, until receipt of the Rissel expert report on July 22nd, 2016.

[25] The plaintiffs’ claim is rooted in Standard negligently misrepresenting to the plaintiffs, not directly but through the defendants Plante and Rivet, by producing data that was in the value guide which was part of a program put out for a specific market and was intended to be relied upon by agents, such as Plante and Rivet, who sold Standard’s program of insurance specifically for this niche market of lodges and resorts.

[26] The Blairs claim that Standard knew, or ought to have known, that the value guide, which the plaintiffs’ expert says is totally inadequate and negligently prepared, would be relied upon by both the local insurance broker dealing with the purchaser of insurance and the purchaser of insurance themselves. The plaintiffs claim that Standard could therefore be vicariously liable if that information is determined to be woefully inadequate and led to undervaluing of the coverage needed in the event of a loss. The claim is that Standard took on a role of an intermediary or middle broker between the local independent broker and the subscribing insurance companies by packaging this program of insurance in a specialized market, for which they claim to have some expertise and for which Standard was compensated.

Issues

[27] The issues to be decided on this motion seeking the amendment to the Statement of Claim are identified at paragraph 15 of the Blairs’ factum as follows:

(a) Is the amendment related to a new cause of action?

(b) Did the defendant, Standard, owe a duty of care to the plaintiffs?

(c) Is it plain and obvious that the claim re negligent misrepresentation as against Standard has no possibility of success at trial?

(d) Based on the “discoverability” provisions under the Limitations Act is the claim for negligent misrepresentation within the two-year limitation period?

(e) Is it plain and obvious that the claim re bad faith with resultant punitive damages as against Standard has no possibility of success at trial?

(f) Based on the “discoverability” provisions under the Limitations Act, is the claim for the amendment re bad faith with resultant punitive damages within the two-year limitation period?

(g) Would the amendment cause prejudice to the defendant, Standard?

(h) If the amendment would cause prejudice to the defendant, Standard, can it be compensated for by an adjournment or by costs?

Analysis

[28] Rule 26.01 of the Rules of Civil Procedure states as follows:

“On motion at any stage of an action, the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. (R.R.O. 1990, Reg. 194, r. 26.01)”

[29] In their submissions and factum, the plaintiffs rely on the Ontario Court of Appeal decision of South Holly Holdings Ltd. v. Toronto-Dominion Bank (c.o.b. Canada Trust), 2007 ONCA 456, [2007] O.J. No. 2445, where the court states as follows:

“A litigant’s pleading should not lightly be struck without leave to amend. To the contrary, leave to amend should be denied only in the clearest of cases.”

[30] The plaintiffs also rely on the Ontario Court of Appeal ruling in Conway v. Law Society of Upper Canada, 2016 ONCA 72, [2016] O.J. No. 451, where the court ruled that before a court will refuse to grant leave to amend, it must be plain and obvious, on a generous reading of the pleading, and taking the factual allegations as true or capable of proof, that the pleading discloses no reasonable cause of action.

[31] The Ontario Court of Appeal in the case of Iroquois Falls Power Compensable Prejudice v. Jacobs Canada Inc., 2009 ONCA 517, [2009] O.J. No. 2642 (Ont. Court of Appeal) states that unless the amendment is to assert a new cause of action after the limitation period has run, the party resisting the amendment has the burden of showing, (a) non-compensable prejudice and (b) that the non-compensable prejudice would result from the amendment. In that case, the court also held that an amendment to assert a new cause of action after the limitation period has run is presumed to be prejudicial to the opposing party. The opposing party could justifiably argue that the prejudice arose from the amendment. However, that argument is not available to an opposing party where the question of whether the limitation period has expired is a genuine issue for trial.

[32] That raises the issues of both whether this amendment sought by the Blairs constitutes “a new cause of action”, as well as the “discoverability” principle under the Limitations Act.

[33] The relevant sections of the Limitations Act are sections 4 and 5.(1) which state as follows:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5.(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Limitations Act 2002, S.O. 2002, c.24, Schedule B, Section 4 and 5.(1).

[34] The defendant, Standard, relies on the Ontario Court of Appeal decision of Frohlick v. Pinkerton Canada, 2008 ONCA 3 at paragraph 17, where the court held that the proper interpretation of Rule 26.01 is that the expiry of a limitation period gives rise to a presumption of prejudice, which shall be determinative unless a party seeking the amendment can show the existence of “special circumstances” that rebut the presumption.

[35] At paragraph 24 of Frohlick, supra, the Court of Appeal wrote that Rule 26.01 does not contemplate the addition of “unrelated statute barred claims” by way of amendment to an existing statement of claim. It held that this should be treated no differently than the issuance of a new and separate statement of claim that advances a statute barred claim.

