The insured homeowner (“Burke”) was entitled to indemnification for losses sustained in a fire despite errors in his application for insurance where the court found that the Insurer would have accepted the risk even if it had been aware of the errors on the application form

Burke v. All-Risks Insurance Brokers Ltd., [2005] O.J. No. 2644, Ontario Superior Court of Justice

Burke was a homeowner in Windsor who had continuously purchased insurance for his home over approximately 25 years. In the fall of 2001, he obtained insurance through All-Risks Insurance Brokers (“All-Risks”) to insure his home for a one year period. During this time, he experienced a break-in to the garage and received approximately $2,800 in compensation for lost or damaged items. This claim was processed by the same agent who sold him the policy at All-Risks. Burke did not receive the renewal notice for this insurance policy. In late October 2002, Burke received a notice of non-renewal indicating that his policy had expired and that his previous insurer was no longer writing homeowner’s policies. Burke discussed this with his broker at All-Risks who recommended that Burke take out a new policy with the Guarantee Company of North America (the “Insurer”). On November 6, 2001, Burke’s broker confirmed that he was bound with insurance from the Insurer. The arrangement between the Insurer and All-Risks did not require prior notification in order to bind coverage. Burke was to attend All-Risks to sign the application and drop the premium cheque off on November 8. He was delayed because of work and called his broker on November 8. She indicated that it was fine to come in on November 11 to sign the application and drop the premium cheque off. On November 10, 2001, Burke sustained a fire in the garage of his home. Burke reported this to his broker who indicated that there was no problem because Burke had been bound as of November 6.

On November 11, Burke attended at All-Risks and signed the application form which had already been completed by his broker.

The Insurer refused to pay out on the policy on the basis that there were two errors on the application form:

1. there was no disclosure of the prior $2,800 claim; and

2. there was no disclosure that Burke’s previous insurer had failed to renew his coverage.

The court found that the application form had been completed by the agent and that Burke was entitled to rely on her to complete the form appropriately. The court was satisfied that Burke did not provide any misleading information to his broker. The broker testified that the error relating to the past claim should not have affected the binder as there had not been two incidents in the previous five years.

The court held that the errors on the application were not misrepresentations of such character as to affect the risk analysis of the Insurer when deciding to honor a binder placed by a broker. The court was satisfied that if the application had been processed in the ordinary course, the Insurer would have provided insurance and that it was the unfortunate timing of the fire loss four days after the binder and prior to the Insurer receiving the application that had influenced the Insurer’s decision to deny coverage.

In the result, the court held that the Insurer was fully responsible to indemnify Burke under the policy with no right of indemnity from All-Risks.

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