Homeowner's insurance - Coverage; Agents and brokers - Duties and liabilities of agent - Breach of contract - Failure to obtain reasonable coverage - Mistakes of agents; Policies and insurance contracts - Rights and duties of insured; Damages - Causation

March 2008

Strougal v. Coast Capital Insurance Services Ltd.

[2008] B.C.J. 107
British Columbia Supreme Court
D.A. Halfyard J.

January 22, 2008

The Insured obtained home insurance for both her real and personal property through the defendant Broker between March 2000 to November 2004.  A fire occurred on November 4, 2004, which resulted in destruction of the Insured's home and contents.  The policy contained a clause which provided for replacement costs of the home in excess of the limit of coverage, which was only $186,000.  Accordinlgly, the Insurer agreed to pay the actual cost of $357,000 to replace the Insured's house despite the lower limit of coverage.  There was no similar term in the policy that applied to the contents, which were subject to the same limit.  As a result there was a shortfall in insurance coverage for the contents of the house, which were valued at roughly $338,000.

The Insured claimed that the Broker was negligent or in breach of contract by underestimating the cost to replace her house.  If the value had been estimated correctly this would have resulted in the higher limit of coverage being applicable to the contents of the house as well  The parties agreed that incorrect information had been used in calculating the replacement cost of the house.

The Court found that the Broker had breached his duty of care to exercise reasonable skill in estimating the replacement cost of the house and to obtain insurance coverage that would meet this estimate.  However, there was no finding of liability since the breach was not found to have caused the Insured's loss.  Mr. Justice Halfyard held that the Broker's conduct in underestimating the house replacement cost did not create the risk that the Insured would suffer harm by way of inadequate coverage for her personal property.  His Lordship found that the risk of inadequte coverage for the house contents was not known nor reasonably foreseeable by the Broker and that there was no evidence of carelessness on his part in respect of obtaining coverage for the contents.  In the result, the Court dismissed the Insured's claim.

Had Justice Halfyard found liability, he would have assessed 50% contributory negligence against the Insured due to her failure to exercise reasonable care in reviewing the insurance coverage renewal materials, which contained erroneous information regarding the characteristics of her house.

This case was digested by Shanti Davies of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact her directly at 604.895.2877 or sdavies@harpergrey.com