Wilson's Electronics Ltd v Spectrum Insurance Brokers Ltd
 JMCC Comm 11
IN THE SUPREME COURT OF JUDICATURE OF JAMAICA COMMERCIAL DIVISION
CLAIM NO. 2013 CD 00140
INSURANCE-AGENCY-INSURANCE SECURED THROUGH A BROKER-BROKER AN AGENT FOR THE INSURED-INSURED REQUIRING COVERAGE FOR ACTIVE CABLE TRANSMISSION LINES-EXCLUSION CLAUSE IN POLICY EXCLUDING SUCH RISK-NO SUCH COVERAGE AVAILABLE IN THE TRADE-BROKER FAILING TO INFORM INSURED OF EXCLUSION CLAUSE-NO DISCLOSURE TO THE INSURER THAT EQUIPMENT WAS ACTIVE TRANSMISSION LINES-NO INDEMNITY BY INSURER-WHETHER THE BROKER IN BREACH OF AGENCY CONTRACT-WHETHER BROKER LIABLE TO INDEMNIFY THE INSURED-WHETHER BROKER UNDER A DUTY TO DISCLOSE THE EXCLUSION CLAUSE OR INFORM THE INSURED THAT NO SUCH COVERAGE AVAILABLE FOR THAT RISK.
MISREPRESENTATION-WHETHER BROKER LIABLE TO THE INSURED FOR MISREPRESENTING TO THE INSURER THE NATURE OF THE PROPERTY TO BE INSURED-WHETHER BROKER MISREPRESENTED THAT COVERAGE HAD BEEN SECURED OVER THE ACTIVE TRANSMISSION LINES-MEASURE OF DAMAGES.
This case involves a company, Wilson's Electronics Limited (the Claimant) which operated a cable distribution service in the parish of Manchester, with its office located at Lot 21 Nashville Sub-Division, Mandeville, in the parish of Manchester. Since 2004 the Company was insured with a reputable insurance company through Spectrum Insurance Brokers Limited (the Defendant). The Claimant really needed insurance both to cover its staff and its equipment. Its active transmission and distribution lines had been damaged by not one but two hurricanes; firstly, by hurricane Ivan in 2004 and then hurricane Dean in 2007. In 2005 it secured, through the Defendant, what it thought was adequate insurance cover on its stock and equipment at its offices and over its transmission and distribution network mounted on Jamaica Public Service Company's (JPS) poles in its Manchester region. It was a standard Fire and Allied Perils policy with an exclusion clause excluding cover for active transmission and distribution lines. This action arose out of the refusal by the insurance company (the Insurers) to indemnify the Claimant for the damage done to its active transmission and distribution lines by the passage of hurricane Dean over the Island of Jamaica in 2007. The insurers relied on this exclusion clause to avoid the policy.
The material facts forming the background to this claim are largely undisputed and can be briefly summarized. The Defendant is and was at all material time an insurance brokerage firm providing insurance services to both individual and commercial clients and was the Claimant's broker since 2003. The Claimant's business was insured, through the Defendant's brokerage firm, with the insurers. Prior to 2004, the Claimant's risk was covered under what was called a Synergy Policy offered by the Insurer. It was a packaged policy offered to clients with small offices. In September of 2004, like many other businesses, the Claimant Company suffered significant losses from the passage of Hurricane Ivan. Having sustained heavy losses to its distribution net work of cables which supplied cable services to its clients, the Claimant sought to recover on the insurance policy it had, up to that point, renewed annually. The insurance company however, paid only that part of the Claimant's claim which involved damage done to its property located at its offices. The Insurer failed to pay the entire claim on the basis that the only risk covered were located at the company's office and no property located away from the office at Lot 21 Nashville Sub-Division was covered by the policy.
In this Synergy Policy there was no property identified as being away from the main office or off-site. Therefore, despite the damage sustained to its active transmission and distribution lines after hurricane Ivan in 2004, the Claimant did not recover from the insurers any sums with respect to such items. The Insurer by letter sent to the Defendant in May 2005 advised that they could not renew the Synergy Policy over the Claimant's risk but recommended a different policy for the Claimant's class of business. The standard Fire and Allied Peril Insurance was suggested as suitable for the Claimant's class of business.