[36] The defendants also point out that the Ontario Court of Appeal in Dee Ferraro Limited v. Pellizzari, 2012 ONCA 55 at para 14, held that amendments outside of the limitation period will be allowed only where they flow directly from facts previously plead.

[37] The Ontario Superior Court of Justice in 1309489 Ontario Inc. v. BMO Bank of Montreal, 2011 ONSC 5505, at para 24, held that where a defendant resists an amendment on the basis that the amendment raises a new cause of action after the limitation period has expired, then the court’s approach is to consider the constituent elements of the alleged new cause of action to see if the facts are originally pleaded, or as better particularized in the proposed new pleadings, could technically sustain that cause of action.

[38] With regard to the issue of what constitutes a new cause of action, the plaintiffs referred to an Ontario Superior Court of Justice decision in Beauchamp (Litigation Guardian of) v. Gervais, [2015] O.J. No. 5233, paras 7 and 13, where the court held that leave to appeal was denied and at para 5, McCarthy, J. states as follows:

“In (Lawless v. Anderson, [2011] O.N.C.A. 102) at paras 23 and 24, the Court of Appeal set out the test as to whether an expert opinion is necessary for the claimant to know the essential facts to establish a cause of action and to trigger the running of the limitation period.

Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been “discovered” and the limitation period begins to run. See Soper v. Southcott (1998), 39 O.R. (3d) 737 (C.A.) and McSween v. Louis (2000), 132 O.A.C. 304 (C.A.).

In some medical malpractice cases, however, it has been recognized that in order to discover that they have a claim, plaintiffs may require advice from a person who is medically trained.”

[39] It is also important to consider the principle of “discoverability” with regards to the existence of the values chart. Paragraph 18 of the defendants’ factum is not accurate when it states as follows:

“18. Ms. Plante confirmed that Standard does not tell her how to deal with her clients in the placement of coverages under the program nor did Standard provide her with any guidelines under the program to determine replacement cost coverage .” [Emphasis added]

That is not an accurate reflection of the issue as to whether Standard provided Wendy Plante with any guidelines under the program to determine replacement cost coverage. At page 73, question 330, the question was clearly qualified as follows:

“Q. Apart from the chart that we have referred to, which was called an “Access Roads Replacement Cost Values Chart ”, did they have any guidelines in relation to – printed guidelines re determining replacement cost value? Was there anything that was ever issued to you? [Emphasis added]

A. No.

MR. FORREST: By Standard, that is.

MR. JOHNSTON: By Standard. I am talking about Standard right now, yes.

THE WITNESS: No.”

[40] With regards to discoverability, paragraph 23 of the defendant’s factum is also not accurate when it states as follows:

“23. Ms. Blair stated that Ms. Plante never told her before the fire that she was using a chart dealing with minimum rates of coverage on a per square foot basis. She first learned of this methodology of using a chart to calculate the replacement cost from her insurance adjuster after the fire .” [Emphasis added]

[41] The reference in paragraph 23 is to the transcript of examinations of Tara Blair, July 31, 2015, at pages 76, 95 and 191.

[42] I have reviewed those pages of the transcript of the examination for discovery of Tara Blair. At page 76, there were no questions or answers relating to the value chart. She specifically denies reference to minimum reconstruction building rates in the range of $130 to $160 per square foot at question 441.

[43] At page 95, question 553 and 554, going over onto page 96, her evidence is that it was not until after the fire that she saw Ms. Plante’s notes referring to the cost per square foot of construction and the square footage calculation of the building itself. Until then, she states that she was not aware of those exact figures being used and, again, there is no reference in either question on those pages about the value chart.

[44] At page 191 of her discovery, Tara Blair is asked specifically at question 1033, again, about the replacement cost and square footage calculation and confirms that the details of that calculation were not known to her until after the fire. Again, there is no reference to the existence of the value chart prepared by Standard and given to independent insurance brokers for use as a guideline to determine the minimally acceptable replacements costs of reconstruction.

[45] I find nothing in any of those answers or questions to support the statement at paragraph 23 in the defendant’s factum that Tara Blair “first learned of this methodology of using a chart to calculate the replacement cost from her insurance adjuster after the fire”.

[46] Her sworn evidence in her affidavit of the 14th of February, 2017, filed in support of this motion at paragraph 6, Tara Blair states as follows:

“It is no secret that at the time when I was dealing with Ms. Plante in relation to the application for insurance in January/February 2009, we were not aware of the actual existence of the document known as the 2008 Road Access Chart. However, with the benefit of the examinations for discovery of Ms. Plante and Mr. McCool, we have learned the following:

(a) Standard produced and distributed to its brokers the 2008 Road Access Chart (“the Standard Valuation Chart”) with the express intention that the data in the said document be used to determine minimum insurance replacement cost values in all applications to Standard for resort insurance.

