Everyday this week we will highlight one of the top 5 Personal Injury Cases you should know about. For personal injury practitioners, many of the most significant decisions of the past year arose in the accident benefits context. However, there have been a number of negligence decisions that will also have significant implications for personal injury practitioners. The decisions I have selected for review in this paper deal with diverse aspects of personal injury practice, from limitation periods to minimum maintenance standards to the applicability of statutory conditions to underinsured motorist coverage. In some instances, the cases will dictate dramatic changes to the approach that both plaintiffs’ counsel and defence counsel should take in applicable circumstances. In others, the cases provide useful reminders of small steps that counsel must take to successfully advance claims, and ensure they will be upheld on appeal.
Broker’s Negligence: Zefferino v. Meloche Monnex
Following the September 1, 2010 Insurance Act amendments that reduced accident benefits coverage, many plaintiffs’ lawyers considered the possibility of suing brokers who did not advise their clients of the possibility of buying optional benefits to increase coverage. Zefferino v. Meloche Monnex Insurance Co. is a reminder that in such actions, it is not enough for an insured to prove that an insurance broker breached the applicable standard of care to be successful in an action against that broker. Rather, plaintiffs must also establish that they likely would have exercised the option to purchase those benefits.
In Zefferino, Nicola Zefferino purchased a policy from Meloche Monnex in 2003 and renewed the policy in 2004. In 2003, Meloche offered Mr. Zefferino optional coverage for various accident benefits and he declined. When he renewed the policy in 2004, Meloche did not offer Mr. Zefferino optional income replacement benefits, even though his income would have qualified him for benefits of $1,000 per week rather than the statutory minimum of $400 per week. Mr. Justice Reid was required to address the three following issues in the litigation:
- Did Meloche owe the plaintiff a duty of care?
- Did Meloche breach the applicable standard of care by failing to properly offer optional income replacement benefits to the plaintiff?
- Would the plaintiff likely have purchased the optional benefits if they were properly offered and, if so, what amount of benefits would he likely have purchased?
With respect to the first question, Justice Reid reviewed Hedley Byrne & Co. v. Heller Partners Ltd. and Fletcher v. Manitoba Public Insurance Co. Hedley Byrne established that insurance agents who are in the business of providing insurance information and advice to customers can owe a duty of care to those customers. In Fletcher, the Supreme Court of Canada held that those who provide information on auto insurance owe a duty of care to their customers if “(i) such customers rely on information, (ii) the reliance is reasonable, and (iii) [the provider] knew or ought to have known that they would rely on information.”
Justice Reid held that, as in Fletcher, it was obvious in the case before him that Meloche knew or ought to have known that purchasers of insurance would reasonably be expected to rely on information communicated to them by Meloche. Consequently, Meloche did owe Mr. Zefferino a duty of care.
On the second question, the standard of care, the plaintiff relied on s. 27(1) of the Statutory Accident Benefits Schedule, which requires an insurer to offer option al income replacement benefits “at $600, $800, or $1,000, as selected by the named insured under the policy, for the purpose determining the weekly amount of an income replacement benefit.” Meloche raised two defences on the standard of care. First, it argued all it was required to do to meet its obligations under the SABS was ask its customers whether they were interested in purchasing optional benefits. It was not required to the inquiring about its customers’ circumstances or to provide a quote as to the additional costs that might be involved in providing optional coverage. Second, Meloche argued that its practice was consistent with the industry standard.
Justice Reid rejected both of Meloche’s defences. On the first point, the statutory requirement to offer optional coverages, Justice Reid held that insurers must give consumers understandable alternatives, which will allow them to measure the need for more coverage against risk and cost. Otherwise, there would be no purpose behind the mandatory language. In the case of less well-known variables, the insurer may face an increased obligation to explain the existence of optional coverages and details. With respect to the industry standard behaviour, Justice Reid noted that customary behaviour, while relevant, is not conclusive evidence of compliance. In other words, “general non-compliance with the statutory requirement does not mean that non-compliance is acceptable.”
To determine whether the plaintiff would likely have purchased optional benefits had they been properly offered to him, Justice Reid embarked on a detailed review of the plaintiffs evidence and historical behaviour. He noted first that the plaintiff had an income that would support optional benefit coverage in the amount of $600 per week on the date that he purchased policy. However, in the 10 years before Mr. Zefferino purchased insurance from Meloche, he had purchased insurance from four other insurance companies and had never purchased anything other than basic coverage. In addition, Mr. Zefferino had chosen to purchase insurance from Meloche based solely on the cost of premiums. Significantly, Mr. Zefferino’s wife, who had actually spoken with the representatives of Meloche, was not called to give evidence at trial and Justice Reid through an adverse inference with respect to her understanding of optional benefits and her choice to decline them. Ultimately, Justice Reid found Mr. Zefferino’s evidence that he would have secured optional income replacement benefit coverage if he had understood what was being offered not to be credible. Having chosen the least expensive possible form of insurance available, he “cannot now change that bargain.”
This third element of proving a broker’s negligence claim based on a failure to advise of available increased coverage is often overlooked when plaintiffs’ counsel consider bringing these actions. Plaintiffs advancing such claims will likely have to show evidence that they have historically chosen to purchase insurance coverage based on factors other than cost alone. This might include the decision to purchase other forms of optional coverage such as increased third-party liability or some form of personal liability umbrella policy (PLUP).