2014 QCCQ 6533, 2014 QCCQ 6533

Falato c. Groupe Viau inc. 2014 QCCQ 6533 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-129548-113 DATE: May 30, 2014 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON J.C.Q. ______________________________________________________________________ Teresa FALATO […] St-Leonard, Qc, […] Plaintiff v.

GROUPE VIAU INC. 1100 East Crémazie Boulevard, Suite 500 Montreal, Qc, H2P 2X2 Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, Teresa Falato, sues her insurance broker, the Defendant Groupe Viau Inc. (“ Viau ”) for the difference between the amount of a water damage claim she made under her home insurance policy with l'Union Canadienne Compagnie d'Assurance and the amount she received as an indemnity relating to a sewer backup occurrence of August 2, 2008. [ 2 ] The water-damage claim was assessed by experts under the auspices of l'Union Canadienne as follows: Repair costs: $ 28,069 Urgent costs: $ 3,818.54 Demolition: $ 3,794.44 Total: $ 35,682.84 [ 3 ] From this total, an amount of $ 4,420 was deducted because of previous damages as assessed.

From the net amount of $ 31,262.45, the deductible of $ 500 was subtracted, leaving a balance of $ 30,762.45. A limit of $ 25,000 was applied, according to the policy, and the claim was settled for that amount. [ 4 ] Ms Falato had an uninsured excess of $ 5,762.45. [ 5 ] She alleges a prejudice of $ 10,682.84, because she does not take into account the deduction the evaluator made for the pre-existing damages. [ 6 ] She reduces her claim to $ 7,000, the current limit of the Small-Claims Division.

[ 7 ] Apart from this, Ms Falano speaks of a loss to the contents, i.e. movable property of close to 15,000, but this is not included in the present claim. [ 8 ] Ms Falato asserts that she was not aware that she was inadequately covered for a loss such as this one, and attributes the fault to her broker, Viau. [ 9 ] Viau denies any fault on its part. Issues [ 10 ] To resolve this conflict, the Court must answer the following questions 1 . Did Viau omit to provide the appropriate professional advice to Ms Falato with respect to coverage for water damage when subscribing and renewing her home insurance policy? 2 .

If so, what is the value of the prejudice caused by this omission?

Facts and Analysis [ 11 ] Mrs Falato testifies that she did not realise that, in the case of water damage to her basement, her claim would be limited to $ 25,000 and that this limit would be reduced not just by the value of the damage to her property in terms of reconstruction and replacement costs, but also by the emergency costs such as cleaning and demolition. [ 12 ] She complains that the broker knew her property well, and, since it knew how this type of policy works, should have recommended to her that the limit be increased to a higher amount, sufficient to cover such a loss completely. [ 13 ] Obviously, in retrospect at least, $ 25,000 is insufficient when it includes not only the value of the finished basement but also emergency clean up and demolition and the replacement cost of the contents. [ 14 ] The Court accepts the sincerity of Ms Falato's testimony that she did not realise that these accessories would eat into the limits of the $ 25,000 coverage.

It may seem obvious to a person well versed in matters of insurance that the limit applies to the amount required to indemnify an insured for an occurrence, not the value of the property insured.

If, for example, a building has a market value of $ 250,000 and it is completely destroyed, the amount of the loss may be quite higher, because of the cost of preparing the site for reconstruction, the price of a new building and the cost of living somewhere else during the reconstruction. [ 15 ] In a small loss, such as this one, the value of the property damaged was only approximately $ 25,000 when the value of the pre- existing damage is deducted, but, for the demolition and cleanup the cost was more than $ 7,500. [ 16 ] When a an insured works with a broker, she has a rightful expectation to be given advice about the nature of the insurance coverage being offered, and to be advised of the usual and beneficial coverage available to her in the market so that she can make an informed decision in her best interests.

In deciding something as fundamental as the limit attaching to a coverage that is added by endorsement, as is the case here, the insured ought to be given proper counsel. [ 17 ] In gauging the duties of a broker in dealing with a consumer of insurance products, the premise is that the insured is a reasonable person, but that she does not have any particular knowledge of the field.