(b) Standard provided a Manual to Ms. Plante which included the 2008 Standard Valuation Chart, and annual Standard Valuation Charts updated by an inflation factor;

(c) Ms. Plante used the data contained in the 2008 Standard Valuation Chart to determine the minimum replacement cost value of our lodge at $427,000 for the Standard Policy;

(d) The Standard Valuation Chart had no qualification re its use, and Ms. Plante in recommending the $427,000 figure based on the data in the Standard Valuation Chart did not indicate any qualification to its use.

In effect, we relied on the recommended minimum replacement cost value of $427,000 as calculated from the data in the Standard Valuation Chart and recommended to us by Ms. Plante as being the minimum replacement cost value that Standard would accept for the issuance of the Policy. We were shocked to learn after the loss that we were grossly underinsured for replacement cost on the lodge and on the equipment, notwithstanding that the Policy indicated replacement cost coverage on both. An Appraisal Award held that that the true replacement cost value of the lodge as at the date of the fire was $690,900, and accordingly we received only $483,693 as being the limit of the Policy as far as the lodge was concerned. Likewise, the equipment was underinsured for replacement cost value. Upon receipt of the Expert Report from Todd Rissel dated July 22, 2016, I learned that the data emanating from Standard and conveyed to us by Plante from the Standard Valuation Chart and relied upon by us to determine the replacement cost coverage of the lodge and the contents under the Policy was grossly inaccurate.”

[47] I find on the above statements of law that there remains a genuine issue for trial as to whether the Amended Statement of Claim would constitute new causes of action as the original Statement of Claim included claims against Standard for negligence and bad faith with resultant punitive damages.

[48] I also find that, pursuant to provisions and protection of Section 5(1) of the Limitations Act, even if either claim is found to be a new cause of action, the limitation period did not begin to run until the Blairs received the Rissel expert report dated July 22, 2016, through their counsel.

[49] The Blairs rely on the Supreme Court of Canada decision in Hunt v. Carey Canada Inc., [1990] S.C.J. No. 93, where the court laid down the principle that unless it is “plain and obvious” or “beyond reasonable doubt” from the Statement of Claim that the plaintiff cannot succeed at trial, the Statement of Claim will not be struck and the action must proceed to trial.

[50] They submit that the same test should be applied for any amendment to the Statement of Claim.

[51] In applying the facts of this case to the law set out above, it is important to consider both what is contained in the original Statement of Claim against Standard for (a) negligence and (b) bad faith with resultant punitive damages.

[52] With regards to the criteria for negligent misrepresentation, both parties in their factums and submissions referred to the Supreme Court of Canada of Queen v. Cognos Inc., [1993] S.C.J. No. 3. The criteria, as laid down by the Supreme Court of Canada for negligent misrepresentation, are as follows:

(i) a duty of care based on “a special relationship”;

(ii) a representation that is untrue, inaccurate, or misleading;

(iii) negligent conduct by the representor in making the representation;

(iv) reliance by the representee on the negligent misrepresentation;

(v) damages suffered by the representee in acting on the negligent misrepresentation.

[53] Not surprisingly, each party takes a completely view of how the facts in this case relate to those five criteria.

[54] The Blairs rely on the Supreme Court of Canada case of Kamloops (City of) v. Nielsen, [1984] S.C.J. No. 29, which adopted the reasoning of the House of Lords in Anns v. Merton London Borough Council, [1978] A.C. 728, where that court laid down a two-part test for determining whether a duty of care exists:

“Part 1: The Court looks at precedents to see if a similar duty of care has previously been recognized. If not, the court considers if it is (i) foreseeable that lack of care by the defendant would cause harm to the plaintiff; and (ii) whether the degree of proximity or relationship between the parties is so close that a duty should be recognized.

Part 2: The Court determines whether or not on the basis of public policy a recognition of that duty of care would lead to an extension to an indeterminate class of persons.”

[55] Regarding the issue of duty of care based on a “special relationship”, Standard has provided in its Book of Authorities, the Supreme Court of Canada case of Thomas John Fletcher and Cheryl Elizabeth Fletcher v. Manitoba Public Insurance Co., [1990] 3 SCR 191. In dealing with this issue at page 207, the court reviews a number of cases to determine the principles of law applicable to the issue of the duty of care and when it exists. In referring to the case of Nova Mink Ltd. v. Trans-Canada Airlines, [1951] 2 D.L.R. 241, Justice Wilson on behalf of the court quotes from page 254 of that case at page 208 of Fletcher, supra, as to how the question of establishment of a legal duty to use care to avoid injury to that plaintiff’s business should be answered by quoting the following paragraphs:

“The common law yields the conclusion that there is such a duty only where the circumstances of time, place, and person would create in the mind of a reasonable man in those circumstances such a probability of harm resulting to other persons as to require him to take care to avert that probable result.”

