Who Is Responsible For Errors and Omissions As Mistakes Upon An Application For Insurance Where the Application Was Prepared By An Agent or Broker?

Although An Insurance Broker or Insurance Agent May Assist a Client As An Applicant For Insurance Coverage With the Preparation of An Insurance Application Document It Is the Client That Remains Responsible For the Accuracy of Information Written Upon the Insurance Application Document.

A Helpful Guide For How to Determine and Understand the Responsibility For Mistakes Upon An Insurance Application

Insurance Claim Document It is a very common practice for an insurance agent or an insurance broker to prepare an insurance application document on behalf of a client and thereafter to provide the prepared insurance application document to the client for review and approval as well as a confirming signature.  When an insurance agent or insurance broker makes a mistake upon an insurance application, it is necessary that the client bring the mistake to attention so to ensure that the insurance company that assesses the stated information may review and underwrite the application for insurance coverage based upon accurate details.

The Law
Is An Insured Responsible For Errors of Agents or Brokers?

From the perspective of the insurance company, being the insurer, the information received for review and assessment by the insurer, whereas such information will be material, meaning relevant, to the willingness to provide insurance coverage as well as the terms of the insurance coverage such as special conditions, premiums, deductibles, among other things, must be accurate.  If an application for insurance is submitted to an insurer and there are errors or omissions within the application due to mistakes by an insurance agent or an insurance broker who was assisting a client with the application documents, the client remains responsible for those mistakes and may be subsequently denied claims against the insurance protection on the basis of misrepresentation, including failure of disclosure.  The responsibility remaining with the client, as the applicant requesting insurance coverage, was stated within the case of 1126389 Ontario Ltd. (c.o.b. Drew Auto Centre) v. Dalton, [2000] O.J. No. 668 as well as Hansra v. York Fire & Casualty Insurance Co. (1982), 1982 CanLII 2005 as were both cited within the more recent case of 2068286 Ontario Inc. v. Jevco, 2014 ONSC 3929 wherein it was said:

[84]  Jevco submits that an applicant for insurance is under a duty to read the application form and correct errors that the insurance agent had written. In 1126389 Ontario Ltd. (c.o.b. Drew Auto Centre) v. Dalton, [2000] O.J. No. 668, Sutherland J. stated the following at para. 75:

75     Virgioni testified that when he signed page 7 of the Risk Data form he did not notice that it stated that he had had in the relevant period only two driving infraction convictions. In law his assertion makes no difference. In North American Life Assurance Co. v. Caputo, 41 C.C.L.I. 104, Saunders J. held that an applicant for insurance was under a duty to read the application form and to correct errors that the insurance agent had written into the form, and that by not reading the document signed by him the applicant left himself responsible for the untrue statements made in the document. I respectfully agree and hold that the same rule applies to the above mentioned page 7.

...

[86]  In Hansra v. York Fire & Casualty Insurance Co. (1982), 1982 CanLII 2005 (ON SC), 38 O.R. (2d) 281 (Co. Ct.) the Court noted the following at p. 4:

Did the plaintiff knowingly misrepresent or fail to disclose a material fact?

Section 206(1)(a)(ii) of the Insurance Act, R.S.O. 1980, c. 218, provides that where there is a wilful misrepresentation or failure to disclose a material fact, "a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited".

By using the word "knowingly" the Act rules out innocent misrepresentation or failure to disclose. In addition the onus is on the defendants to prove not only misrepresentation or failure to disclose but knowledge: Hoey v. Merit Ins. Co. et al., 1971 CanLII 456 (ON CA), [1971] I.L.R. 1-417 (Man. Q.B.).

The general rule is, however, that where a person signs an application for automobile insurance which contains untrue statements he "knowingly" makes a misrepresentation. The general rule applies where the applicant possesses information that the statements are untrue even though the applicant did not complete the application himself and signed it without reading it: Sleigh v. Stevenson, 1943 CanLII 341 (ON CA), [1943] O.W.N. 465, [1943] 4 D.L.R. 433, 10 I.L.R. 287 (C.A.). The reason for the rule appears to be based on case law that when an agent fills in an answer for the insured on an insurance application he does so, not as the agent of the insurer, but as the amanuensis of the insured. The latter by signing the application adopts the answers there in and makes them his own: Newsholme Brothers v. Road Transport and General Ins. Co., Ltd., [1929] 2 K.B. 356 as cited in Boutilier et al. v. Traders General Ins. Co., 1969 CanLII 871 (NS CA), 7 D.L.R. (3d) 220, [1969] I.L.R. 822. See also LeBlanc v. Co-Operative Fire and Casualty Co. (1964), 1964 CanLII 576 (NS SC), 46 D.L.R. (2d) 79.

There is a duty on the applicant to read the answers which the agent has filled in before signing the application: Bonneville v. Progressive Ins. Co. of Canada, 1954 CanLII 142 (ON SC), [1955] 2 O.R. 103, [1955] 2 D.L.R. 779, [1955] I.L.R. 1-171.

Even where the applicant for insurance is illiterate, with the exception of signing his own name, if he answers a question put to him by the agent, knowing his answer is untrue, he will be bound by the answer: Goguen v. Co-Operative Fire and Casualty Co. (1977), 1977 CanLII 2341 (NB CA), 18 N.B.R. (2d) 139 as cited in Martin v. Tapper; Canadian General Ins. Co. et al. (Third Parties), 1981 CanLII 1687 (ON SC), [1981] I.L.R. 1-1346 at p. 5124. It is not necessary that the applicant know that the effect of the nondisclosure vitiates the policy: Martin v. Tapper at p. 5124.

...

[90]  On this issue, therefore, I am satisfied that the plaintiff is bound by the information contained in the application and in the OAF1.

As shown within 2068286, and per the cases cited within, the law deems that where an applicant for insurance obtains the assistance of an insurance agent or insurance broker for the preparation of the insurance application document, it is the applicant who shall become the insured within the proposed insurance coverage that remains responsible for mistakes involving errors or omissions written upon the insurance application by the insurance agent or insurance broker.  Interestingly, per cases cited within 2068286, the applicant remains responsible for mistakes even where the applicant is illiterate or unable to read or write in the language of the insurance application and therefore the assistance of the insurance agent or insurance broker; however, it was unmentioned whether the applicant would succeed in a claim brought against the insurance agent or insurance broker for professional errors and omissions due to issues such as inaccurate language translation, among other things.

Summary Comment

When a client of an insurance agent or an insurance broker, as an applicant for insurance coverage, obtains the assistance of the insurance agent or insurance broker with the preparation and completion of an application for insurance coverage that will be submitted to an insurance company for review and assessment, the applicant remains responsible for any mistakes, whether errors or omissions, within the application document; and accordingly, the applicant for insurance must read and carefully review the application document for accuracy and thoroughness.


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