Standard Yet Complex

Canadian insurance brokers have cause for relief in the recently released decision of Nova Scotia’s Court of Appeal in Marsh Canada Ltd. v. Grafton Connor Property Inc. Issued in June 2017, the appeal court partially reversed the 2015 ruling by the Supreme Court of Nova Scotia, which had been widely viewed as expanding the scope of the standard of care applicable to brokers.

Notwithstanding the reversal, the decision serves as a reminder to brokers that the standard of care is inextricably linked with the sophistication of the client and the sophistication of the risk.

Heather Gray, Equity Partner, Clyde & Co. Canada LLP

In Grafton Connor, the insurer denied coverage on the basis that material features of the insured building had been misrepresented in the application for insurance. The insured challenged the denial and commenced a claim against its insurer and its long-time broker.

In its 2015 ruling, the Supreme Court of Nova Scotia agreed the insurer was entitled to void the policy for misrepresentation, but found the broker liable for 50% of the insured’s loss.

The court held that in complex insurance transactions, the standard of care requires brokers to make “additional inquiries, before the application form is completed… to ensure” that their clients have “the necessary skill to provide accurate information.” The information at issue was whether the building was of masonry construction, and whether or not it contained sprinklers.

Read the full article in the Digital Edition of the November 2017 Canadian Underwriter.

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Heather Gray, Equity Partner; and Laura Sullivan, Articling Student, Clyde & Co. Canada LLP