Law Times

Law Times • January 7, 2019 Page 9 www.lawtimesnews.com Good recordkeeping can protect against claims BY MICHAEL MCKIERNAN For Law Times G ood recordkeeping can help insurance brokers protect them- selves against claims by underinsured clients, ac- cording to a Toronto insurance lawyer. In her Sept. 28 judgment in 2049390 Ontario Inc. v. Leung, Ontario Superior Court Justice Lise Favreau found a commer- cial insurance broker met her duty of care to an underinsured client, in part because the bro- ker, Doris Leung, testified that it was her usual practice to warn property owners of the need for an accurate valuation assess- ment at renewal time. Brian Sunohara, a lawyer with litigation boutique Rogers Partners LLP, says the judge's re- liance on Leung's usual practice is encouraging for other brokers who find themselves faced with a negligence lawsuit, but adds that the case may never have made it to trial had she documented her advice in writing. "One of the lessons that emerges from this case is that brokers should be keeping de- tailed contemporaneous notes of the advice they provide, and if it's given verbally, then it's a good idea to follow up with written confirmation," says Sunohara, who was not involved in the case himself. "Often, if there is a problem, it comes up years later, when it's more difficult to remember ex- actly what happened." When brokers become the target of a negligence lawsuit, he says they will usually need to show how they met their profes- sional duty by addressing the possibility of any gaps in cover- age. "Brokers need to understand the nature of their client's busi- ness, so that they can properly advise of any risks," Sunohara says. Outside the realm of com- mercial insurance, he says bro- kers in personal lines may also need to be aware of the risks of underinsurance. Recent cuts to accident ben- efit entitlements have raised fears about the adequacy of auto insurance coverage, particularly for victims left with catastrophic injuries. In 2016, the most recent sig- nificant amendments to the Statutory Accident Benefits Schedule saw the previous Lib- eral provincial government re- duce attendant care and medi- cal and rehabilitation services for catastrophically injured vic- tims from $2 million to $1 mil- lion, along with a series of other cuts. But consumers can still boost their coverage to the old limits by paying an additional premi- um, says Sunohara. Lee Akazaki, a partner at Gil- bertson Davis LLP who acted for the plaintiff in Leung, says underinsurance in the context of real estate typically arises only in the commercial sector, since most residential home insur- ance policies offer guaranteed replacement cost coverage. "It's a much more mass prod- uct, so companies do it to at- tract clients, and also because they don't want to go through the process of getting accurate appraisals done frequently on people's homes," he says. The Leung case concerned an aging building on Queen St. W. in Toronto owned by James Kan, that was destroyed by fire in 2012. Kan's insurer determined that the building was under- insured because the estimated $1.6-million cost of rebuilding it was about $450,000 above the policy's building limit. As a result, it paid out the face value of the policy, instead of helping with the reconstruc- tion. After an abandoned attempt to rebuild, Kan sued Leung for almost $2 million to cover the insurance shortfall plus lost rent in the years since the fire, alleging she had failed to warn him of the need for sufficient insurance. According to the decision, Kan claimed the $850,000 building limit on the 2009 pol- icy, acquired with the help of Leung, was based on her sugges- tion, and that the raised limits in subsequent years were made at his request and to adjust for inf lation. Leung admitted the $850,000 figure came from her $200 per- square-foot "rule of thumb" es- timate, but claimed that she told Kan she was not an expert cost consultant, and that he should contact a professional appraiser to get an accurate valuation. After assessing the evidence of the two key players, Favreau found Kan's "lacked an air of reality," while Leung's was, on balance "more reliable and cred- ible." Barry Papazian, an insur- ance litigator who acted for the defendants, says the case essen- tially boiled down to the issue of credibility, and that he was im- pressed with Leung's determina- tion throughout the hard-fought case. "We went to trial reluctantly. She could have shied away, but she stood firm and was very pleased," says Papazian, a found- ing partner with Toronto firm Papazian Heisey Myers. "These cases are pretty rare, and it does a good job of pro- viding some guidelines for the industry." Kan's lawyer Akazaki agrees that the judge's view of the par- ties was key to the result, but it also forms the basis of his client's appeal of the judgment. "The impression we had is that the trial judge confused a number of legal issues, and that she was harsh in her assessment of the plaintiff 's evidence, while overly lenient in considering the defendant's evidence," he says. LT FOCUS What do your clients need? The means to move on. Guaranteed. ™ Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. » Pre- and post- settlement consultation and support » Caring professionalism for over 30 years » No fee to you or your clients Need more information? Contact us at 1 800 387 1686 or baxterstructures.com Kyla A. Baxter, CSSC PRESIDENT, BAXTER STRUCTURES READERS ' CHOICE 2018-19 STRUCTURED SETTLEMENTS Untitled-5 1 2018-11-06 3:05 PM Brian Sunohara says 'brokers should be keeping detailed contemporaneous notes of the advice they provide.'

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