[56] Justice Wilson continued to quote from Fletcher, supra, as follows:

“Many attempts have been made to generalize the circumstances which create a legal duty of care…. What is common . . . is the idea of a relationship between parties attended by a foreseeable risk of harm .... That relationship may arise out of circumstance of physical proximity; but it is not that circumstance per se which gives rise to duty but the probability of harm inhering in the relationship of parties, spatial or otherwise. If such a relationship does exist in fact, or in contemplation, and is fraught with the likelihood of harm to another in that relationship, the basis of duty exists; and it is immaterial that the locus or date of the occurrence of the apprehended harm be unknown. [Emphasis in original.]”

[57] Justice Wilson in Fletcher, supra, then goes on to quote more extensively from the series of cases on which this principle has been developed leading back to the House of Lords. She does so in the following words:

“At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances . . . . You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.

English and Canadian courts have applied Lord Atkin’s “neighbour principle” to many types of relationships, including those involving the communication of information. There is now ample authority for the proposition that reasonable reliance by a person on information provided by someone else can ground a duty of care at common law that binds the provider of the information. For example, in Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465, the House of Lords considered the liability of bankers who had negligently provided references concerning the solvency of one of their clients to the plaintiff company. The plaintiff company relied on these references and subsequently suffered significant losses when the client went into liquidation. The Law Lords held that in certain cases involving the provision of information or advice by one person to another, despite the absence of any contract between them, a special relationship can arise so as to impose on the provider of the information a duty of care towards the person who received it. Lord Morris of Borth-y-Gest said at pp. 502-3:

My Lords, I consider that it follows and that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise. [Emphasis added.]

Courts in England and Canada have applied the Hedley Byrne principle to other relationships of proximity where it was foreseeable that one party would reasonably rely on the information or advice given by the other: see, for example, Haig v. Bamford, [1977] 1 S.C.R. 466 (chartered accountants/investors), B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228 (courier company/client), and Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2 (municipal building inspectors/homeowners).

In Mutual Life & Citizens’ Assurance Co. v. Evatt, [1971] 1 All E.R. 150, Lord Diplock discussed at p. 154 the type of circumstances which give rise to a relationship of reliance and a concomitant duty to take care:

In Hedley Byrne itself and in the previous English cases on negligent statements which were analysed in the speeches, with the notable exceptions of Fish v. Kelly, (1864) 17 CBNS 194, Derry v. Peek (1889) 14 App Cas 337, [1886-90] All ER Rep 1, and Low v. Bouverie, [1891] 3 Ch 82, [1891-94] All ER Rep 348, the relationship possessed the characteristics (1) that the maker of the statement had made it in the ordinary course of his business or profession and (2) that the subject-matter of the statement called for the exercise of some qualification, skill or competence not possessed by the ordinary reasonable man, to which the maker of the statement was known by the recipient to lay claim by reason of his engaging in that business or profession.

The editors of MacGillivary & Parkington on Insurance Law (8th ed. 1988), commenting on the evolution of the Hedley Byrne principle, state at p. 231:

Although the grounds and scope of the duty to take care in the making of statements cannot be said to be definitively settled, there is no doubt that the duty would apply to parties in negotiations for a policy of insurance.

Indeed, English and Canadian courts have not hesitated to apply the Hedley Byrne principle to the relationship between insurance agents and their clients: see, for example, Cherry Ltd. v. Allied Insurance Brokers Ltd., [1978] 1 Lloyd’s Rep. 274 (Q.B.), General Accident Fire and Life Assurance Corp. v. Peter William Tanter (The “Zephyr”), [1985] 2 Lloyd’s Rep. 529 (Eng. C.A.), Banque Financiere de la Cite SA v. Westgate Ins. Co., [1989] 2 All E.R. 952 (Eng. C.A.), Pare v. Occidental Life Insurance Co. of California (1986), 23 C.C.L.I. 288 (B.C.S.C.), Bell v. Tinmouth (1988), 34 C.C.L.I. 179 (B.C.C.A., Norlympia Seafoods Ltd. v. Dale & Co., [1983] I.L.R. 6475 (B.C.S.C.) and Woodside v. Gibraltar General Insurance Co. (1988), 34 C.C.L.I. 150 (On. S.C.) (appeal pending).

