Broker’s conduct binds insurer to defend insured in lawsuit

BC Court of Appeal overturns BC Supreme Court decision and finds broker acted as agent for insurer, and broker’s conduct and communications with insured bound the insurer to defend the insured in lawsuit.

Insurance law – Commercial general liability insurance – Interpretation of policy – Named insured – Duty to defend; Bad faith; Agents and brokers; Practice – Appeal.

Deasan Holdings Ltd. v. Continental Casualty Co., [2025] B.C.J. No. 958, British Columbia Court of Appeal, May 29, 2025, B. Fisher, S.A. Griffin and S.A. Donegan JJ.A.

The insured appealed an order of the BC Supreme Court that the insurer had no duty to defend the insured in a lawsuit arising from its gravel pit operation. The insured obtained an insurance policy through a broker, and the central issue on the application was whether the broker acted as agent for the insurer to bind the insurer to defend the insured in a claim arising out of its gravel pit operation. The judge concluded that the broker was agent for the insurer in sending a certificate of insurance to the insured, but interpreted the certificate narrowly finding that the broker did not extend the insurer’s coverage to the insured’s gravel pit operation. The insured appealed. 

The appeal turned on two issues: (1) whether the broker, as agent, had the ability to bind the insurer to provide insurance to the insured in relation to its gravel pit operation, and (2) whether the broker did so.

The BC Court of Appeal found that while the BCSC judge correctly stated the principles that govern the law of agency, he failed to apply them and overlooked important evidence of the broker’s conduct. The BCCA found that where an insurer’s agent makes representations to the insured about the scope of the insurance contract, any ambiguity ought to be resolved consistenly with the parties’ reasonable expectations, and ambiguity in a certificate of insurance describing coverage provisions ought to be interpreted broadly, in favour of coverage. Based on the broker’s communications and conduct with the insured, and by operation of Statutory Condition 4, the BCCA found that the broker had the ability to and bound the insurer to provide insurance to the insured for its gravel pit operation, and that the insurer had a duty to defend the insured in this regard. The appeal was allowed.

This case was digested by Alicia Catalano and edited by Steven W. Abramson of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].