



COURT OF APPEAL FOR ONTARIO

CITATION: 2049390 Ontario Inc. v. Leung,
    2020 ONCA 164

DATE: 20200303

DOCKET: C66021

Doherty,
    Brown and Thorburn JJ.A.

BETWEEN

2049390
    Ontario Inc.

Plaintiff (Appellant)

and

Doris
    Leung and Pacific Insurance Broker Inc.

Defendants (Respondents)

R. Lee Akazaki, for the appellant

Barry B. Papazian,
    Q.C. and Michael Krygier-Baum, for the respondents

Heard: February 13,
    2020

On appeal from the judgment of Justice
    Lise G. Favreau of the Superior Court of Justice, dated September 28, 2018,
    with reasons reported at 2018 ONSC 5759, 85 C.C.L.I. (5th) 222.

Thorburn J.A.:


OVERVIEW

[1]

This is an appeal by 2049390 Ontario Inc. (the
    appellant) from the trial judges dismissal of a claim for negligence and
    breach of contract.

[2]

The appellant is the owner of a commercial
    property located at 369 Queen Street West (the property). The property was
    destroyed by fire in 2012.

[3]

James Kan owns and operates the appellant
    company.

[4]

The appellants insurer refused to cover the cost
    of rebuilding the property because it was underinsured. Instead, the insurer opted
    to pay out the value of the building limit under the policy. It also charged a
    co-insurance penalty because the property was underinsured by more than 10% of
    its value.

[5]

The appellant sued its insurance brokers Pacific
    Insurance Broker Inc. and one of Pacifics licensed insurance brokers, Doris
    Leung (together the respondents), alleging that they had failed to secure
    adequate reconstruction cost insurance for the building and were liable for their
    ensuing losses.

[6]

The appellant claims the respondents were thereby
    negligent and/or breached their contract with the appellant. The respondents
    defended on the basis that they met their duty of care and contractual
    obligations to the appellant.

[7]

The trial judge dismissed the action. On appeal,
    the appellant claims the trial judge erred by:

a)

refusing to enforce the [respondents] promise
    to provide adequate coverage;

b)

excusing the [respondents] for having given an
    estimate of building costs they were unqualified to give; and

c)

relieving Leung of admissions that she did not
    qualify her advice.

[8]

The appellant further claims that the trial
    judge adopted a flawed approach to causation and damages. Finally, the
    appellant claims that the trial judges reasons gave rise to a reasonable
    apprehension of bias.

[9]

For the reasons that follow, the appeal is dismissed.

THE EVIDENCE

[10]

Until 2009, the property was insured through ING
    Insurance. In 2006, the property had a policy building limit of $484,531. In
    2008, it was insured with

a building limit of $550,000. The building
    limit increased to $924,000 after the appellant refinanced the property.

[11]

In January 2009, ING Insurance issued a policy
    with a building limit of $984,060. The appellant did not renew the policy.

[12]

Instead, the appellant contacted the respondent
    brokers to find a new insurer. The trial judge found that there was a sense of
    urgency in securing the insurance. Kan contacted Leung on January 20, 2009 by
    late night email and indicated that the policy was going to expire in February
    2009. Several email exchanges between Kan and Leung also note the urgency to
    secure insurance for the property.

[13]

Leung asked Kan for the propertys current
    insurance policy. Kan provided her with the original 2008 policy with a
    building limit of $550,000 but did not provide her with the revised 2008 policy
    in the amount of $924,000 or the 2009 quote for renewal in the amount of $984,060.

[14]

The respondents provided the appellant with a
    quote from The Dominion of Canada General Insurance Company (Dominion) with a
    building limit of $850,000 for 2009, to increase each year thereafter. The
    appellant purchased the insurance.

[15]

The trial judge found as a fact that, for the
    following reasons, Kan, the appellants principal, was a sophisticated client
    who was in a good position to assess whether his insurance coverage was
    sufficient:

a)

Kan was a real estate agent and mortgage broker
    and supervised renovations to the building;

b)

On two occasions, Kan requested an increase in
    coverage to reflect work done on the property after purchasing the Dominion
    policy; and

c)

Kan was aware that the appellants building
    limit increased to $924,000 in 2008 under the appellants previous ING insurance
    policy but did not disclose it to the respondents.