At issue in Banque Financiere, supra, was the liability of the defendant insurer for the actions of its agent who had negligently failed to disclose to the plaintiff banks the deception being practised by one of the banks’ debtors. Slade L.J. stated at p. 1007:

In many cases where a misrepresentation has been made to another person, particularly by a professional man acting in the course of his profession, the assumption of responsibility may be readily inferred.”

[58] At the bottom of page 211, Justice Wilson continues with the following references:

“... Norlympia Seafoods Ltd., supra, concerned the duty of care of an insurance broker who, while arranging insurance for the maiden voyage of a large fish processing barge, mistakenly advised the owners of the barge that certain forms of coverage were in place. The barge ran aground and suffered extensive damage to the hull and machinery. These losses were not covered by insurance.

Although McLachlin J. (as she then was) was of the view that the relationship between the parties was properly analysed on the basis of contract, she added at p. 6491:

… it may be noted that application of recognized tort principles would also establish the liability of Dale & Company. On the principles established in Hedley Byrne … the defendant is liable for failure to properly inform the plaintiffs of material facts and for misrepresentation of material facts.

These cases support the proposition that individuals or corporations whose business involves the provision of information or advice to others owe a duty of care in communicating that information or advice to those whom they know will reasonably rely on it. As Slade L.J. said, at p. 1007, where the information is provided in the course of doing business, the “assumption of responsibility may be readily inferred.”

In my view, the sale of automobile insurance is a business in the course of which information is routinely provided to prospective customers in the expectation that they will rely on it and who do in fact reasonably rely on it. It follows, therefore, that the principle in Hedley Byrne applies and that MPIC will owe a duty of care to its customers if: (i) such customers rely on the information, (ii) their reliance is reasonable, and (iii) MPIC knew or ought to have known that they would rely on the information.”

[59] Justice Wilson went on to decide whether the reliance was reasonable in the facts of that case and then addressed the question of whether the reliance was expected in the following terms at page 213:

“In B.D.C. Ltd. v. Hofstrand Farms Ltd., supra, Estey J. made it clear that, before a court can impose a duty of care on the defendant, a plaintiff has to establish not only that there was reasonable reliance by him or her but that the defendant was aware of that reliance. On the latter criterion Estey J. followed Haig v. Bamford, supra, in which Dickson J. (as he then was) elaborated on the requirement that the defendant “know” that the plaintiff will rely on him. Dickson J. held at pp. 476-77 that it was not necessary that the defendant be aware of any specific plaintiff who was relying on him. The defendant’s liability was grounded rather in his knowledge that a limited class of persons (to which class the plaintiff belonged) would use and rely upon his statement.”

[60] At page 214, Justice Wilson goes on to consider the duty on private agents and brokers and refers specifically to the Fine’s Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 17 O.R. (2d) 529 (C.A.), which is also in the defendant’s Book of Authorities at Tab 13. Justice Wilson reviews that case and the principles arising from it in the following terms beginning at the bottom of page 214:

“ Fine’s Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 17 O.R. (2d) 529 (C.A.), is the leading Canadian case concerning the duty of care owed by private insurance agents and brokers. Mr. Fine had an extensive horticultural business. He asked his insurance agent, through whom he had purchased insurance for more than 20 years, to obtain “full coverage” for his business. The agent obtained coverage under a policy which covered a number of risks. However, it did not cover damage resulting from breakdown of the heating system due to normal wear and tear of the pumps. A pump failure subsequently occurred and extensive damage was caused to the plaintiff’s plants and flowers.

The outcome of the case turned on whether the plaintiff’s loss fell within the scope of the duty owed by the insurance agent. The majority discussed the agent’s duty at p. 538:

The main ground of appeal from the judgment of the learned trial Judge is that he put far too broad and sweeping a duty on insurance agents. They are not insurers. It is not part of their duty to know everything about their clients’ businesses so as to be in a position to anticipate every conceivable form of loss to which they might be subject. The agent’s duty, counsel submits, is “to exercise a reasonable degree of skill and care to obtain policies in the terms bargained for and to service those policies as circumstances might require”.

I take no issue with counsel’s statement of the scope of the insurance agent’s duty except to add that the agent also has a duty to advise his principal if he is unable to obtain the policies bargained for so that his principal may take such further steps to protect himself as he deems desirable . The operative words, however, in counsel’s definition of the scope of the agent’s duty, are “policies in the terms bargained for”.

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 . [Emphasis added.]

