Canadian insurers generally feel that they cannot be bound by unilateral actions of brokers in the absence of a particular agreement. In some cases, an insurer has been ordered to respond to a right of an insured to whom a policy has not been issued because a representative or broker has not forwarded the insurance claim to the insurer. However, in such cases, the insured would have paid the necessary premium and the insurer would have issued a policy if he had received the application. Kouri was an insurance broker whose clientele consisted exclusively of about 175 camping operators. Kouri received assurances for his ecclesiastical insurance clients through Gougeon, a wholesale broker with a business book for Ecclesiastical. The sub-brokerage agreement between Gougeon and Kouri provided that Kouri did not have the power to bind Ecclesiastical to an insurance contract. In the recent decision of Mr.B Kouri Insurance Brokers Ltd. v. R.L. Gougeon Ltd., the Ontario Court of Appeal ruled that a broker could issue a mandatory renewal of an insurance policy when a broker had agreed that he did not have that power.
[i] Unusually, the insurer argued that the extension was binding because it wished to recover the premiums collected by the broker for the unauthorized extension. However, the Court`s argument may open the door to other circumstances in which a court might require an insurer to cover the risk it did not accept. The Ontario Court of Appeal allowed the appeal and ordered Kouri to pay ecclesiastical the amounts received from his clients as premiums for coverage renewal. The Court invoked Section 402 of the Insurance Act, which provides that a broker or broker who receives money as a premium for an insurance contract is considered a fiduciary benefit to the insurer. [ii] According to the Court, Kouri`s unilateral sending of insurance certificates has taken the road to valid contracts. The question was not whether Kouri could hire the insurer; Given the sub-brokerage agreement, Kouri did not have such authority. However, an insured who received a certificate was not aware of the terms of the sub-brokerage contract and had no reason to question its validity. Accordingly, the Court finds that “the alleged power of the Court of Justice was sufficient to create compulsory insurance contracts in the name of Ecclesiastical.” To protect themselves from such a situation, insurers should ensure that policies clearly set the limit on a broker`s authority to grant renewals. Insurers should also remind brokers of the limits of their powers in their agreements, when coverage expires shortly and no prorogation decision has been made. Unfortunately, none of these measures provides full protection, as policyholders may not be able to distinguish between certificates actually issued by the insurer and those developed by a broker who acted with authority in former stores. All insurance policies for camping owners had a common expiry date May 30, 2004.
In early 2004, Kouri Gougeon called for a possible renewal of ecclesial policy. In the absence of a response, Kouri unilaterally issued new insurance certificates to its customers on 10 May for a new one-year Ecclesiastical insurance period.