An insurance company owes no personal duty directly to the insured when an independent broker is mediating the transaction, an Ontario court has ruled.
“In short, when there is an independent broker and the insurer is not in an advisory role, it appears that an Ontario court will not hold the insurer responsible for inadequacies in coverage,” Ian Gold of Thomas Gold Pettinghill LLP wrote in an analysis of the case.
Joey Boudreau was rendered a paraplegic in February 2008 while playing soccer at an indoor soccer field in Hamilton, Ontario, in a league operated by the Ontario Soccer Association (OSA).
HKMB International Insurance Brokers Ltd. arranged coverage with Chubb Insurance Company of Canada, which issued a “blanket insurance policy” to the OSA. (continued)#pb#
Among other things, the policy offered $40,000 to OSA members for quadriplegia resulting from an accident occurring while the insured member was participating in an OSA-sanctioned practice, game, exhibition game or tournament.
Chubb paid out $46,500, representing the maximum benefits provided under the policy for quadriplegia, physical therapy, fracture and home renovation.
Boudreau took the insurance company and HKMB to court, saying the insurer’s product was “woefully inadequate to the risk.”
Boudreau’s representatives in court argued that Chubb entered into an advisory role to the OSA. Chubb should have refused to enter into the contract with the OSA, knowing the coverage was inadequate, they said.
But the broker, HKMB, not the insurance company, was in the advisory role, the court determined.
“When dealing with an experienced broker, the insurer owes no personal duty directly to the insured,” the court ruled. “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 only obligation to OSA was to issue a policy in accordance with the terms requested by OSA’s broker.”
Chubb told the court it offered the coverage based on what HKMB said its client could afford.
“The decision in Boudreau has been appealed,” Gold commented in The Ontario Broker. “The Court of Appeal for Ontario’s response on this will be of interest.”