[16]

The
    trial judge accepted Leungs evidence that when she prepared the insurance quote,
    she told the appellant that she used a rule of thumb of $200 per square foot to
    arrive at the $850,000 estimate. The trial judge also accepted Leungs evidence
    that, when they met in person on January 29, 2009, Leung advised Kan:

about the need to insure the full
    value of the property to avoid a penalty  [S]he also told Mr. Kan that the [respondents]
    were not cost consultant professionals and that he should consult a cost
    consultant or professional appraiser to get an
accurate
estimate of the cost of rebuilding the property.

[17]

After their meeting, Leung sent a letter to the appellant on
    February 23, 2009 which included the following warning: [I]f you have not
    insured your property up to the amount of insurance required, you may become a
    CO-INSURER. She also enclosed with the letter a Guide to Co-insurance which
    reiterated the importance of obtaining an accurate appraisal of the propertys
    value:

A regular and careful review of the value of
    your insured property is essential if Co-Insurance penalties are to be avoided.
    We recommend your insurable values be frequently reviewed by a competent,
    independent appraisal company.

[18]

Leung testified that she had similar conversations with Kan each
    time the 2009 policy was renewed and that she would have provided him with
    documents advising him to review the value of his property upon renewal.

[19]

In her testimony at trial, Leung elaborated on the advice that she
    gave the appellant and her reasons for the advice that she gave:

We are not
    contractors, we are not involving in constructions, I dont know. Im providing
    a coverage like against fire, against water damages  The limit we are  we would
    not be able to appraise the building limit on the clients behalf [
sic
].



The number as I
    explained to him is an estimate to get the quote going.



I explain[ed] to
    him. Its an estimate then if hes not doing anything, then I would not be
    responsible.



The figure we provided,
    and I told him that this is the limit that youve got to use for rebuilding,
    replacing, repair[ing] your building in case of a total loss. So, this number 
    you must make sure is adequate.

[20]

The appellant itself read into evidence as part of its case the
    following excerpt from Leungs examination for discovery in which she stated
    that she cautioned the appellant that the figure provided was only an estimate:

Q: Okay. So you need to understand what the
    client was looking for, and you told us about that, and then you obtained
    information about the property. Okay. And were there any further services that
    you understood that you were supposed to provide as an insurance broker?

A:
We would give the, the quote, but always
    caution them [that this] is based on the information they supplied, and you
    convey the same message to the insurance company, so we are not professionals,
    in terms of the building limits and the upgrades to the building  In all
    fairness, I would say that this is only an estimate. Whether or not it is
    adequate, you need a cost consultant or professional engineer to determine the
    limit to rebuild or replace the building
.

Q: And you told him that.

A: Yes. [Emphasis
    added.]

[21]

This information was given to the appellant
    before it purchased the policy. Knowing the limitations of the insurance quote,
    the appellant chose not to seek expert advice.

[22]

A fire destroyed the property in 2012. Dominion
    paid out the policy limit of $1,438,358, which included the building loss and
    other claims.

[23]

The property was underinsured and has not been
    rebuilt.

ANALYSIS

(1)

Did the trial judge err by invoking the wrong
    test to determine whether there was a breach of the brokers duty to the
    insured?

(a)

The appellants position


(i)

The
    central issue

[24]

In respect of the first three grounds of appeal,
    the appellant submits that the central issue is whether the trial judge applied
    the wrong legal test to determine the respondent brokers obligation, resulting
    in an erroneous conclusion that the respondents did not breach their duty of
    care or contractual obligations in providing insurance.


(ii)

Matters
    that are not in dispute

[25]

At the hearing of this appeal, the appellant advised
    that it was no longer contesting the trial judges findings of fact that:

a)

Leung provided Kan with a building limit
    estimate of $850,000 for reconstruction costs. This calculation was based on a
    $200 per square foot rule of thumb in accordance with the industry norm;

b)

Leung told Kan that she was not an expert in
    determining replacement cost estimates; and

c)

Leung told Kan he should consult a
    reconstruction cost expert if he wished to get an accurate assessment.

[26]

Moreover, the appellant does not challenge the
    trial judges finding that, to the extent Kans evidence was inconsistent with
    Leungs, the trial judge found Leungs evidence more credible and therefore
    preferred Leungs evidence.


