Introduction
On February 2, 2024, the Ontario Court of Appeal released its decision in the case Gagne v. Ivari[1]. The decision overturned a motion judge’s ruling, which asserted that insurers are never obligated to assess an insured individual’s needs regarding the appropriateness of an insurance product. The key points of the judgment, starting with the initial decision from the Ontario Superior Court and continuing with the Ontario Court of Appeal’s determination, are outlined below. Please note that this summary is for informational purposes only and does not constitute legal advice or an opinion on any matter.
Ontario Superior Court: October 26, 2022
In Gagne v. Ivari, Marc Gagne, Roche Gagne and M R Investments Corp. (collectively, Gagne) commenced an action in the Ontario Superior Court of Justice against the respondent life insurance company, Ivari and others (Ivari). The allegations encompassed breach of contract, breach of fiduciary duty and negligence concerning a financial retirement plan, which involved, among other elements, the utilization of life insurance contracts. Gagne claimed that the retirement plan was unsuitable and resulted in them suffering losses and damages.
Ivari filed a motion seeking the dismissal of the action against them due to the alleged failure to present a reasonable cause of action. The motion judge accepted Ivari’s assertion that insurers are not obligated to assess the individual insured’s needs. Consequently, the motion judge concluded that Gagne did not identify a duty owed to them by Ivari and failed to illustrate how such duty was breached. The motion judge interpreted the dispute as centered around poor advice rather than a flawed product or the improper delivery of insurance products. As a result, the motion judge denied permission to amend Gagne’s statement of claim, asserting that there was no viable way to amend the pleadings in a manner consistent with settled legal principles distinguishing between insurance brokers and insurers.
Ontario Court of Appeal: January 31, 2024
At the Ontario Court of Appeal, Gagne contended that the allegations against Ivari were adequately pleaded, and in the event of any deficiencies in the pleading, the motion judge made an error in denying permission for Gagne to make amendments. The Ontario Court of Appeal reinstated the legal proceedings against Ivari, granting Gagne the opportunity to modify their statement of claim for the following reasons:
- The Motion judge erred in its treatment of the motion brought by Ivari.
The motion judge erred by treating the motion brought by Ivari as if it were a motion for summary judgement. A summary judgment in Ontario is a legal procedure that allows for the prompt resolution of a civil lawsuit without the need for a full trial in accordance with the Ontario Rules of Civil Procedure. A motion for summary judgment can be granted if the court is satisfied that there is no genuine issue requiring a trial because the case can be decided based on the evidence and legal arguments presented. The motion brought by Ivari should focus on the legal sufficiency of a plaintiff’s pleading and not the merits of the proceedings. Accordingly, a pleading is to be read generously, accounting for deficiencies in drafting.
- No general principle of law that an insurer will never owe a duty to an insured with respect to the suitability of an insurance product.
The motion judge determined that the statement of claim failed to establish a cause of action against Ivari, citing established legal principles that distinguish the responsibilities of insurers from those of brokers and agents. The Ontario Court of Appeal disagreed with the notion that there is an overarching legal principle that insurers never have a duty to ensure the suitability of an insurance product for an insured. The cases cited by the motion judge to support this conclusion were rendered in the context of summary judgment motions or post-trial proceedings, where claims against insurers were dismissed based on presented evidence. In this case, evidence was not admissible as part of the motion, emphasizing that the primary focus was on evaluating the legal sufficiency of the claim as pleaded by Gagne.
- Gagne has a tenable cause of action.
While the Ontario Court of Appeal acknowledged that the motion judge accurately determined that the statement of claim lacked the essential elements for the various causes of action against Ivari, the denial of leave to amend the statement of claim should only occur in situations where, among other considerations, there is no viable cause of action. The Court found that Gagne’s statement of claim, in this case, presents viable causes of action against Ivari, and Gagne should be afforded the chance to correct their pleadings by articulating the essential elements of the pertinent causes of action and providing supporting facts for their claims.
Conclusion
In summary, this case underscores the significance of insurer oversight when intermediaries carry out insurance activities on the insurer’s behalf. This is particularly noteworthy since the law has not definitively established that insurers are exempt from the responsibility of ensuring that the appropriate insurance product is being marketed and sold to the insured. In fact, every insurer in Ontario that authorizes one or more agents to act on behalf of the insurer must establish and maintain a system that is reasonably designed to ensure that each agent complies with the Insurance Act (Ontario), its regulations, FSRA’s rules and the agent’s licence. In addition, the Guidance: Conduct of Insurance Business and Fair Treatment of Customers published by the Canadian Council of Insurance Regulators and the Canadian Insurance Services Regulatory Organizations in September 2018 clearly provides that insurers are responsible for the fair treatment of customers throughout the life-cycle of the insurance product, including with respect to oversight of the distribution of products and any policy servicing activities performed on the Insurer’s behalf.
Insurer oversight plays a crucial role in maintaining the integrity of the insurance industry, protecting consumers and upholding regulatory standards. Insurers are expected to implement robust systems and processes to monitor the actions of their intermediaries and take corrective measures when necessary, including ensuring that needs analyses are being carried out in accordance with the insurer’s requirements and expectations.
For further details, legal advice or questions, please reach out to Arthur Hamilton, Marisa Coggin, Taschina Ashmeade, Jaspal Nagra or a member of Dentons Corporate and Regulatory Insurance Group and we would be happy to assist.
[1] Citation: Gagne v. Ivari, 2024 ONCA 82
