Broker Liable for Failing to Advise Insured of Vacancy Exclusion

An insured brought an action against his insurance broker for failing to advise him about the vacancy exclusion in his policy.  The action was allowed and the insured was awarded damages.

Cheecham v. Saskatchewan Government Insurance [2011] S.J. No. 500, August 2, 2011, Saskatchewan Court of Queen’s Bench, B. Scherman J.

The plaintiff, Mr. Roy Cheecham, brought an action against his insurer, Saskatchewan Government Insurance, and his insurance broker, Meadow North Agencies Ltd. (“Meadow North”) after coverage was denied for damage sustained to his vacant rental property. The claim against the insurer had been dismissed following a summary judgment application on the basis that the policy excluded coverage for vandalism if the property was vacant. The issues left to be decided by the Court were whether Meadow North had breached a duty owed to the plaintiff as his broker, whether the breach was a proximate cause of the loss, and whether the plaintiff had breached his duty to advise of a material change in the risk thus voiding the policy.

In 1993 the plaintiff attended at Meadow North’s office and completed an application for insurance for the property. The policy was issued and renewed annually thereafter. A booklet that outlined the policy stated that coverage for vandalism while the property was vacant was excluded.  It also stated that the plaintiff was required to notify the insurer within 30 days if the property became vacant. The insured was operating under the assumption that during those 30 days he would be coved for vandalism. That was not the case, as his coverage ended immediately upon vacancy.

In 2004, the property sustained $30,000.00 in damage shortly after the plaintiff’s tenants had vacated the property. The plaintiff asserted that he was not aware of vacancy exclusion.

The Court found that Meadow North breached the duty of care owed to the plaintiff and that it was a proximate cause of the loss. There was no evidence that the plaintiff was provided with the booklet that outlined the coverage and the exclusions, nor was he advised about the fact that coverage would not be provided immediately when the property became vacant. It was reasonably foreseeable that a policy holder may think that they had 30 days to advise of the vacancy. Meadow North had a stringent duty as an insurance broker to provide information and advice to the plaintiff about his insurance coverage, including any gaps it may have had.

The plaintiff was awarded $30,000.00 in damages, plus pre-judgment interest, and costs.

This case was digested by Kim Yee and edited by David W. Pilley of Harper Grey LLP.

Saskatchewan Court of Appeal upholds payments to mother of brain-injured child

In this case, the Saskatchewan Court of Appeal considered a number of issues surrounding payments that Saskatchewan Government Insurance had made to the mother of a brain-injured infant as "income-replacement," to allow her to stay home and care for her daughter.

SGI had attempted to characterize these payments as "ex gratia", and argued that it had no obligation to continue them.

The Automobile Injury Appeal Commission (the "Commission") disagreed, holding that the payments must have been authorized under the relevant legislation, as "you can't spend money you are not authorized to spend."

The appeal by SGI from a decision of the Commission ordering SGI to pay income replacement benefits to the mother of an injured child was dismissed where the Commission properly concluded that benefits paid to the mother were covered by Personal Injury Benefits Regulations and were not merely ex gratia payments.

Saskatchewan Government Insurance v. Becker, [2011] S.J. No. 154, February 23, 2011, Saskatchewan Court of Appeal, R.G. Richards, G.A. Smith and R.K. Ottenbreit JJ.A.



On October 17, 2006, Emilia Becker, then 11 years old, was a passenger in a school bus involved in an accident. Emilia suffered a moderate brain injury and experienced dizziness, severe headaches, and difficulty with concentration and memory. Prior to the accident, she had been an excellent student. In 2007, a neuropsychologist recommended that Emilia attend school for half days because her symptoms were made worse by fatigue. The neuropsychologist recommended that she be at home in the afternoon with parental supervision to nap and rest for the rest of the day.

The SGI injury representative responsible for Emilia's claim during the initial period felt that it would be a benefit for Emilia to have a parent involved in her care and SGI compensated Emilia's mother, Heather Becker, for time that she was away from her employment to look after Emilia. SGI considered the payments to Heather Becker to be ex gratia as there was no express provision in the Act authorizing reimbursement of the parent of an injured insured minor who takes time off work to care for the injured child. After almost a year had expired, SGI notified Heather Becker that it would discontinue payments at the beginning of the school year and would no longer be making the ex gratia payments. An appeal to the Commission was brought in Emilia's name seeking an order that SGI pay the difference between Heather's salary prior to the collision and what she earned at her reduced hours while looking after Emilia. SGI took the position that the Commission had no jurisdiction to adjudicate the issue since the payments had been ex gratia. SGI also requested that the Commission put any questions it had in writing concerning potential issues in the appeal. The Commission complied and asked the parties to make submissions as to whether Emilia was entitled to benefits, such as custodial care from her mother, under s. 112(2) of the Act and, as to whether, on the assumption that SGI thought compensating Heather Becker for lost income while caring for her daughter was either "necessary or advisable", it had reasonably terminated that benefit. Section 112(2) of the Automobile Accident Insurance Act, R.S.S. 1978, c. A-35, provided as follows:

(2)     Subject to the regulations, the insurer may take any measure it considers necessary or advisable to contribute to the rehabilitation of an insured, to lessen a disability resulting from bodily injury and to facilitate the insured's recovery from the accident.

After receiving questions from the Commission, SGI elected to not make further submissions and, instead, made a formal offer to settle the matter by paying the lost wages claimed, provided that Emilia withdraw her appeal and that Heather and Mark Becker execute a final release in relation to any economic loss arising from the circumstances. When the hearing before the Commission reconvened, SGI took the position that the requested payment had been made and, therefore, the right of appeal no longer existed. Emilia and her parents took the position that they had not accepted SGI's settlement and wanted to continue with the appeal.

At the hearing, the Commission ruled that it was seized with the matter and concluded that Heather's care was necessary or advisable to lessen Emilia's disability and facilitate her recovery. The Commission further concluded that funding for Emilia's mother's net wage loss for the time period at issue was not reasonably terminated and ordered SGI to make that payment together with prejudgment interest. SGI appealed this decision.

The Court of Appeal reviewed the correspondence concerning the settlement offer and held that this offer had clearly not been accepted by Emilia or her parents who wanted the issue determined. The Court reviewed s. 112(2) of the Act and found that, by its clear wording, it gave SGI an extremely broad discretion to make payments considered necessary or advisable to contribute to the rehabilitation of an insured.  In the Court's view, the Commission did not err in concluding that, where a parent's presence is considered necessary or advisable to the proper recovery or rehabilitation of a child who suffered an acquired brain injury, this provision was broad enough to authorize funding necessary to make that presence possible. The Court further concluded that the Commission had jurisdiction to order the payment of the benefit to the insured rather than referring the matter back to SGI under s. 112(2) as s. 193(7)(b) of the Act expressly authorized the Commission to "make any decision that the insurer is authorized to make pursuant to this Part".

In the result, SGI's appeal was dismissed.

This case was digested by Jonathan D. Meadows and edited by David W. Pilley of Harper Grey LLP.