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When can a broker bind an insurer? Navigating the relationship between broker and underwriter and the case of Deasan v. CNA

Case citation: Deasan Holdings Ltd. v. Continental Casualty Company, 2024 BCSC 580

In a recent decision of Deasan Holdings Ltd. v. Continental Casualty Company, 2024 BCSC 580, Brownlee lawyers David Pick and Hassan Khan successfully argued that the plaintiff, an affiliate of an insured under a commercial general liability (CGL) policy issued by the defendant did not fall under the definitions of a ‘named insured’ and that the defendant insurer had no obligation to provide the affiliate with a defence and indemnity in an underlying claim for damages. 

By way of background, an affiliate of the named insured was being sued for damages arising from a landslide in Ft. St. John, BC.  Notably, the affiliate had not been previously disclosed to the insurer, and its business operations were materially different from those of the insured. The insured argued that the CGL policy should provide coverage for this affiliate, or the broker for the insured had authority to bind the insurer (ostensible authority) for insurance coverage.

In an extensive decision which reviewed the state of the law in Canada on agency and ostensible authority, the trial judge concluded that the plaintiff failed to establish it fell within the CGL policy’s definition of ‘named insured.’ The trial judge also dismissed arguments by the plaintiff that the effect of a phone call between the broker and the underwriter, which purported to add gravel pit operations to the CGL policy, could bind the insurer based on ostensible authority.  

The court found that the broker’s authority to bind the insurer was limited to a document called ‘certificate of insurance’. The interpretation and effect of this document was restricted by the court, leading to the denial of the sought-after-coverage. The plaintiff also advanced arguments that the insurer had preconceived its conclusion on coverage prior to completing a full investigation. However, the court agreed that the insurer’s position was reasonable given their understanding of events, and it was determined that the insurer had not breached its duty of good faith.  

Consequently, the court dismissed the plaintiff’s action and affirmed there is no duty to defend a claim when there is no duty to indemnify under a CGL policy as underwritten.   


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