Most homeowners know that they need insurance to protect their most important asset – their home. However, most don’t know all the ins-and-outs of insurance. They rely on their insurance broker to help them with the process. This includes determining what kind of coverage they need and what potential gaps might be lurking in that coverage. It is important that the broker obtains the right coverage and also informs the insured of potential gaps in coverage.
The Role of Insurance Brokers
A broker’s failure to advise of potential gaps in coverage can lead to a loss being an uninsured loss. That was the case in Alvaro v. InsureBC, 2019 BCSC 2017. The plaintiffs had owned a rental property in Maple Ridge for many years – it was intended to supplement their retirements. They were in between tenants when the house was destroyed by fire.
They expected they would be covered because they had done everything right; they had purchased insurance year after year for many years, expecting it to be there for them in the event of a loss.
Like many homeowners, they did not understand all the fine print in the insurance policy. Their policy – like virtually all homeowners policies – included exclusions that limited coverage as soon as the residents moved out. All coverage was lost after the building had been vacant for 30 days unless the insured purchased a “vacancy permit” from the insurer. Had the plaintiffs known this, they would have bought the vacancy permit. But because their broker failed to tell them about this gap in coverage, they assumed that they were still insured while they looked for a new tenant.
Lawyers at Murphy Battista acted for the insureds in bringing a claim against the insurance broker. The insurance broker argued that they had not been negligent in failing to tell their clients about this gap in coverage. They also alleged that the plaintiffs were at fault for failing to read and understand all the fine print in the policy.
A BC Supreme Court judge concluded that the broker had been negligent in failing to draw the potential gaps in coverage to the attention of the plaintiffs. The plaintiffs were blameless because even if they had reviewed all the documents provided to them, the materials were too complicated for the insureds to fully understand the effects of vacancy on their coverage; the complexity of insurance policies is why individuals rely on professional insurance brokers to help them understand their insurance needs.
Steps to Take After an Insurance Claim Denial
If you have been denied coverage following a loss – be it a flood, a fire, or some other loss – it is important to consider whether you got what you paid for. If you purchased insurance intended to cover you for the loss that occurred, the broker may have failed to ensure that the policy purchased was appropriate or that you were advised of gaps in coverage. Contact us and a lawyer at Murphy Battista will be happy to review the facts with you and give you advice on how to proceed.