When You Were Not Covered After All

You asked to be protected, you paid the premiums, and the claim was denied because the policy never covered it. That gap is often the broker’s.

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Coverage GapsDuty to AdviseFine’s FlowersRIBO

Coverage Gaps | Failure to Advise | Denied Claims | Recovery

What these claims turn on.

How specific your instructions were. General instructions attract the broadest duty.

Whether the broker understood your business well enough to identify its risks.

Whether a gap was pointed out, even if it could not be filled.

RIBO regulates property and casualty brokers. FSRA licenses life and health agents.

Quick Answer

Does an insurance broker have to tell me if my coverage is inadequate?

Often, yes, and this is the foundation of broker liability in Canada. Fine’s Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 17 O.R. (2d) 529, is the leading Ontario Court of Appeal authority. A greenhouse operator with a long and close relationship with his agent asked to be covered for all foreseeable and normal risks. A water supply pump failed, the boilers shut down and the business suffered heavy loss, and the insurer denied coverage because a water supply pump was not a defined object. The Court held that where a client relies on the broker for advice on the adequacy of coverage and gives a general instruction to obtain full protection, the broker must either obtain adequate coverage or advise the client of the gap, and must understand the client’s business well enough to assess its risks. The scope of that duty varies with the retainer. It is at its widest on general instructions and considerably narrower where the client gave specific ones.

Ontario law · Reviewed by Lexaltico LLP, Toronto · Arrange a consultation

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THE DUTY

Its Width Depends on What You Asked For

The single most important variable in these claims is how the instruction was framed. A client who says "make sure the business is properly covered" has engaged the broker’s judgment and attracts the widest duty. A client who says "renew the same policy" has not.

Fine’s Flowers is the high water mark and is often quoted as though it created a freestanding duty on every broker to advise on adequacy in every case. It did not, and pleading it that way overstates it. What it establishes is that where reliance is placed on the broker for counsel on adequacy, the broker cannot simply procure a policy and stay silent about what it leaves out.

In practice the argument is usually about which category the relationship fell into, and the evidence is the history: how long the relationship ran, whether the broker visited the premises, whether the broker had previously recommended changes, and how the renewals were handled.

THE GAP

Failing to Obtain, or Failing to Warn

There are two distinct breaches and it helps to separate them. The first is failing to obtain coverage that was available and should have been obtained. The second is failing to advise that a risk was uncovered, whether or not cover for it could have been arranged.

The second is the more useful allegation, because it survives the answer that no insurer would have written the risk. A broker who knew a business faced an exposure the policy did not answer, and said nothing, has left the client unable to make their own decision about it.

The recurring examples are business interruption limits set years earlier and never revisited, flood and sewer backup exclusions, exclusions for property in the care of others, coverage that does not follow a change in operations, and additional insured requirements in a contract that were never passed to the insurer.

CAUSATION

Would You Have Done Anything Differently?

Establishing the breach is often the easier half. The harder question is what would have happened had the broker advised properly, and the defence in nearly every case is that the client would not have paid the additional premium.

That is a real argument and it has to be met with evidence rather than assertion. Was cover actually available, from whom, and at what cost? Is there a history of this client buying protection when it was recommended? Was the premium trivial relative to the exposure?

Where the shortfall is a limit rather than an exclusion, the analysis is usually easier, because increasing a limit is generally cheap and clients generally take that advice. Where the answer would have been a materially higher premium for a risk the client had never worried about, it is harder.

THE REGULATORS

RIBO and FSRA Are Not the Same Body

Ontario splits this regulation in a way that is frequently reported incorrectly. The Registered Insurance Brokers of Ontario regulates property and casualty insurance brokers, under the Registered Insurance Brokers Act. The Financial Services Regulatory Authority of Ontario licenses insurance agents, including life and health agents.

An individual can hold both, and the same person may sell you business insurance under a RIBO licence and life insurance under a FSRA licence. Which body is relevant depends on the product, not the person.

As with every regulator in this area, neither is a compensation route. A complaint addresses the broker’s conduct and licensing. Recovery of an uninsured loss is a civil claim, and it is worth noting that the loss you are claiming is the coverage you should have had, not automatically the full loss you suffered.

Common Questions

Frequently Asked Questions

The insurer denied my claim. Is the broker liable?

Only if the reason for denial is something the broker should have obtained or should have warned you about. A denial for non disclosure by you, or for a risk properly excluded and properly explained, is not the broker’s problem. A denial because a coverage you asked for was never arranged usually is.

Does every broker have to review whether my coverage is enough?

Not in every case. The duty is broadest where you gave general instructions and relied on the broker’s judgment, as in Fine’s Flowers, and narrower where you gave specific instructions. The relationship history matters, so a long standing broker who knows the business is in a different position from one filling a single order.

Who regulates insurance brokers in Ontario?

RIBO regulates property and casualty insurance brokers. FSRA licenses insurance agents, including life and health. They are different bodies with different jurisdictions, and the answer depends on the product involved.

What is my loss if the broker was negligent?

Generally the benefit of the coverage you should have had, subject to the limits and deductible that coverage would have carried. It is not automatically the whole uninsured loss, and the difference between those two figures is often significant.

The broker says I would never have paid for more cover. Does that end it?

No, but it has to be answered. Causation requires showing you would have acted on proper advice. Evidence that cover was available at modest cost, or that you had taken up recommendations before, is what meets that defence.

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Call Message

When You Were Not Covered After All

Does an insurance broker have to tell me if my coverage is inadequate?

Speak to a Professional Negligence Lawyer

Its Width Depends on What You Asked For

Failing to Obtain, or Failing to Warn

Would You Have Done Anything Differently?

RIBO and FSRA Are Not the Same Body

Frequently Asked Questions

Discuss a Claim Against an Insurance Broker

Lexaltico LLP

Ready to Talk? Start My Enquiry

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