(iii)

The
    appellants argument

[27]

The appellant submits that the respondents represented
    that the estimate would ensure adequate insurance coverage. They were thereby
    in breach of their duty of care and/or made a negligent misrepresentation.

[28]

Alternatively, the appellant submits that the
    respondents had a contractual obligation to provide adequate insurance and failed
    to do so, resulting in damages to the appellant. The appellant submits the
    trial judge should not have distinguished an accurate estimate to be acquired
    through a professional appraiser from the rough estimate provided by the
    broker because the broker had contracted to provide adequate insurance. The
    appellant submits this is so, regardless of whether the respondents advised the
    appellant to seek expert advice if they wished to obtain an accurate
    assessment.

(b)

No breach of the duty of care

[29]

In her reasons, the trial judge accepted that
    insurance brokers owe a duty of care to their clients to provide information
    and advice about which forms of coverage they require in order to meet their
    needs and the limits of that coverage:
Fletcher v. Manitoba Public
    Insurance Co
., [1990] 3 S.C.R. 191, at p. 216. See also
Fines Flowers
    Ltd. et al. v. General Accident Assurance Co. of Canada et al.
(1978)
,
17 O.R. (2d) 529 (C.A.). However, the trial judge found that the respondents discharged
    their duty to the appellant by advising Kan that the appellant should obtain adequate
    coverage, that the respondents did not have the expertise to provide an
    accurate estimate of the appellants reconstruction costs, and that the appellant
    should obtain expert advice.

[30]

I see no error in her conclusions.

[31]

Both the appellants and respondents experts agreed
    that insurance brokers are not qualified to give replacement cost advice to
    their clients and that it is a best practice to advise clients about the need
    to obtain expert advice.

[32]

Stephen White was the appellants expert on the
    subject of what advice, if any, an insurance broker should provide to a client
    in respect of replacement costs. As reflected in the trial judges summary of
    his evidence at para. 36, he testified that:

the standard of
    practice requires insurance brokers to advise clients about the importance of
    having coverage that protects the full value of their property, to advise that
    they are not qualified to provide advice on the value of property and to
    recommend that clients retain the services of a reconstruction cost consultant
    in order to obtain an accurate estimate of the costs of reconstruction.

[33]

Similarly, the respondents expert, Frank Szirt,
    opined in his report

that:

It is an accepted tenet in the insurance
    industry that the responsibility for determining the limits which accurately
    reflect the values exposed to risks fall on the insured. This is because the
    special knowledge necessary to determine insurable values resides in the
    insured, it is the insured who is in the best position to choose the limit(s)
    which provides adequate protection. And, since the adverse financial
    consequences arising from the underinsured property will be borne by the
    insured, this is a non-transferrable responsibility.

The responsibility of brokers is confined to
    arranging insurance coverage the scope of which, within market availability,
    fully respond to the needs of their clients. This is the function they are qualified
    for by their training, licensing requirements and mandatory continuing
    education.

Concerning real property, brokers are
    untrained in property appraisal and thus lack the requisite expertise to assess
    their clients' values at risk. Similarly, brokers cannot provide any meaningful
    advice about their clients' appropriate business interruption limit, given that
    it is based on financial information to which the insured, and not the
    insurance broker, is privy. Consequently, if insureds require assistance in
    determining the appropriate limits, they must seek it from professional
    appraisers for real property and their accountants for business interruption.

In short, the
    proper role of brokers is to explain to their clients the need for insurance to
    full value. In terms of their involvement in establishing policy limits, the
    fail-safe recommendation is to obtain professional advice  appraisal for
    property and accounting for business interruption.

[34]

These opinions are not challenged on appeal.

[35]

The trial judge accepted the standard
    articulated by the experts that an insurance broker must (i) advise clients of
    the importance of having insurance to protect the full value of the property, (ii)
    advise that the broker is not qualified to provide advice on the value of the
    property, and (iii) recommend that clients retain an reconstruction cost
    consultant qualified to provide an accurate estimate.

