Insurers and brokers may not owe a duty to a third party to ensure that the insured is the owner of the vehicle

Two insurance companies and an insurance broker were found not to owe a duty to the actual owner of a vehicle to investigate the ownership of a vehicle when approving or issuing an application for insurance.

Barzo v. Chrysler Financial Services Inc., [2011] O.J. No. 5874, December 21, 2011, Ontario Superior Court of Justice, J. Mackinnon J.

The plaintiff Barzo was involved in a single vehicle accident. The alleged at-fault vehicle was owned by Chrysler and was uninsured at the time of the accident. The plaintiff sued Chrysler as the owner of the vehicle. The third party Perth Mutual Insurance Company had issued a policy to the alleged at-fault driver who described himself as the owner of the vehicle. That policy was cancelled for non-payment of premiums prior to the date of the accident. Chrysler third partied the company which brokered the policy, alleging negligence and failing to verify that Chrysler was the owner. Chrysler also third partied Economical Mutual Insurance Company, which had the prior policy on the vehicle.

All three third parties brought a summary trial application to dismiss the claims against them. Economical and Perth took the position that the case against them had no chance of success because neither owed a duty to Chrysler; neither had a contractual relationship with Chrysler, and no statute or regulation required them to investigate the ownership of the vehicle when approving an application for insurance. The broker took the position that it had no duty to Chrysler to verify the information it received as to ownership of the vehicle.

On the basis of the evidence, the Court concluded that there was no genuine issue for trial because none of the third parties owed Chrysler a duty of care at the material time. As a result, the third party claims were dismissed.

This case was digested by Cameron B. Elder of Harper Grey LLP.

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