Thus, the agent would have discharged his duty in Fine’s Flowers if he had informed the plaintiff that certain types of losses were not covered by the policy he had arranged and had advised the plaintiff to purchase additional coverage for the pumps if he really wanted “full coverage”. Estey C.J.O. (as he then was) stressed that the agent owed a positive duty to warn the client. He put the standard for determining the agent’s liability in negligence as follows at page 533:

It was the duty of the defendant agent to either procure such [requested] coverage, or draw to the attention of the plaintiff his failure or inability to do so and the consequent gap in coverage. Having done neither, the defendant agent is liable in negligence,…

In my view, Fine’s Flowers stands for the proposition that private insurance agents owe a duty to their customers to provide not only information about available coverage, but also advice about which forms of coverage they require in order to meet their needs. I note that Professor Snow has summarized the effect of Fine’s Flowers in “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, in the following terms, at page 169:

The implication of this case and many others like it in recent years seems clear. 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 . Moreover, given the general situation of the principal relying very heavily on the expertise of the agent, it does not seem to be an unreasonable burden for an insurance agent to bear. [Emphasis added.]

The duty of care owed by an insurance agent was further elaborated in G.K.N Keller Canada Ltd. v. Hartford Fire Insurance Co. (1983), 1 C.C.L.I. 34 (Ont. H.C.) (conf. on appeal (1984), 4 C.C.L.I. xxxvii (Ont. C.A.)). It was held in that case that where the customer adequately describes the nature of his or her business to the agent, the onus is then on the agent to review the insurance needs of the customer and provide the full coverage requested. Should an uninsured loss occur, the agent will be liable unless he or she has pointed out the gaps in coverage to the customer and advised him or her how to protect against those gaps.

It is clear that within the insurance industry, as also within the courts, private insurance agents and brokers are viewed as more than mere salespeople. The Continuing Legal Education Society of British Columbia’s 1985 Seminar on Insurance Law focused on the services they provide, (at p. 6.1.03):

The services of a competent agent or broker will include, in addition to advice on insurance, and the brokering or placing of insurance on behalf of the client, an active interest and involvement in loss prevention and a claims supervisory service to assist your client in the satisfactory settlement of the claims.

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.”

[61] Justice Wilson goes on at page 218 and makes the following comment:

“The purchase of insurance is predicated on decisions made about assessing and bearing risks. Members of the public need to have all relevant information available to them in an explicit and readily comprehensible manner if they are to make intelligent decisions about how much risk they are prepared to bear. The public insurer has the responsibility of seeing to it that the information is provided to them in a reasonably intelligible fashion.”

[62] On this question of duty of care, the defendant relies on the Ontario Superior Court of Justice reported case of Ostenda v. Bahena Miranda, 2012 ONSC 7346, in which the court drew a distinction between that case and the Fletcher case referred to above. “In Ostenda, a transportation company, Synergy, was sold a Zurich policy by a broker, JDIMI, which did not contain uninsured or underinsured coverage. A Synergy driver was subsequently injured in an accident involving an underinsured driver, and thus had no claim under its own policy. Synergy then sued Zurich, arguing that it had breached a duty of care it owed to Synergy to warn about the need for OPCF 44R coverage.”

[63] The court rejected this argument, finding there was no evidence that Synergy had relied on Zurich to advise it of the risks against which it should be insured or about gaps in its coverage. The court found that Synergy was attempting to extend the duty owed by a broker to the insurance company and that concept was not accepted.

[64] At paragraphs 29 to 31, the court made the following statements:

“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 [page 709] 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] S.J. No. 214, 2009 SKCA 44, [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] O.J. No. 3619, 2012 ONSC 4461 (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].

A 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.”

[65] The court in Ostenda went on to make the following comments beginning at paragraph 40:

“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 as 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] [page 713]

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.”

[66] The Court continues to address the principle of duplication of services at paragraph 46 by making the following comments:

“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.”

[67] I find the Ostenda case is clearly distinguishable from the facts of the case in the motion before this court. The presence of specific exclusionary clauses regarding liability was an important consideration for the court in Ostenda. More importantly, there is no evidence that the insurance company, Zurich, provided any information to specifically be relied upon by an insurance agent dealing with a client as Standard has done in this case by providing the value chart to local insurance agents selling the package of insurance developed by Standard for this specialized market of customers seeking coverage for resorts.

[68] The court in Ostenda specifically at paragraph 29 distinguished the Fletcher case referred to above as that case did not include the role of any “intermediary”, who had the responsibilities of a broker. In this case, Standard has played an intermediary role between the subscribing insurance companies and the independent broker who does have legal responsibilities to the customer. By doing so, Standard may have incurred liability if they were negligent in providing information to the independent broker, contained in the value chart, which they knew, or ought to have known, would be relied upon by that broker to provide advice or services to the customer purchasing the insurance package.