[36]

The trial judge held that the respondents met
    the standard of care, as she accepted Leungs evidence that:

a)

Leung provided the appellant with a cost
    estimate of $850,000 to rebuild (to be increased each year) based on industry
    standards and the information provided to her by the appellant;

b)

Leung advised the appellant of the importance of
    having coverage that protects the full value of the property;

c)

Leung advised that she was not qualified to
    provide accurate advice about the value of the property; and

d)

Leung recommended that the appellant retain the
    services of a reconstruction cost consultant or other expert to obtain an
    accurate estimate of the costs of reconstruction.

[37]

In so doing, the trial judge applied Leungs
    evidence, which she accepted, to the agreed standard of care as articulated by
    the experts for both parties.

[38]

There is no error in her articulation of the
    duty of care or her conclusion that it was met in this case. Nor was there any negligent
    misrepresentation, as Leung was found to have provided full disclosure in
    accordance with the duty to be met.

[39]

Her findings were also supported by the fact
    that Kan was a sophisticated insured who was involved in supervising the
    renovations to the building and had experience as a mortgage broker. Kan would
    have understood the significance of her advice, as well as the distinction
    between an estimate and a professional assessment.

(c)

No obligation in contract to provide adequate
    insurance

[40]

The appellant argues that, even if the
    respondents are not liable in tort, they are liable in contract based on their
    agreement to provide adequate insurance.

[41]

The appellant claims that the document
    REGARDING BROKER COMPENSATION creates an obligation on the respondents to
    provide adequate insurance. The document states that the broker will strive
    to provide suitable, affordable and adequate insurance:

We would like to take this
    opportunity to thank you for your business. As your independent Insurance
    Broker, we at Pacific Insurance Broker Inc.
strive to provide to you
    insurance products and services that are suitable, affordable and adequate
.
    [Emphasis added]

[42]

If this was a contractual term, it was satisfied:
    Leung provided a quote based on industry norms, made it clear that she was not
    qualified to provide an accurate value, and advised the appellant to obtain an
    opinion from a qualified expert. As such, she strove to provide suitable
    insurance.

[43]

A promise to strive to provide insurance
    products that are suitable, affordable and adequate is very different from a
    guarantee that they will be adequate. The evidence makes it clear that the respondents
    were not agreeing to provide a guarantee in this case.

[44]

The trial
    judge did not err when she concluded at para. 81 that the respondents met their
    obligations toward the appellant:

I find that Ms. Leung did advise Mr. Kan that she was not in a
    position to provide accurate advice on the replacement cost value of the
    building on the Queen Street property and that he should obtain a professional
    opinion if he wanted an accurate assessment. I do not believe Mr. Kans
    evidence that he requested higher building limits and that Ms. Leung advised
    him that Dominion would not increase the amount of coverage. It was made clear
    to the [appellant] through Ms. Leungs words and through the documents sent to
    the [appellant] that the [appellant] was responsible for ascertaining the value
    of its property. The [respondents] were not negligent nor were they in breach
    of any contractual obligations, and I would dismiss the claim on this basis.

(d)

Conclusion

[45]


The trial judges
    conclusion that the respondents met their obligations in tort or contract is
    fully supported by the evidence and the law. It is also sufficient to dispose
    of this appeal on the merits. Accordingly, it is not necessary to address the
    appellants remaining grounds of appeal regarding causation and the trial
    judges assessment of damages.

(2)

Did the trial judges reasons give rise to a reasonable
    apprehension of bias?

[46]

The appellant submits that the trial judge did the following
    things in her reasons for judgment which create a reasonable apprehension of
    bias:

a)

Deliberately writing the decision in such a way
    as to avoid assessing damages for reconstruction;

b)

Drawing a faulty distinction between accurate
    and rough estimates; and

c)

Reversing the motives of the insured and the broker.

[47]

A party alleging bias has a high burden to
    meet given the strong presumption of judicial impartiality:
Yukon
    Francophone School Board, Education Area #23 v. Yukon (Attorney General),
2015
    SCC 25, [2015] 2 S.C.R. 282
,
at paras. 25-26. For this court to
    intervene, the apprehension of bias must be a reasonable one.

[48]

I do not agree that the burden was met in this
    case. The trial judges approach to liability and damages was sound. The
    reasons for judgment give no indication that she engaged in backward reasoning
    and every reason to believe she decided the case based on the evidence and
    argument.

