McIntosh v. Royal & Sun Alliance

In 2002 the Plaintiff/assured purchased a high performance power boat and took out insurance with the Defendant/insurer through the co-Defendant broker. The Plaintiff intended at some point to use the boat in a business but obtained a policy that was for pleasure use only. The Plaintiff’s broker knew of the assured’s intended use and attempted to obtain commercial coverage but was unable to do so. The Plaintiff was specifically advised by the broker that commercial coverage was not available and that the boat was only insured for pleasure use. Nevertheless, the Plaintiff set up a company called Offshore Performance Tours, had “Offshore Performance Tours” decals put on the boat and took the boat to a number of meets during the summer of 2002 to promote the business. It was claimed that no paying customers were carried in 2002. The following year the policy was renewed with the pleasure use warranty and the assured continued to market the boat by taking it to meets. Again, the Plaintiff claimed he was unable to attract any paying customers. During the fall of 2003, after having used the boat for pleasure purposes, the vessel was stolen while on a trailer at the Plaintiff’s cottage. Not surprisingly, the insurer denied coverage for the theft on the grounds that the assured had breached the pleasure use warranty. The denial was upheld by the Judge who did not believe the Plaintiff’s claim that there were no paying passengers. The Judge found as a fact that there were paying customers and, therefore, a breach of the pleasure use warranty. The Judge further held that the pleasure use warranty was a true warranty and not a suspensive condition. The Judge then turned to the claim by the Plaintiff against the broker. The Judge found that the broker had not met the required standard of care of a broker in that he failed to sufficiently explore the Plaintiff’s business plans and provided inaccurate information that the pleasure use warranty would only be breached when a paying customer was taken on the boat. The Judge held that the mere act of using the boat to promote a charter business amounted to a commercial use of the boat. However, the Judge held that there was no causal link between the breach of duty by the broker and the Plaintiff’s damages. Specifically, the Plaintiff did not rely upon the broker’s advice and instead chose to deliberately ignore it by taking paying passengers onboard. In result, the action against the broker was also dismissed.