June 8, 2011 by Canadian Underwriter
The B.C. Court of Appeal has dismissed an appeal from a February 2010 B.C. Supreme Court case, Beck v. Johnston, Meier Insurance Agencies Ltd., which establishes the onus on brokers to advise clients of gaps in homeowners’ coverage, particularly when the client has changed dwellings.
The insurer and the broker essentially asked the Appeal Court to reconsider whether or not the broker had sufficiently advised a client about an “intentional act” exclusion in her homeowners’ policy.
Richard Beck murdered his wife, Karen Beck, in November 2007 and then set fire to the house she owned. The home had been their family home, where Richard Beck had resided since his wife had moved out in 2005. Richard Beck then killed himself.
The Becks were co-insured on the home. The insurance policy contained an intentional act exclusion, meaning the policy did not cover damage arising out of any intentional criminal acts.
After settling a claim with the insurer, Canadian Northern Shield, for 50% of the value of the home, Karen Beck’s son, representing her estate, called on the broker to pay for the balance of the home’s value. The estate argued the broker had failed to advise Karen Beck of an opportunity to change her coverage – i.e., to a policy that did not contain an intentional act exclusion – once the broker had found out she no longer lived in the family home.
In the Court of Appeal, the insurer and its broker argued the trial judge erred in concluding the damage to Beck’s property was “reasonably foreseeable” and therefore the exclusion did not take effect.
“While Ms. Beck may not have had any knowledge or belief that Mr. Beck intended to harm the home at the time her insurance coverage was renewed in July of 2007, such knowledge was not the issue,” the Court of Appeal found. “The issue was whether her insurance broker ought to have discussed her insurance needs with her when it was clear that she and her husband had separated.”
The court similarly dismissed two other grounds of appeal. One was that the trial judge erred in finding a breach of duty by the broker.
“The summary trial judge was clearly of the view that, when a renewal of insurance coverage is required, the broker similarly has a duty to provide relevant information about the types of coverage available to the client, to meet any change in needs that the client may have as a result of any changes in his or her circumstances of which the broker is or should be aware,” the Appeal Court found. “There was ample evidence upon which the trial judge could make that finding, and no basis upon which this court can interfere with it.”