[49]

The appellant also submits that this court
    should accept that the trial judge, faced with a judgment that had been on
    reserve for six months, decided to fashion a judgment that would allow her to
    deliver reasons quickly and avoid addressing the complicated evidence
    concerning damages. In essence, the appellant argues that the trial judge
    delivered reasons that do not reflect her genuine assessment of the evidence
    and the issues but were instead produced as an expedient was to dispose of the
    case. This submission invites a finding of dishonesty for which there is no
    support in the trial record. The argument is without merit.

(a)

The
failure
to assess damages for
    reconstruction

[50]

The
    trial judge provided four pages of analysis on damages, in her 111-paragraph
    judgment. The trial judge addressed each category of damages in sequence: cost
    of reconstruction, lost rent, and co-insurance. She then reviewed the evidence
    and case law in coming to her conclusions.

[51]

She did not quantify the replacement cost, both because she found
    that the insured was not entitled to damages and because she would not have
    done so even if she had found that it was entitled to damages. Rather, she
    indicated that she would have referred this issue to a Master pursuant to r. 54.02
    of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194
.

[52]

In addition to finding that the respondents met
    their duty of care and or contractual obligations to the appellant, the trial
    judge noted that a party is not entitled to replacement cost damages where
    there is no evidence it would have diligently replaced the building with a
    building of like kind and quality:
Carter v. Intact Insurance Company
,
    2016 ONCA 917, 133 O.R. (3d) 721, at paras. 48-49, leave to appeal refused, [2017]
    S.C.C.A. No. 53.

[53]

In addressing damages for reconstruction, the trial judge held
    that:

[T]he [appellant] has not proceeded with due
    diligence, nor has it built or intended to build a property of like kind and
    quality.



There was no
    evidence at trial to demonstrate that the cash value of the building was more
    than the amount paid out by Dominion. Therefore, it is not possible to find
    what, if any damages, the [appellant] has suffered on this basis.

[54]

Given her finding that there was no liability
    and therefore the appellant was not entitled to damages, she had no obligation
    to assess damages. In these circumstances, a trial judges failure to assess
    damages is not a freestanding ground of appeal; success on this ground depends
    on whether damages were owing in the first place:
Tkachuk Farms Ltd. v.
    LeBlanc Auction Service Ltd.
, 2008 SKCA 31, 307 Sask. R. 188, at para. 34;
Morris Architect Group v. C.L. Bain Interior Design Ltd
., 1997 ABCA 32,
    47 Alta L.R. (3d) 269, at para. 8.

[55]

Secondly, the trial judge held that, had she
    found that the appellant was entitled to replacement cost damages, the trial
    judge would have referred the issue of quantifying the damages to a Master under
    r. 54.02(1)(b). She found, at para. 100, that the parties experts took
    different approaches to assessing the reconstruction costs which could not be
    resolved on the basis of the evidence that she heard at trial:

[T]he experts'
    differences require a line by line comparison of what was properly included or
    improperly omitted. I am not confident that the evidence at trial would allow
    for such an exercise. If I had found that the [appellant] was entitled to
    replacement cost damages, I would have been inclined to refer the damages
    assessment to a Master pursuant to
Rule 54.02
of
    the
Rules of Civil Procedure
.

[56]

Rule 54.02(1)(b) provides that:

a judge may at any
    time in a proceeding direct a reference of the whole proceeding or a reference
    to determine an issue where  a prolonged examination of documents or an
    investigation is required that, in the opinion of the judge, cannot
    conveniently be made at trial[.]

[57]

Nothing in r. 54 prevents a trial judge from exercising
    her discretion to have the assessment of damages that she has found a party is
    not entitled to, addressed by a Master if necessary and where further
    investigation is required.

[58]

In short, there is no basis to suggest that how the
    trial judge dealt with damages gave rise to an appearance of bias. Nor is there
    any evidence that she decided there was no liability so as to avoid having to
    deal with damages.

(b)

Whether the trial judge drew a faulty distinction
    between accurate and rough estimates

[59]

The trial judge distinguished between the value derived
    by the brokers to give the quote, and the actual cost of reconstruction.