[69] I, therefore, find that with regards to the duty of care based on a special relationship as the first requirement for a finding of negligent misrepresentation, according to the Queen v. Cognos, I am unable to find that it is plain and obvious or beyond any reasonable doubt that the Statement of Claim as amended would be one that should be struck on the grounds that the plaintiff cannot succeed at trial, to use the language of the Supreme Court of Canada in Hunt v. Carey. I find, therefore, that the first criteria of the five listed in Queen v. Cognos is not beyond reach of the plaintiff’s requested amendment.

[70] With regards to the second requirement in Queen v. Cognos that the representation be found to be untrue, inaccurate or misleading, there is the expert opinion contained in the report from Todd Rissel, corroborated by the contractor who commented on that issue as part of his report on the actual cost of replacing the lodge destroyed by the fire.

[71] The same evidence would relate to the third requirement under Cognos that there be negligent conduct by the representor in making the representation.

[72] The fourth criteria under Cognos that there is reliance by the representee on the negligent misrepresentation could be found in the evidence of the defendant, Ms. Plante, who stated that she did rely on the value chart in her calculations for the replacement cost of the lodge in her discussions with the Blairs.

[73] The fifth requirement under Cognos is that there be damages suffered by the representee in acting on the negligent misrepresentation and there is evidence of a significance loss caused by the fire herein, over and above the actual coverage provided by the policy purchased by the Blairs.

[74] To summarize the request for an amendment to include negligent misrepresentation, I find that it is not plain and obvious or beyond a reasonable doubt from the Amended Statement of Claim on this issue that the Blairs cannot succeed at trial with their claim for negligent misrepresentation.

[75] I find that the criteria for negligent misrepresentation may reasonably be found to exist, that the Blairs are within the limitation period based on the “discoverability” principle and that there is a reasonable cause of action against Standard for negligent misrepresentation that entitles the plaintiffs to amend their Statement of Claim accordingly.

[76] The plaintiffs also seek to amend the Statement of Claim herein to claim punitive damages based on bad faith of the defendant, Standard, by breaching the implied duty of good faith through negligent misrepresentation and are claiming an additional award of aggravated or punitive damages as set out in the draft Amended Statement of Claim. In support of that amendment, the Blairs rely on a decision of the Ontario Superior Court in Atlantic Steel Industries v. CIGNA Insurance Company of Canada, [1997] O.J. No. 1278, in which case the plaintiff moved for leave to amend to add a claim for punitive damages alleging the breach of the duty of good faith. In that case, the court stated as follows:

“Reliance is placed on Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 85, where it is said that punitive damages are rare in actions based on a breach of contract because the plaintiff must establish an independent actionable wrong. Rare or not, such claims have succeeded. An insurance contract is a contract of utmost good faith and Canadian courts have recognized that a breach of the duty of good faith can constitute an actionable wrong and may be deserving of an award of punitive damages.” “A claim for punitive damages against an insurer based on bad faith must disclose conduct which is malicious, extreme and outrageous and show a wanton and reckless disregard for the insured’s rights.”

The court permitted the amendment of the Statement of Claim and further stated as follows:

“In summary, this pleading asserts bad faith against an insurer for knowingly denying coverage on the basis of an exclusion in the policy contrary to an alleged intention that the provision is to cover the kind of losses claimed here. That the plaintiff may face hurdles in the proof of this claim or that it makes this action longer or more complex does not mean that it is an unreasonable cause of action: Hunt v. Carey supra. Accordingly, I am not able to conclude that it is “plain and obvious and beyond doubt that the plaintiff cannot succeed at trial”.

[77] The Blairs also rely on the Supreme Court of Canada case of Finney v. Barreau du Quebec, 2004 SCC 36, [2004] S.C.J. No. 31 where the court held that bad faith conduct includes not only intentional fault, but also “serious carelessness or recklessness amount to a fundamental breakdown of the orderly exercise of authority or an actual abuse of power”.

[78] The defendant, Standard, has cited the Supreme Court of Canada case of Bhasin v. Hrynew, [2014] SCC 71, wherein the court characterized good faith as an “organizing principle” which underpins and informs the various rules in which the common law recognizes obligations of good faith contractual performance.

[79] The court in that case goes on to make the following statements at paragraph 65 and 66:

“65. The organizing principle of good faith exemplifies the notion that, in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith. . . .

66. This organizing principle of good faith manifests itself through the existing doctrines about the types of situations and relationships in which the law requires, in certain respects, honest, candid, forthright or reasonable contractual performance. Generally, claims of good faith will not succeed if they do not fall within these existing doctrines. But we should also recognize that this list is not closed. . . .”

