Docket: CACV2159 Meadow-North Agencies Ltd. v. Saskatchewan Government Insurance, 2012 SKCA 123

THE COURT OF APPEAL FOR SASKATCHEWAN Citation: 2012 SKCA 123 Date: 2012-12-12 Between: Docket: CACV2159 Meadow-North Agencies Ltd. and Saskatchewan Government Insurance Appellant - and - Roy Cheecham Respondent Coram: Cameron, Jackson and Richards JJ.A. Counsel: Shannon Metivier for the appellant Gary Bainbridge for the respondent

Appeal: From: 2011 SKQB 297 Heard: December 12, 2012 Disposition: Dismissed (orally) Written Reasons: December 14, 2012 By: The Honourable Mr. Justice Richards In Concurrence: The Honourable Mr. Justice Cameron The Honourable Madam Justice Jackson Richards J.A. I. Introduction [ 1 ] The respondent, Roy Cheecham, owned a rental house in La Loche, Saskatchewan. He purchased insurance coverage for the house through the office of the appellant Meadow-North Agencies Ltd., an insurance agency. Mr. Cheecham’s tenants moved out and the house was subsequently vandalized as it sat vacant. [ 2 ] Mr.

Cheecham then filed a claim with his insurer. It was denied because the policy of insurance provided that, if the house was vacant, vandalism was not an insured peril. This came as a surprise to Mr. Cheecham. He sued Meadow-North, alleging that it had acted negligently in failing to alert him to the fact that, when the house was unoccupied, he had no coverage for vandalism. [ 3 ] The Queen’s Bench trial judge found in Mr. Cheecham’s favour. He concluded Meadow-North had breached its duty of care to Mr. Cheecham by not advising him of the limitations in the coverage for vandalism.

Meadow-North then appealed from this decision. [ 4 ] We dismissed Meadow-North’s appeal following oral argument but promised brief written reasons to confirm those given orally in the courtroom. These are those written reasons. II. Factual Background [ 5 ] As noted, Mr. Cheecham (and his wife) owned a rental house in La Loche. Mr. Cheecham visited the Meadow-North office in October of 1993 and completed a Saskatchewan Government Insurance (“SGI”) application for insurance for the house. He dealt with Jim Shryko of Meadow-North. [ 6 ] Mr.

Shryko knew the house was a rental property and that, as a result, it could be expected to be vacant from time to time, even for weeks or months. [ 7 ] SGI issued a policy of insurance (the “Policy”) which was then renewed annually, and without interruption, for a number of years through and including the years directly relevant to the claim in issue here. [ 8 ] More particularly, in September of 2003, Meadow-North sent Mr. Cheecham a renewal package for the period October 31, 2003 to October 31, 2004.

The package consisted of a letter, a copy of the Policy cover page for the renewal term and a document described as a “checklist”. The letter contained the sentence “[I]f the house ever goes unoccupied or vacant, please let us know”. The cover page identified the property as being “Rented to Others”. The checklist said, among other things, “Important. Please let us know if at any time

your dwelling becomes unoccupied or vacant”. It also contained a provision stating “This checklist is for your convenience only and does not include all limitations and exclusions on your policy. Policy wording booklets are available at our office. You are welcome to pick them up or to stop in to review your policy.” [ 9 ] By letter dated September 17, 2004, Meadow-North sent Mr. Cheecham a renewal package for the year October 31, 2004 to October 31, 2005. Again, the package compromised a letter, a copy of the Policy cover page and a “checklist”.

In material terms, each of these documents read the same as their equivalents had read in the 2003 renewal package. [ 10 ] The detail of the coverage provided by the Policy for the time period relevant to the matters in issue here was found in a document entitled “Your Easy to Read Special Coverages Booklet” in form OC-13. The Coverages Booklet listed “Vandalism or Malicious Acts” as one of 13 covered perils under the heading “Perils Insured”. However, it did so in these terms: 7) Vandalism or Malicious Acts.

