Insurance Brokers May Be on a Collision Course With Insurers Over Coverage Issues
Mar 13, 2017
In Routh Chovaz Insurance Brokers Inc. v Aviva Insurance Company of Canada, 2016 ONSC 2567 the Insured had an automobile insurance policy with Jevco, which he had obtained through Routh Chovaz Insurance Brokers. In 2013 the Insured requested that Routh Chovaz switch policy coverage from his 2008 Mercedes to a recently acquired 2010 Mercedes. Despite issuing a new motor vehicle liability insurance card, the broker failed to process the change with Jevco. In March 2014, the Insured’s policy was renewed and the broker arranged for Aviva to provide coverage. The broker bound Aviva to insure the 2008 Mercedes under a Brokerage Agreement between Aviva and Prolink Broker Network (“Prolink”).
In October 2014 the Insured suffered a motor vehicle accident, damaging the 2010 Mercedes and opening him to liability for a personal injury claim. Aviva took the position that it was not responsible for insuring the loss and refunded the Insured the entire amount of policy premium he had paid. Routh Chovaz’s errors and omissions insurer paid the property damage claim and subrogated under Routh Chovaz’s name. It sought recovery from Aviva and a declaration that Aviva must indemnify the insured against any personal injury claim that arose from the subject collision.
On a motion for summary judgment, Justice Dow of the Superior Court of Justice assessed whether Routh Chovaz had a claim again Aviva from three perspectives: contract, tort, and whether there was declaratory relief. He found that Routh Chovaz had no viable claim against Aviva and dismissed the action.
Routh Chovaz argued that it had a remedy under either the contract for automobile insurance or the Brokerage Agreement. Justice Dow quickly dismissed both arguments with a primarily factual analysis. As Routh Chovaz was not a party to the contract of automobile insurance, the contract did not apply and could not provide a cause of action. The Brokerage Agreement explicitly established the parties’ obligations. On the basis of these provisions, Routh Chovaz was not entitled to indemnification or reimbursement from Aviva on contractual grounds.*
The Court also determined that Routh Chovaz did not have an equitable remedy of recoupment against Aviva. The broker argued it was entitled to indemnity and reimbursement as a just and reasonable remedy. Justice Dow disagreed. The terms of the Brokerage Agreement were clear and uncontradicted. Accepting the broker’s argument that Aviva had to indemnify the insured would require ignoring the Brokerage Agreement.
Most importantly, the Court held that Aviva did not owe a duty of care to Routh Chovaz under tort law. The Court relied upon the decision in Boudreau v Ontario Soccer Association, where Justice Lofchik held that an insurer owes no duty to the insured when an experienced broker is involved. It also referred to Ostenda v Miranda which highlighted the nature of the insurance broker industry. Brokers are highly regulated. They must abide by a code of conduct and fulfill certain obligations. They are responsible for determining customer needs and obtaining policies that meet those needs. Imposing an additional duty of care on an insurer to assess the customer/insured’s requirements would duplicate work and drive up costs for the consumer. As a result, Justice Dow found that Aviva did not owe a duty of care to Routh Chovaz or the insured.
The decision in Routh Chovaz v. Aviva is important in light of recent changes to the Statutory Accident Benefits Schedule. With the amount of basic available accident benefit coverages reduced, individuals will have to seek additional pockets to pursue recovery insurance brokers will likely attract much of the plaintiffs’ attention. Routh Chovaz reminds us of the role of brokers within the insurance industry and reiterates their responsibilities. It also confirms that brokers will end up in conflict with the insurers they write coverage for on a more regular basis.
*The Court of Appeal, in decision 2017 ONCA 55, overturned the decision on the Brokerage Agreement due to what it called inadequate reasoning. The Court of Appeal found that Justice Dow did not adequately explain why the provisions of the Brokerage Agreement meant that the broker was not entitled to reimbursement or indemnification. The Court of Appeal found that the pleadings did not adequately frame the issue on summary judgment and where the evidence was not well directed to the issue of a hold harmless indemnification from the insurer to the broker, it held that summary judgment should not have been granted. Rather than make a finding of its own on the subject, the Court of Appeal suggested the matter be remitted to trial for a determination.