[60]

Given the duty of care articulated by both
    experts, and the fact that there was no contractual obligation to provide an
    accurate quote, there is no basis for concluding that this indicates any
    appearance of bias.

(c)

Whether the trial judge reversed Kan and Leungs
    Motives

[61]

Lastly, the appellant argues that the trial judge
    revers[ed] the motives of the respondents and the appellant insured, which
    gave an appearance of bias. The appellant claims the
straw-man argument
    regarding accurate versus rough insurance limit estimates was compounded by
    the
role reversal
of Kan as motivated by cost to underinsure and Leung
    as the victim of Kans stratagem.
The appellant argues that it
    was the broker, Leung, who wanted to lower the limits rather than the appellant
    who sought to reduce insurance costs. To make this point, the appellant cited
    excerpts from trial.

[62]

First, the appellant argues that the trial judge
    erred by finding that the appellant cancelled his policy with his previous
    insurer because the premiums were too high.

[63]

The appellant submits this could not be true because
    ING never sent the policy renewal to him. In support of his submission, the
    appellant cites the following passage from the cross-examination of James Hui,
    the appellants previous broker:

Q: I appreciate that the file shows that you
    received the cancellation from Mr. Pa through Pacific, but the file does not
    show that you actually sent the 2009 policy to the [appellant].

A: Okay, the file show  but um, if the client
    did not receive the renewal policy, he would not be able to discuss with me about
    a premium, because the I think he received the premium, the renewal premium.

Q: Im going to suggest to you that if he
    didnt receive the policy, then he couldnt have reviewed the policy with you.

A: Yes.

[64]

However, Hui also testified that:

A: The cancellation [was] from Mr. Pa [who managed the insurance on
    the property at the time], but I think I at some point I did or maybe I have 
    I did talk to Mr. Kan through email or phone call and he asked us to cancel the
    policy.

Q: And the reason given?

A: Premium.

[65]

As held by the trial judge, this excerpt from
    the cross-examination confirms that, whether or not the written policy was
    delivered to Kan, either Kan or his agent informed Hui that the premiums were
    the reason for the decision not to renew.

[66]

Secondly, the appellant suggests that it was
    Leung who wanted to underinsure the property, not the appellant. The appellant cites
    the following excerpt from the evidence of one of Leungs superiors, who
    testified that Leung was concerned that the figure quoted was too high:

Q: Okay, do you remember speaking with her
    and being advised that the client was reluctant to increase the coverage from $550,000?

A: I can freely
    recall that she was worried about the premium because the figure is way higher.
    I said, Well either you do it or you dont because youve got to do, make sure
    its properly insured.

[67]

Leung was worried that this premium was much
    higher than the last insurance quote she was aware of (as provided to her by
    Kan), which was based on a building limit of $550,000. Leung was not provided
    with the 2008 revised policy which had a building limit of $924,000 and was not
    aware that there was a quote in 2009 based on a value of $984,060.

[68]

This excerpt does not suggest a desire to
    underinsure but simply a concern that the quote being provided was much higher
    than the quote given to the appellant in the past.

[69]

The trial judge concluded that:

The [appellant]
    cannot complain that the [respondents] did not provide proper advice, when it
    was in fact in possession of information that it did not disclose that was
    relevant to the assessment of risk
.
In
Frost v.
    Asselin Insurance Brokers Ltd.
, [1993] O.J. No. 3070 (Gen. Div.), at paras. 19 and 20, the Court
    dismissed a claim of underinsurance where a plaintiff sought out new insurance
    without disclosing that the prior coverage was higher.

[70]

This evidence supports the trial judges
    conclusion that Leungs motive was not to minimize the premiums to be paid by
    underinsuring the building.

(d)

Conclusion in respect of the reasonable
    apprehension of bias claim

[71]

The appellant made serious allegations of reasonable
    apprehension of bias but points to no evidence substantiating their claim.

[72]

For these reasons, this ground of appeal also
    fails.

DISPOSITION

[73]

The appeal is dismissed.

[74]

Partial indemnity costs are awarded to the
    respondents in the amount of $40,000, inclusive of HST and disbursements, as
    agreed by the parties.

Released: March 3, 2020 (D.D.)

J.A.
    Thorburn J.A.

I
    agree. Doherty J.A.

I
    agree. David Brown J.A.


