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Personal Injury

The duty of an insurance broker to offer additional coverage

By John McLeish and Courtney Stewart

Benefits available to injured Ontario drivers have been dramatically decreased in the past decade. Many Ontario drivers do not know that they can protect themselves and their families by purchasing additional coverage at very little cost.

For more information on additional coverage options, click here.

Insurance brokers play a pivotal role in helping their clients understand how the decreases have impacted their coverage, and what optional benefits are available. Under s. 28(1) of the Statutory Accident Benefits Schedule an insurance company has a duty to offer optional benefits. This duty has been confirmed by Canadian courts, who have found that insurance brokers owe a professional obligation to their clients to properly advise of these optional benefits.

If your broker fails to inform you about optional benefits, and you or a family member are injured in a collision, and your insurance policies fall short in covering your losses, you could have a claim for negligence against your broker.

An example of where broker may be found liable

The Toronto van attack provides an example of where a broker may be liable for shortfalls in coverage. On April 23, 2018, a man drove a rented truck onto the sidewalk in Toronto and killed ten people and injured twelve. Without additional coverage, the victims and their families will be limited to sharing the $1 million insurance on the rented truck. Those families who purchased additional coverage of $2 million will be able to claim against their own insurance company for the shortfall. Those families who did not purchase additional coverage, and were not advised by their broker of the availability of the additional coverage at very little cost, may have a claim against their broker for the shortfall.

To succeed in a negligence claim against an insurance broker, a client of the broker who is injured must prove two things: first, that the broker owed a duty of care to the injured person, and second, that the broker breached the standard of care owed to the person.

Duty of care

A broker will be found to owe a duty of care to a client who is injured if the client reasonably relies on the broker’s advice and the broker knew or ought to have known that the client would rely on that advice. This element is not difficult to establish and such reliance is usually present in a typical relationship between a broker and client buying automobile insurance.

Standard of care

The standard of care owed by a broker to a client depends on what instructions the client gives the broker, as well as the relationship between the broker and the client.[1] When a client gives specific instructions with respect to the type or extent of coverage desired, the broker must use a reasonable degree of skill and care to obtain such coverage, inform the client if that coverage is not available, and advise of any further steps that may be taken. If specific instructions are not given and the client relies on the broker to see that the client is protected, the broker must acquaint himself with the client’s needs and offer the client the coverage that is available to meet those needs – and very importantly, advise of additional coverage options

In this Supreme Court of Canada case,[2] the client informed the broker of his desire for “maximum coverage.” The broker, however, did not advise the client that there was optional underinsured and uninsured coverage available. In this case, the justices of the Supreme Court of Canada found that brokers have a “stringent duty to provide both information and advice to their customers,”[3] including pointing out coverage gaps. The client won the case against the broker.

Higher standards of care have also been imposed when there is a long-standing personal relationship[4] or where the broker knows from experience that the client will not be thorough in their instructions regarding insurance.[5]

On the other hand, a lower standard of care might be applied if a client seems to know what coverage he or she wants and does not ask for advice during the transaction with the broker.[6]

What should a purchaser of insurance do?

One thing virtually every car owner purchasing insurance should do is purchase extra liability insurance, and uninsured and underinsured coverage, up to $2 million. The cost will likely be less than $100.

Conclusion

Brokers have a duty to make sure clients purchase insurance that fits their needs and the needs of their families. If brokers do not live up to this duty, and a client with insufficient insurance is injured or killed, the broker may be liable for the shortfall in coverage.

[1] http://canlii.ca/t/g1c41

[2] http://canlii.ca/t/1fsqh

[3] Ibid, para 57.

[4] http://canlii.ca/t/g1c41supra note 1; and, http://canlii.ca/t/fsq55

[5] http://canlii.ca/t/fx8k6

[6] (1991) 4 CCLI (2d) 256 (BCSC)

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