[80] The Blairs also rely on the Ontario Court of Appeal case of McIntyre v. Grigg, [2006] O.J. No. 4420, where the court dealt with the issue of aggravated or punitive damages in an action based on damages arising from a motor vehicle accident. In that case, the Court of Appeal cited with approval the Nova Scotia Court of Appeal decision of Roose v. Hollet, [1996] 154 N.S.R. (2d) R.161 at para. 237, in which held that recklessly exposing a vulnerable plaintiff to substantial risk of harm without any justification resulted in an award of punitive damages.

[81] In the Ontario Court of Appeal case of McIntyre v. Grigg, [2006] O.J. No. 4420, the court makes the following comments at paras 67 through 70:

“67. At the end of the trial, during the motion to strike the claim for punitive damages, the Appellants Grigg argued that an award of punitive damages required the defendant’s conduct to be specifically directed at the plaintiff. We disagree with this submission and with the reasoning in both Kaytor, supra and Nichols, supra insofar as they would require the misconduct to be deliberately directed at the injured party.

68. Such a requirement could well bar punitive damages in product liability cases, where punitive damages may be awarded depending on the level of indifference or recklessness of the defendant. See for example Van Oirschot v. Dow Chemical Canada Inc. (1993), 142 A.R. 149 (Q.B.), affirmed (1995), 1995 ABCA 264, 174 A.R. 157 (C.A.). In that case, the defendant was aware of the dangers with respect to the product and did not provide appropriate warnings to its customers. The trial judge found the defendant had acted in a high-handed and oppressive manner. The Court of Appeal found that the $10,000 awarded by the trial judge for “high-handed conduct” was an appropriate award for punitive damages.

69. In Vlchek v. Koshel (1988), 52 D.L.R. (4th) 371 at 375 (B.C.S.C.), Gallaghan J., in review of the holdings of previous British Columbia cases, including Kaytor and Nichols, concluded:

While negligence or an intentional act, can trigger an award of exemplary damages, it does not follow that the act must be directed towards a specific individual. But the act must be malicious or reckless to such a degree as to indicate complete indifference to the consequences that might flow therefrom, including the welfare and safety of others. In other words, intention to cause the injury need not be present; it will suffice if there was an intention to do the act which eventually caused the injury. The act alleged in this case was the manufacturing of inherently dangerous and unstable machines which were sold and used by the general public. [Emphasis added.]

70. In Vlchek, supra, the British Columbia Supreme Court moved away from a strict application of the holding in Kaytor. We agree with this reasoning. It would, in our view, be inappropriate to narrow the scope of punitive damages by specifically requiring that the defendant’s conduct be directed at the plaintiff. Rather, it is sufficient if there was an intention to do the act or combination of acts that eventually caused the injury.”

[82] I find that it is not plain and obvious or beyond a reasonable doubt from the Amended Statement of Claim that the Blairs cannot possibly succeed at trial on the claim for bad faith with resultant punitive damages. The evidence supporting that claim would primarily be the expert report of Todd Rissel, corroborated to some extent by the report of Randy Porter, the general contractor, retained to estimate the cost of replacing the lodge destroyed by the fire. The Amended Statement of Claim alleges that Standard knew, or ought to have known, that reliance on the data in the value chart put their insured at risk and, by doing so, that Standard was guilty of wanton and reckless conduct.

[83] Regarding the claim of bad faith in the Statement of Claim, given the evidence available on this motion, the Blairs could have a cause of action for bad faith with resultant punitive damages. I am unable to find that claim cannot possibly succeed at trial.

[84] As quoted above, Rule 26.01 reads as follows: “On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[85] In considering those elements, the Ontario Court of Appeal stated in the case of Iroquois Falls Power Compensable Prejudice v. Jacobs Canada Inc., 2009 ONCA 517, [2009] O.J. No. 2642 at paragraph 16:

There are two elements to the aspect of prejudice:

(a) The first element is non-compensable prejudice.

(b) The second element is whether that prejudice would result from the amendment.

[86] I find no basis in this case that establishes a link from the amendments sought and any prejudice to Standard that cannot be resolved by an appropriate ruling on timing of the filing of amended statement of defence, or in a ruling on costs in the ultimate resolution of the matters if the plaintiffs are not successful with any new claims.

[87] In view of the above findings and applying the law to those findings, the Blairs’ request for leave to amend their Statement of Claim in the form provided in the materials is granted with costs. A draft order was provided at the time the motion was argued and I am prepared to sign a clean copy of that order which I had already marked as a draft working copy on the day of the motion and I will now mark as Schedule “A” to this ruling and an order may issue in accordance with Schedule “A” to these written reasons on motion.

[88] With regards to costs, the plaintiffs submitted a bill of costs in support of both this motion and the cross-motion of the defendants. I will deal with costs after ruling on that cross-motion.

The Honourable Mr. Justice K. E. Pedlar Released: March 20, 2017