Following on this experience with losses resulting from the earlier hurricane, the Claimant, wanting to now definitively secure coverage for its active transmission and distribution lines which were located away from its offices, sought to have that risk covered by insurance. It subsequently entered into discussions with the Defendant as to how it could secure adequate coverage for the business and especially to prevent a repeat of the earlier experience where it was unable to recover under its policy of insurance for damage to its active transmission and distribution lines. A new contract of insurance for the standard Fire and Allied Peril Insurance was sought on its behalf by the Defendant in 2005 and thereafter entered into between the Claimant and the insurers.
There was some misunderstanding between the Claimant and the Defendant as to the reason for the change in the type of policy required for the Claimant's class of business. On the one hand the Claimant seemed to have thought the change was necessary as the Synergy Policy could not cover the transmission lines. However, the Defendant maintained that the change was necessary as the Synergy Policy was for small offices and not commercial enterprises of the nature of the Claimant's business. Though the nature of the discussions surrounding how the new policy came to be secured was in dispute, the result was that the Claimant thereafter, entered into an insurance contract requiring a significant increase in the premiums paid.
In order to ensure that its entire business was covered under the policy of insurance, the Claimant, at the request of the Defendant provided a list of its equipment which was to be covered under the policy. The list which was prepared by the Claimant included items which were described as �off-site�. Importantly, this description was contained in the document titled �Fire and Allied Perils Schedule Forming part of and attaching to Policy No. F000000323, in the name of Wilson's Electronics Limited Elaine Wilson, and dated 03/09/05�. This list was provided to the Insurance Company yearly as part of the renewal process. The policy was effected based on the list of property provided and was renewed annually from 2005 to 2007.
In 2007, the Claimant again suffered significant losses to its equipment from the passage of a hurricane; this time Hurricane Dean. Included in that loss was damage done to property which it had listed as �off-site� and which were the active transmission and distribution lines used in its cable business. The Claimant again made a claim on its policy and was again met with a rejection of part of this claim. This time the insurer cited the exclusion clause in the policy which excluded liability for damage to active transmission and distribution lines located 500 feet from the insured's main building.
The upshot of all this was that the Claimant thought it had secured insurance coverage for its active transmission and distribution lines which were �off-site�, that is away from its main buildings and attached to JPS poles but this was not so. As it turned out, because of the risk involved with that type of property, not only was the company not insured for that risk, there was an exclusion clause in the policy of insurance it secured through the Defendant, excluding such risk. Importantly too, based on the evidence given, it would have been impossible to secure any such coverage from any other insurance company in the island of Jamaica at the time. The claim was denied by the insurer because the items were active lines and attached equipment, which were excluded under the policy. There was no dispute that based on this exclusion clause the insurer was entitled to deny liability.
It is as a result of the foregoing that the matter is before this court. The Claimant sought to recover from the Defendant the costs of replacing the damaged items. The Claimant had sued both the Defendant and the insurers but subsequently the action against the insurers was discontinued. The Defendant has denied that it is liable to indemnify the Claimant for its loss.
The Claimant's 2 nd Amended Claim Form presented a claim for breach of contract and misrepresentation of contract as to property to be insured under an insurance contract. Consequentially, the remedies sought by the Claimant was a declaration that it was entitled to be indemnified under the terms of the contract in respect of costs incurred by it in remedying the damage to the property and/or in respect of the replacement value of the property. In effect, the Claimant claimed for the sums lost amounting to $11,462,064.50, an indemnity under the contract in respect of the loss or alternatively damages to the said amount, damages for loss of business opportunity and interest at the commercial rate of 16.47% and costs. The penultimate claim for loss of business was never argued nor was any attempt made to prove such a claim so it was treated as having been abandoned.
In the 2 nd Amended Particulars of Claim the Claimant averred that the Defendant, in acting as its broker in the process of applying for insurance coverage, was, as its agent, under a duty to secure insurance coverage appropriate to cover the property to...
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