Contracts can negate insurance company’s common law duties to insurance broker


Routh Chovaz Insurance Brokers Inc. v Aviva Insurance Co of Canada, 2016 ONSC 2567

This was a motion by Aviva Insurance Co of Canada (“Aviva”) for a summary judgment dismissing the Plaintiff’s action as Aviva argued the Plaintiff did not have a cause of action. Dow J granted the motion and dismissed the action. Routh Chovaz is an insurance brokerage firm, and Aviva is an insurance company.

In June 2013, one of Routh Chovaz’s customers, Mr. Zaidi, requested that Routh Chovaz change his Aviva insurance coverage from a 2008 vehicle to a 2010 vehicle. Although Routh Chovaz issued Mr. Zaidi a new motor vehicle liability insurance card (or pink slip) in processing this change, they failed to properly file this change with Jevco. In March 2014, Routh Chovaz transferred Mr. Zaidi’s insurance from Jevco to Aviva, but since the paperwork was not properly processed, they transferred coverage for the 2008 vehicle rather than for the 2010 vehicle.

On October 2, 2014, the Zaidi vehicle rear-ended another vehicle, resulting in $23,658.31 of damages, as well as a potential personal injury claim. Aviva refused coverage to Mr. Zaidi and voided Mr. Zaidi’s policy. Routh Chovaz’s errors and omission insurer paid Mr. Zaidi’s claim. Routh Chovaz brought this action against Aviva in order to seek recovery of the amount paid to Mr. Zaidi as well as to obtain a declaration of Aviva’s responsibility to defend and indemnify any personal injury claim in accordance with the automobile insurance provided for the 2008 vehicle.

In order to decide whether Routh Chovaz had a cause of action against Aviva, Dow J examined the issue within the context of (1) contract law, (2) tort law, and (3) recoupment.

On the first issue of contract law, Dow J examined the automobile insurance between Mr. Zaidi and Aviva. He found that Routh Chovaz was not a party to the automobile insurance contract and thus the contract did not apply to the litigation.

Dow J then examined the contract between Routh Chovaz and Aviva outlining their brokerage agreement and found that it clearly indemnified each party from the other’s negligence in the case of a conflict. As such, even though there was case law stating that the insurer was bound to cover the broker’s mistake, the case law did not apply here. The judge thus found that Routh Chovaz did not have a cause of action under contract law.

On the second issue of tort law, Dow J relied on the cases of Boudreau v Ontario Soccer Assn, 2012 ONSC 4461, and Ostenda v Miranda, 2012 ONSC 7346 and found that where the insurer is providing insurance to an experienced insurance broker and the information on the application is not correct, the insurer owes no duty of care to the insured. He thus found that the plaintiff did not have a cause of action under tort law.

Finally, on the third issue of the equitable remedy of recoupment, Dow J found that although the case law, particularly Insurance Corp of British Columbia v Hosseini, 2006 BCCA 4, supported the proposition that the insurer ought to cover the loss if it would have insured the vehicle if the information provided to it was correct.  While the court found this an attractive argument it stated that the contract between the insurer and the broker was paramount. Moreover, the judge found that if this argument were to succeed, there would have been no need for Routh Chovaz to have obtained errors and omissions insurance in the first place. The judge ultimately found that the Plaintiff did have a cause of action in recoupment and dismissed the action.

What the insurer should know

It is the contract between the insurer and a brokerage which will be determinative of a dispute between the parties.

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Mitch Kitagawa Jennifer Cox, Articling Student