We do not cover loss or damage: - … - while your dwelling is under construction or vacant. - … [ 11 ] General Condition No. 7 of the Policy also spoke to the effect of a vacancy on coverage. It provided that there was no coverage if the house was vacant for more than 30 days: 7) You must tell us when your dwelling becomes vacant. Vacant refers to the circumstance where, regardless of the presence of belongings: - all occupants have moved out with no intentions of returning and no new occupant has taken up residence; or - in the case of a newly constructed house, no occupant has yet taken up residence.

You must also tell us when no one has been living in your dwelling for a full year. We feel that those dwellings are vacant too – even if belongings are still in place. If you do not tell us within 30 days of your dwelling becoming vacant, we will not cover any loss or damage that happens after 30 consecutive days of vacancy. You will be covered after 30 days, only if you tell us your dwelling is vacant and Vacant Dwelling coverage – Cover Code AE is shown on your Cover Page.

Any permission for vacancy that we allow in this condition does not change any coverage restriction, due to vacancy, mentioned in other parts of this policy. [ 12 ] On or about September 15, 2004, and with no prior notice, Mr. Cheecham’s tenants vacated the house. Mr. Cheecham and his wife then made arrangements to inspect the house from time to time. On September 17, 2004, they noticed some minor vandalism and began looking for someone to make the necessary repairs so the house could be re-rented. They also boarded up the doors and windows to protect against further vandalism.

Unfortunately, other acts of vandalism did occur on September 23, 25 and between October 10 and 13, 2004. The damage was substantial. [ 13 ] On October 13, 2004, Mr. Cheecham filed a claim with respect to the damage to the house. An SGI adjuster inspected the property, advised Mr. Cheecham that it was a “write-off”, and told him to proceed with demolition, at SGI’s expense. Then, on November 1, 2004, Mr. Cheecham received a letter from SGI denying coverage. The basis for the denial was that the house had been vacant at the time of the loss. [ 14 ] Mr.

Cheecham commenced an action in the Court of Queen’s Bench against both SGI and Meadow-North. He contended SGI was in breach of the Policy by failing to provide coverage and that it was liable for what were described as the negligent misrepresentations of its adjuster. Meadow-North sought

summary judgment against Mr. Cheecham. Allbright J. concluded that he could deal with the claim against SGI on this basis but that a simplified trial was necessary to resolve the claim against Meadow-North. In dealing with the SGI side of the case, he concluded the Policy did not cover the losses incurred by Mr. Cheecham. III. The Decision of the Trial Judge [ 15 ] Mr. Cheecham’s claim against Meadow-North then proceeded by way of the

summary trial procedure. Both Mr. Cheecham and Mr. Shryko (who swore an affidavit filed by Meadow-North) were cross-examined.

[16] The trial judge began his decision by reviewing the facts concerning both the contents of the Policy and the circumstancessurrounding its initial purchase and annual renewal. He then referred to the leading authorities in this area, Fine’s Flowers Ltd. GeneralAccident Assurance Co. of Canada (1977), (ON CA), 81 D.L.R. (3d) 139 (Ont. C.A.) and Fletcher v. ManitobaPublic Insurance Co., (SCC), [1990] 3 S.C.R. 191. [17] The trial judge concluded there was no evidence to support a conclusion that Meadow-North had either provided Mr.

Cheechamwith a copy of the Coverages Booklet or reviewed the Policy’s terms of coverage and exclusions with Mr. Cheecham. He went on to saythat, even if the Coverages Booklet had been provided to Mr. Cheecham, Meadow-North should have foreseen that he might erroneouslyunderstand that he had 30 days to inform SGI of a vacancy before his coverage ceased. In the assessment of the trial judge, the wordingof Meadow-North’s “checklist” (i.e. “Please let us know if at any time your dwelling becomes unoccupied or vacant.”) did not informMr.

Cheecham that there would be an immediate loss of coverage for vandalism if the house became vacant. [18] The heart of the trial judge’s reasoning with respect to the allegation of negligence against Meadow-North was as follows: [27] As stated by the Supreme Court of Canada, private insurance agents and brokers have a stringent duty to provide bothinformation and advice to their clients.

In my opinion, Meadow North's duty of providing information and advice extended to drawing tothe attention of Roy Cheecham the fact that his vandalism coverage ended immediately upon the property becoming vacant and toprovide him with information or advice as to steps he could take to avoid this loss of coverage.

