Insurance Law Blog
Knowledge Centre

Broker ordered to pay replacement cost where insured could not replace because of coverage denial

May 11, 2021

Court of Appeal awarded damages equivalent to replacement cost of a dwelling where insureds showed they would have replaced the dwelling had they had effective coverage.

Insurance law – Property insurance – Landlord and tenant – Exclusions – Damages – Actual cost vs replacement cost – Agents and brokers – Duties and liabilities of agent – Failure to advise of exclusion clauses – Mistakes of agents – Practice – Appeals

Alvaro v. InsureBC (Lee & Porter) Insurance Services Inc., [2021] B.C.J. No. 385, 2021 BCCA 96, British Columbia Court of Appeal, March 3, 2021, P.M. Willcock, J.J.L. Hunter and G.B. Butler JJ.A.

The insureds purchased insurance for their rental building from their broker. After a fire damaged the building, the insurer denied the insureds’ claim on the basis of a vacancy exclusion. The insureds successfully argued at trial that the broker was negligent for failing to bring the vacancy exclusion to the insureds’ attention and failing to advise of the availability of coverage in the form of a vacancy endorsement. The trial judge awarded damages of $180,472.50, being the actual cash value of the destroyed building. The trial judge concluded that ACV was the proper award because the insureds had not replaced the damaged building. The trial judge dismissed the broker’s argument that the insureds were contributorily negligent for failing to read the policy and note the vacancy exclusion. The insureds appealed and the broker cross appealed.

On appeal, the insureds argued that the trial judge erred by awarding the actual cash value of the damaged building rather than its replacement costs. The broker alleged the trial judge erred in dismissing the argument that the insureds were contributorily negligent.

The Court of Appeal allowed the insureds’ appeal, set aside the damage award made by the trial judge, and substituted it with the amount the insurer would have paid if the building had been replaced. The court held that where “insureds do not have effective coverage, the simple fact that they have not replaced the property within a reasonable period does not disentitle them from seeking to be indemnified by the agent responsible for the loss of the right to opt for replacement cost”. The court was satisfied that the insureds would have opted to replace the building if they had effective coverage.

The court dismissed the broker’s cross appeal, confirming the trial judge’s finding that the broker’s negligence flowed primarily from the broker’s failure to advise the insureds how a gap in coverage might be avoided by a vacancy endorsement, and that the insureds did not contribute to that failure by failing to read the policy.

This case was digested by Alicia Catalano, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Alicia Catalano at [email protected].

To stay current with the new case law and emerging legal issues in this area, subscribe here.

Tags

Expertise

Important Notice: The information contained in this Article is intended for general information purposes only and does not create a lawyer-client relationship. It is not intended as legal advice from Harper Grey LLP or the individual author(s), nor intended as a substitute for legal advice on any specific subject matter. Detailed legal counsel should be sought prior to undertaking any legal matter. The information contained in this Article is current to the last update and may change. Last Update: May 11, 2021.

Related

Harper Grey welcomes four new associates
Harper Grey welcomes four new associates
Abigail Turner recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise
Abigail Turner recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise Abigail Turner recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise
Bruno Desparts to present at Ma Pratique hosted by Association des juristes d’expression française de la Colombie-Britannique
Bruno Desparts to present at Ma Pratique hosted by Association des juristes d’expression française de la Colombie-Britannique Bruno Desparts to present at Ma Pratique hosted by Association des juristes d’expression française de la Colombie-Britannique
Lesley Russell lends her Expertise in Recent Presentation focused on Estate Planning
Lesley Russell lends her Expertise in Recent Presentation focused on Estate Planning Lesley Russell lends her Expertise in Recent Presentation focused on Estate Planning
Christopher Rusnak, KC recognized as a Litigation Star by Benchmark Canada® 2024 in three areas of expertise
Christopher Rusnak, KC recognized as a Litigation Star by Benchmark Canada® 2024 in three areas of expertise Christopher Rusnak, KC recognized as a Litigation Star by Benchmark Canada® 2024 in three areas of expertise
Retail Case Update: A Follow Up on the Impact of Failure to Immediately Disclose Settlement Agreements
Retail Case Update: A Follow Up on the Impact of Failure to Immediately Disclose Settlement Agreements Retail Case Update: A Follow Up on the Impact of Failure to Immediately Disclose Settlement Agreements Retail Case Update: A Follow Up on the Impact of Failure to Immediately Disclose Settlement Agreements
David Pilley recognized as a Litigation Star by Benchmark Canada ® 2024 in two areas of expertise
David Pilley recognized as a Litigation Star by Benchmark Canada ® 2024 in two areas of expertise David Pilley recognized as a Litigation Star by Benchmark Canada ® 2024 in two areas of expertise
Harper Grey sponsors 2024 Allard Law Alumni Achievement Awards
Harper Grey sponsors 2024 Allard Law Alumni Achievement Awards
Abigail Turner participates as judge in external Advisory Panel for 2024 Canadian Law Awards
Abigail Turner participates as judge in external Advisory Panel for 2024 Canadian Law Awards Abigail Turner participates as judge in external Advisory Panel for 2024 Canadian Law Awards
Three Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of General Commercial Litigation
Three Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of General Commercial Litigation
Kimberly Jakeman, KC recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise
Kimberly Jakeman, KC recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise Kimberly Jakeman, KC recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise
Five Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of Health Law
Five Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of Health Law
Nigel Trevethan recognized as Insurance Litigator of the Year by Benchmark Litigation® Canada for third consecutive year
Nigel Trevethan recognized as Insurance Litigator of the Year by Benchmark Litigation® Canada for third consecutive year Nigel Trevethan recognized as Insurance Litigator of the Year by Benchmark Litigation® Canada for third consecutive year
Michael Hewitt recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise
Michael Hewitt recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise Michael Hewitt recognized as a Litigation Star by Benchmark Canada® 2024 in two areas of expertise
Two Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of Environmental Law
Two Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of Environmental Law Two Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of Environmental Law Two Harper Grey lawyers selected by Benchmark Canada® 2024 as Litigation Stars in the area of Environmental Law
arrow icon

Subscribe