In Deasan Holdings Ltd. v. Continental Casualty Company, 2025 BCCA 177,Deasan Holdings Ltd. ("Deasan") successfully appealed a decision of the BC Supreme Court finding that its insurer, Continental Casualty Company ("Continental"), had no duty to defend Deasan against claims following a landslide on its gravel pit property in 2018.
The insurance policy in question was obtained through CMB Insurance Brokers (the "Broker") and had been issued in the name of D.R.S. Energy Services Inc. ("DRS"), a company affiliated with Deasan, but separate and distinct from Deasan.
The Broker had been obtaining insurance for DRS since 2015. The Broker was aware of the relationship between Deasan and DRS and had initially obtained a policy under which Deasan was covered as an affiliated company.
Deasan purchased the gravel pit property in 2017, which it planned to develop, and worked with the Broker to secure liability coverage. The Broker sought to replace the existing policy with a new one from Continental. Owing to administrative errors and miscommunications, Deasan was not listed as an insured party in the application for insurance submitted to Continental. A certificate of insurance issued to Deasan by the Broker in relation to the policy did list Deasan as an additional insured, but only with regard to another property, and not to the gravel pit.
At the time of the landslide in the summer of 2018, both Deasan and the Broker honestly believed that coverage had been secured for Deasan in relation to the gravel pit.
Following the landslide, Continental denied that it had any duty to defend Deasan against claims by neighbouring property owners on the basis that Deasan was not an insured under the policy.
In a judgment written by Justice Griffin, the Court of Appeal found that Deasan did qualify as an insured under the policy in light of all the circumstances, and Continental had a duty to defend Deasan against the relevant claims.
The Court considered the principle that insurance brokers may at times act as agents for a party seeking insurance, and at other times act as agents for the party providing insurance coverage, including in the course of a single transaction.1] It was found that, when the Broker provided the certificate to Deasan with Deasan listed as an additional insured, the Broker was acting as an agent of the insurer with authority to bind the insurer to the terms evidenced by the certificate.2
The Court then found that the trial judge had erred in narrowing the scope of the coverage afforded to Deasan based on the wording in the certificate and had failed to take into account the entire factual matrix. The circumstances surrounding the acquisition of the policy and the context of the relationship between Deasan and the Broker weighed in favour of Deasan being covered for the loss under the policy, in particular:
– The Broker had knowledge that Deasan wished to be added to DRS's insurance and to have the same coverage for all of its property, including the gravel pit;
– The Broker knew that the gravel pit lands were owned by Deasan and that Deasan expected to commence pit operations in the future;
– The Broker knew that the gravel pit lands were listed in the certificate as property that was insured;
– The Broker believed that Deasan was added to the policy with equivalent coverage as DRS; and
– The Broker communicated to Deasan that he had bound coverage with Continental.3
The Court recognized a number of cases in which binding insurance contracts have been found where a broker has acted as agent for the insurer, but has failed to correctly fill out an insurance application on behalf of the insured or note an exclusion applicable to the insured.4
The knowledge of an agent acting in the scope of his authority must be imputed to the principal.5 As stated at paragraph 96 of the decision:
An agent acts for its principal. If the insurer had all the same conversations and history with Deasan's principals as did the Broker in this case, it is difficult to see how the conclusion would be anything but the insurer represented to Deasan that Deasan was covered.6
Finally, the Court emphasized that any ambiguity ought to be resolved consistently with the parties' reasonable expectations, and ambiguity in a certificate of insurance describing coverage ought be interpreted broadly in favour of coverage.7
In the result, the Court of Appeal overturned the trial judge's decision, finding that Deasan was an insured under the policy with respect to the gravel lands and that Continental had a duty to defend Deasan against claims for loss relating to the landslide.
Footnotes
1 Para 76.
2 Para 77.
3 Para 80.
4 Para 89.
5 Para 98.
6 Para 96.
7 Paras 85-86.
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