Having found as a fact that MeadowNorth did not provide Roy Cheecham with the Coverages Booklet nor did anyone advise Roy Cheecham as to the immediately operativeeffect of the exception that applied to his Vandalism and Malicious Acts coverage in the event of vacancy, it follows that Meadow Northbreached its duty of care to Roy Cheecham. [19] Having dealt with the issue of negligence, the trial judge considered, and dismissed, arguments advanced by Meadow-North to theeffect that any breach of its duty of care was not the proximate cause of Mr. Cheecham’s loss and that the Policy had been voidedbecause Mr.

Cheecham had failed in his duty to notify SGI of a material change in risk. [20] With that, the trial judge concluded his judgment by writing as follows: 34 Having concluded that:

a) Meadow North, as Roy Cheecham's insurance agent, had a stringent duty to provide both information and advice to him regardingthe details of his insurance coverage including gaps in coverage and how to avoid such gaps;

b) Meadow North breached its duty by failing to inform Roy Cheecham that while his policy purported to cover him for vandalismthat there was no such coverage while the property was vacant;

c) Meadow North breached its duty in circumstances where it knew the property being insured was rental property and thus couldreasonably be expected to be vacant from time to time; and

d) Meadow North's breach of its duty to inform and advise had the consequence that Roy Cheecham failed to take steps to ensurethe property was not vacant where there were no paying tenants. I thus conclude that Meadow North's breach of its duty was theproximate cause of Roy Cheecham's loss; I grant Judgment in favour of Roy Cheecham in the amount of $30,000 being the agreed upon value of his loss. Roy Cheecham will alsohave interest on this sum in accordance with the provisions of The Pre-judgment Interest Act, S.S. 1984-85-86, c. P-22.2, and costs of theaction to be taxed at double column 5 of the Tariff. IV.

Analysis [21] Meadow-North’s first argument is that the trial judge improperly expanded the duty of care owed by an insurance agent to his orher client. It says the judge did this by imposing on it an obligation to “service” Mr. Cheecham’s policy over time by way of activelymonitoring changes in the circumstances pertaining to the house. In Meadow-North’s submission, it had an obligation to advise Mr.Cheecham only in relation to the circumstances that existed when the Policy was renewed, i.e. that existed when the house was rented. Itsays the onus was on Mr. Cheecham to notify if the house became vacant.

Only on such notification, says Meadow-North, would it havehad an obligation to advise Mr. Cheecham with respect to how the vacancy affected his position. [22] We do not accept this characterization of the trial judge’s decision. The starting point in the relevant analysis is the one provided bythe Supreme Court of Canada in Fletcher v. Manitoba Public Insurance Co., supra.

There, in describing the duty of care owed by aninsurance agent to his or her client, Wilson J. said this at p. 217: In my view, it is entirely appropriate to hold private insurance agents and brokers to a stringent duty to provide both information and

advice to their customers . They are, after all, licensed professionals who specialize in helping clients with risk assessment and in tailoring insurance policies to fit the particular needs of their customers. Their service is highly personalized, concentrating on the specific circumstances of each client. Subtle differences in the forms of coverage available are frequently difficult for the average person to understand. Agents and brokers are trained to understand these differences and to provide individualized insurance advice.

It is both reasonable and appropriate to impose upon them a duty not only to convey information but also to provide counsel and advice . [emphasis added] [ 23 ] In the circumstances of this case, Mr. Cheecham purchased insurance coverage for a rental house. Meadow-North knew that the house was a rental property and knew it was likely to be vacant from time to time. In that situation, the trial judge was entitled to conclude that, as part of its duty to provide counsel and advice, Meadow-North should have drawn Mr.

Cheecham’s attention to the fact that, the moment the house became vacant, there would be no coverage for vandalism. On the facts here, vacancies were not speculative or a mere possibility. They were part and parcel of the rental property business. The failure of the Policy to insure against vandalism during periods of vacancy can, in this context, reasonably be seen as being a gap in coverage. It was open to the trial judge to conclude that Mr. Cheecham should have been alerted to that issue.

