An insured who relies on their broker for insurance coverage may not have an action against their broker despite the fact that they purchased the wrong insurance

Application for indemnity under Insurance Corporation of British Columbia (“ICBC”) policy, for losses sustained in a logging accident, was denied. There was a material misrepresentation in the application for coverage and consequently the insured’s coverage was forfeited pursuant s. 19(1)(b)(c) of the Insurance (Motor Vehicle) Act. The insured did not prove on a balance of probabilities that there was negligence on the part of the insurance broker in arranging coverage.

Triack Resources Ltd. v. Insurance Corporation of British Columbia, [2010] B.C.J. No. 764, April 29, 2010, British Columbia Supreme Court, J.C. Grauer J.

Insureds, Mr. and Mrs. McRae, owned a business, Triack Resources Ltd. (“Triack”). They insured several vehicles leased by Triack with ICBC.  When a claim was made for damage to their 2006 Kenworth tractor, ICBC denied coverage on the basis that there was a material misrepresentation in the application for coverage relating to the intended use of the vehicle and the proper class rate. This was because the vehicle was insured as a class rate 120 (vehicle designated and used for delivery and dumping of materials) instead of class rate 114 (vehicle used for the delivery of logs).

Prior to 2006, Triack’s business was 95% logging. However, in the spring of 2006, Triack began to transition into a wood wasting company. Mr. McRae was aware that he required a higher class rate (114) if a vehicle was to be covered for hauling logs as well as other materials. He had previously insured a 1992 Kenworth tractor, for the purpose of “delivery of logs”, at class rate 114. However, in 2006, Mrs. McRae attended at the insurance broker to purchase insurance for a newly purchased 2006 Kenworth tractor.  The vehicle was only insured as a class rate 120. At trial the insureds admitted that although it was used primarily for dumping materials, the tractor was also used sometimes (less than 10%) for hauling logs.

ICBC argued that by using the tractor for hauling logs, Triack was operating it for a use contrary to “delivering and dumping materials” and thereby breaching s. 55(2)(a) of the Revised Regulation (1984) under the Insurance (Motor Vehicle) Act, and forfeiting its coverage pursuant to s. 19(1) of the Insurance (Motor Vehicle) Act.  The insured argued that the description “vehicle designated and used for delivering and dumping materials” was wide enough to encompass hauling and delivering of logs and that if ICBC meant to exclude the hauling and delivery of logs from “delivering and dumping materials” , it should have said so. The court, however, looked at the policy as a whole, including the schedule of Vehicle Rate Classes. Since there was a separate rate class for “vehicles used for delivery of logs”, the court found that the phrase “delivering and dumping materials” did not include the hauling and delivery of logs.

The court then went on to determine whether the insurance broker had been negligent in arranging coverage or giving advice to the insureds. It found that the evidence supported a finding that Mrs. McRae told the broker that the truck would be used for dumping. Further, the court found that it was reasonable for the broker to accept that the truck was only used for dumping, even though other vehicles in the fleet were also insured for logging purposes. The broker was aware that the area of the business was changing and the broker’s focus was not on the overall business but on the particular vehicle being insured.  On a balance of probabilities, the court found that the broker had not been negligent in the provision of its services.

This case was digested by Natasha D. Morley and edited by David W. Pilley of Harper Grey LLP.

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