An insured can recover damages from their insurance broker if the broker does not advise of changes to the insured’s insurance status following a move out of the family home
An insurance broker was found liable for failing to advise insured of change in her insurance needs following her moving out from the family home.
Beck Estate v. Johnston, Meier Insurance Agencies Ltd.,  B.C.J. No. 972, May 21, 2010, British Columbia Supreme Court, S.A. Griffin J. (In Chambers)
This case concerned a property insurance policy. The action was brought by the Estate of the Insured, who was murdered by her estranged husband. He then set fire to the house the Insured owned, which had been their family home where he had been residing since she moved out, and then killed himself.
The insurance policy contained an exclusion of coverage for intentional acts of an insured. The Insured’s husband was an Insured under the policy and the intentional act exclusion meant that the Insured’s Estate was denied coverage. A claim against the Insurer by the Insured’s Estate was eventually settled for approximately 50% of the value of the home. The Insured’s Estate then brought an action in negligence against the Insured’s broker seeking damages for the loss in insurance coverage represented by the insured value of the home less the settlement proceeds.
The theory of the Estate of the Insured was that the Defendant broker should have identified to the Insured that she might have a change in her insurance needs because she was the owner of a home that she was no longer living in due to her separation from her husband. The Insured’s Estate argued that the defendant should have explained to the Insured that the Intentional Act exclusion in her policy would exclude coverage for her if the loss was due to an intentional act by her husband. It argued that if this gap in coverage had been explained to the Insured, and alternative coverage pointed out, she likely would have changed her insurance coverage.
It was not disputed that the defendant owed the Insurer a duty of care. The Court found that the defendant had breached the duty of care it owed the Insured. The Court held that once the defendant learned that the Insured had moved out of the family home, and given that the Insured had directly contacted the defendant to obtain her own tenant’s insurance, the defendant had a duty to canvass with the Insured whether or not she had a change in her insurance needs. At that time, and on subsequent occasions when the defendant dealt with the Insured, the defendant should have made inquiries about her separation from her husband, advised her that her homeowner’s policy did not cover her if her husband or another tenant intentionally damaged the property, and advised her that she could instead obtain rental dwelling insurance that would not exclude damage caused by intentional acts of tenants. The Court found that had the defendant fulfilled its duty of care, the Insured would likely have replaced her homeowner’s policy with a rental dwelling policy. The defendant’s breach of its duty of care caused the Insured’s Estate to suffer an uninsured loss. It was reasonably foreseeable that if the defendant failed to advise the Insured of the gap in coverage under her homeowner’s policy and of the availability of substitute coverage that any loss falling within the gap of coverage would not be covered and the Insured (or her Estate) would suffer damages.
This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.
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