There is no reviewable error in his treatment of the matter. [ 24 ] Meadow-North also argues that the trial judge made several errors in relation to the facts underpinning the dispute between it and Mr. Cheecham. In this regard, Meadow-North refers to the trial judge’s findings that (

a) it did not provide Mr. Cheecham with a copy of the Coverages Booklet in form OC-13, (

b) the wording of the Coverages Booklet in 2003 was likely different than it was in 1993, (

c) there was no evidence as to the policy language that would have been reviewed in 1993, if such a review had in fact been conducted, and (

d) the documentary evidence was not consistent with Mr. Shryko’s testimony that normal practice was to send a copy of the insurance policy with letters relating to policy renewals. [ 25 ] We need not deal with all of these matters because, neither singly nor collectively, do they impact the bottom line of the trial judge’s reasoning. That said, we will offer brief comment on the most significant feature of Meadow-North’s argument in this area, i.e. its submission to the effect that the trial judge erred on the question of whether Mr. Cheecham had received a copy of the Policy.

Specifically, we note it is unlikely that the trial judge’s treatment of the evidence on this point can be said to have involved a patent and overriding error. See: H.L. v. Canada (Attorney General) , 2005 SCC 25 , [2005] 1 S.C.R. 401. However, even if it did, the trial judge also found, by way of an alternative rationale, that Meadow-North had breached its duty of care by failing to explain the arguably confusing contents of the Policy to Mr. Cheecham.

On this issue, the trial judge wrote as follows: 24 Even if the Coverages Booklet had been forwarded to Roy Cheecham, that would not, in my opinion have discharged Meadow North's duty to provide counsel and advice, given that vandalism coverage ceased immediately upon vacancy. While the exclusionary language noted in para. 8 of these reasons was there to be read, the reader could easily misunderstand. General Condition No. 7 stated that: If you do not tell us within 30 days of your dwelling becoming vacant, we will not cover any loss or damage that happens after 30 consecutive days of vacancy.

You will be covered after 30 days, only if you tell us your dwelling is vacant and Vacant Dwelling coverage - Cover Code AE is shown on your Cover Page. Meadow North should reasonably have foreseen that the policy holder might understand that he had 30 days to inform the insurer of the vacancy before the coverage ceased and that coverage while vacant after 30 days could be available.

The advice contained in Meadow North's checklist document, "Please let us know if at any time your dwelling becomes unoccupied or vacant", does not inform the policy holder of the problem of immediate loss of vandalism coverage in the event of vacancy or the steps that could be taken to avoid loss of coverage. [ 26 ] In the end, and as indicated above, we do not see any of Meadow-North’s arguments about the trial judge’s factual findings as being capable of upsetting the judge’s ultimate conclusion in relation to negligence. [ 27 ] Finally, it is necessary to deal with Meadow-North’s third argument.

It concerns the issue of costs and, more specifically, it concerns the fact that the trial judge concluded his decision by saying, without further explanation, “… costs of the action to be taxed at double Column 5 of the Tariff.” Meadow-North points out that the Queen’s Bench Tariff has no Column 5. [ 28 ] The sum at issue in the dispute between Meadow-North and Mr. Cheecham, $30,000, would normally bring the award of costs under Column 3 ($25,000 to $100,000). Given that the trial judge’s reference to “Column 5” is self-evidently an error, “Column 3” should be substituted for the reference to “Column 5”.

As to the question of whether the award of “double” costs should be set aside, we are not persuaded the trial judge made any reviewable error on this point. Meadow-North provided no authority as to when an award of double costs in the Court of Queen’s Bench might be appropriate and no guidance as to the practice of the Court of Queen’s Bench in this regard. As a result, while not necessarily endorsing the trial judge’s decision in relation to double costs, we conclude that Meadow-North has not succeeded in demonstrating that it should be set aside.

V. Conclusion [ 29 ] The trial judge’s order with respect to costs must be varied so as to substitute “Column 3” for “Column 5”, with the result that costs will be awarded in the Court of Queen’s Bench on double Column 3. In all other respects, Meadow-North’s appeal is dismissed. Mr. Cheecham is entitled to costs in this Court in the usual way.