It is precisely for this reason that the profession has been created: to protect the public from unscrupulous dealings of intermediaries, and to provide a level of expertise that will serve the interests of an uninformed person by providing her access to the most suitable products available in a competitive market. The broker does not just act as an intermediary to facilitate the transaction in return for a commission. The broker has a duty of counsel, like other professionals.

[ 18 ] Before buying her home, Ms Falato had been insured through Viau for a tenant's policy. In making the change to a single family home in 2001, she gave extensive information about the building, including a copy of an inspector's report. [ 19 ] She now knows that the water damage limit in the first policy was $ 20,000. [ 20 ] She testifies that there was no explanation about what that meant, and no options offered at the time. [ 21 ] In 2002, she had a 14 feet by 12 feet addition built on two levels, including a basement. She called Viau to seek advice about the situation.

She was told that certain modifications were being made. Viau's notes (D-3) show that the value of the building was increased to $ 207,000. There is no mention of a limit on the water damage coverage. [ 22 ] The policy was renewed from year to year until, in the 2006-2007 renewal, the building is mentioned in the notes at $ 245,000. One reads, "EGOUT 25,000$ INCLUS". [ 23 ] The notes show a concern on the part of Ms Falato about the price. She testifies that the only change she was aware of was the increase to the value of the property globally. [ 24 ] In the 2010 renewal, the building is now valued at $326,400.

One reads: "DOMM.L'EAU: 25000$". [ 25 ] During this renewal, Mrs Falato, having had the experience of an under-insured claim, was now seeking an increase to the water- damage limit to $ 50,000 or $ 60,000. [ 26 ] Having neither rebuilt the finished basement nor replaced its contents, Ms Falato decided finally to leave the limit at $ 25,000. [ 27 ] Danielle Landriault, a broker with Viau, explained to the Court that the policy had certain basic coverage, with the possibility of adding additional protection by endorsement.

She was unable to answer the question whether Ms Falato could have obtained a higher coverage with Union Canadienne, having not made a request at the time. She seemed vague as well, on the question of what discussions had occurred between her firm and Ms Falato, stating that the notes written in the file are just a

summary. [ 28 ] The usual practice of Viau, as she knows it, is to simply offer the renewal in describing the coverages that are presently in place and that are being offered again in the renewal. The renewal, in some cases, is just sent with a questionnaire. Included in the questionnaire is a question about whether "You do not have "sewer back-up" protection or wish to increase the amount of insurance related to it?" [ 29 ] The inadequacy of this approach is patent. The value of the building has gone up by more than 60%.

No suggestion is made to the insured to adjust the limit of the water damage coverage if, in fact, there is any discussion of it whatsoever. No refresher is given to her as to what the limit applies to. There is no verification of the insured's needs, just a presumption that nothing has changed. The broker does not treat the renewal as an occasion to actively provide counsel to its client; the approach is passive. If the client seeks a change or has an issue with the premium, the broker will react.

Otherwise, the policy will be renewed with changes to the value of the building because of the increased property value, but with no increase to the limit to the water damage endorsement. [ 30 ] Barring some extraordinary change to the insurance market, it would stand to reason that, as property values inflate with time, the available limit on a given property coverage will go up. If this were not the case, Viau would have provided the court with that information. [ 31 ] In conclusion, Ms Falato did not receive the adequate counsel to which she was entitled from Viau.

This resulted in her being underinsured for the loss that occurred. The part of the claim dealt with here was indemnified to the full extent of the insurance, leaving a shortfall of $ 5,762.45 which is the measure of the damages she can claim against Viau.

BY THESE REASONS, THE COURT: CONDEMNS the Defendant to pay the Plaintiff the amount of $ 5,762.45. CONDEMNS the Defendant to pay to the Plaintiff judicial costs of $ 159. __________________________________ DAVID L. CAMERON J.C.Q. Date of hearing: February 4, 2014