The Court held that due to ambiguity in the language of the policy, “in transit” coverage was included in the insurance policy. The Court also held that the insurer was negligent in failing to provide the insurance coverage applied for by the insured. The agents were negligent in failing to advise the insured of the lesser coverage. The insured was not contributorily negligent in failing to read the policy of insurance.

Audio Works Production Services Ltd. v. Canadian Northern Shield Insurance Co., [2005] M.J. No. 348, Manitoba Court of Queen’s Bench

The insured was in the business of providing audio-sound equipment to various venues. The insured’s audio-sound equipment was damaged while in transit to such a venue during a motor vehicle rollover. The defendant insurer, Canadian Northern Shield Insurance Company (“CNS”), refused to indemnify the insured for the loss.

The insured had sought insurance coverage for its audio-sound equipment on and off premises and while “in transit”, and for replacement cost coverage. The Court found that the agent Wagner did not advise the insured’s insurance agents that the CNS policy would not include “in transit” coverage or replacement cost coverage.

The Court found that the language of the policy with respect to whether the policy included “in transit” coverage was ambiguous and confusing. As such, the Court concluded that the ambiguity should be interpreted in favour of the insured, and that the CNS policy included “in transit” coverage.

The Court concluded that on the basis of common law, the insured and its agent were entitled to rely on the insurer and its agent to provide the insurance coverage for which the insured had applied, unless the insurer advised, in writing, of the material differences between the application for insurance and the policy. In failing to do so, the insurer and its agent breached the duty of care owed to the insured.

The Court held that the insured’s insurance agents were also personally liable in failing to adequately read the policy and advise the insured of the lesser coverage.

The Court held that CNS, as principal, was vicariously liable for the negligence and breach of contractual obligations of its agents to the plaintiff’s agents, and hence to the plaintiff.

The Court held that the insured was not contributorily negligent in failing to read the policy of insurance as it was entitled to rely upon the expertise and advice of its agents and to assume that it would receive the coverage for which it had applied.

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