The Court dismissed the claim by an Insurer (“Scottish & York”) against its sub-broker (“Metrix”) for damages arising from a theft of jewellery worth in excessive of $2,000,000. The Court found that Scottish & York failed to prove that the failure by Metrix to communicate the policy warranties to the broker who placed the policy caused or contributed to the loss.

Scottish & York Insurance Co. v. Metrix Professional Insurance Brokers Inc., [2006] B.C.J. No. 1431, British Columbia Supreme Court

On January 23, 2000, four armed gunmen robbed the Haworth Jewellery Store in Kelowna, British Columbia shortly after the closing of the store. The owner was present and had not locked the backdoor. At the time, the jewellery had been removed from the display cases and was collected in trays ready for nighttime storage in the vault. Shortly before the robbery, the owner purchased, through her local insurance agent, Capri Insurance Services Ltd. (“Capri”), a Scottish & York jeweller’s block policy of insurance. The Scottish & York jeweller’s block insurance policy contained warranties that stipulated certain store closing procedures. One of those warranties required that the insured lock the exterior store doors before the jewellery was moved from the locked display cases to the vault. By the date of the robbery, the owner had not been provided with a copy of the warranties and consequently, having never previously purchased a jeweller’s block insurance policy, was unaware that some of her business practices breached the warranties. Scottish & York paid the loss and sued to recover the amounts paid out from Metrix for failing to advise the agent, Capri, of the content of the warranties and failing to obtain the insured’s acceptance of the warranties by the time the insurance was bound.

It was common ground that the store opening and closing warranty was not contained, nor referred to, in the application for insurance. Metrix argued that its obligations to Scottish & York were governed by contract, written and oral, and that it was never an express or implied term of the contract that Metrix was obliged to send warranties to the insured in the quotation or with the interim binder. Metrix’s standard practice was to send the policy and warranties to the agent, in this case, Capri, asking for the return of the signed warranties “as soon as possible”. The Court also found that Scottish & York did not have a standard practice of requiring the return of the signed warranties at the time of the placing of the policy and that its usual practice was to obtain the warranty signed by the insured within four months of the placing of the policy. It was Scottish & York’s standard practice to stay on risk without the warranty in the period between the date of the binding and the signing of the warranties by the insured. Scottish & York did not expect the warranties to be accepted by the insured prior to the date of their delivery with the policy. The Court held that unless an insured had an ability to read and accept the full warranties before the loss, the warranties were unenforceable citing McKay v. Norwich Union Ins. Co. (1895) 27 O.R. 251 (Ont. C.A.). In this case, the owner of the Haworth Jewellery Store had not agreed to the warranties and Scottish & York was unable to enforce them and was liable to pay the loss under the policy.

The Court agreed with Scottish & York that Metrix did owe a duty of care to Scottish & York to communicate the content of the standard warranties of the policy to Capri, at least at the binding stage of the transaction, and that Metrix breached this duty of care in this instance. The issue then became whether Scottish & York was able to prove, on a balance of probabilities, that Metrix’s failure to inform Capri about the warranties caused or contributed to the loss. The Court noted that to succeed, Scottish & York would have to prove that if Metrix had informed Capri about the warranties, Capri would in turn have informed the owner of Haworth and that the owner would have altered her opening and closing procedures to comply with the policy, and further that the robbery probably would not have occurred if the door had been locked as required by the warranty. After reviewing evidence relating to the owner’s recklessness concerning her surveillance system and financial matters, the Court held that to find that the owner would have complied with the warranties would be largely speculative and, therefore, Scottish & York had failed to discharge its burden of proof.

In the result, Scottish & York’s claim against Metrix was dismissed, with costs.

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