All insurance policies for camping owners had a common expiry date May 30, 2004. In early 2004, Kouri Gougeon called for a possible renewal of ecclesial policy. In the absence of a response, Kouri unilaterally issued new insurance certificates to its customers on 10 May for a new one-year Ecclesiastical insurance period. A few days later, Ecclesiastical Gougeon announced that it was extending the life of the existing policy by 30 days, while deciding to renew the program. Meanwhile, Kouri charged its customers premiums at an increased rate for new annual coverage. Kouri did not inform Ecclesiastical or Gougeon that it sent new certificates to its clients for an additional year of coverage, nor that it had collected bonuses for the first month of this coverage. The result in Kouri v. Gougeon was clearly influenced by the ecclesiastical position that Kouri`s renewals were binding despite Kouri`s lack of authority to do so. The Court`s argument regarding Kouri`s alleged authority could, however, apply in situations where an insurer challenges coverage. According to the Court`s analysis, this was not Kouri`s real authority, but the perception of the insured.
Therefore, if it is not the insurer`s right to collect premiums, but its obligation to cover a significant claim, the Court could quite conclude that an insured was entitled to coverage when a broker had granted an extension without the insurer`s consent. In such a case, the insurer may be entitled to damages against the broker, but its right to recover may be limited by the broker`s inability to pay a large judgment. To protect themselves from such a situation, insurers should ensure that policies clearly set the limit on a broker`s authority to grant renewals. Insurers should also remind brokers of the limits of their powers in their agreements, when coverage expires shortly and no prorogation decision has been made. Unfortunately, none of these measures provides full protection, as policyholders may not be able to distinguish between certificates actually issued by the insurer and those developed by a broker who acted with authority in former stores. Kouri was an insurance broker whose clientele consisted exclusively of about 175 camping operators. Kouri received assurances for his ecclesiastical insurance clients through Gougeon, a wholesale broker with a business book for Ecclesiastical. The sub-brokerage agreement between Gougeon and Kouri provided that Kouri did not have the power to bind Ecclesiastical to an insurance contract. The Ontario Court of Appeal allowed the appeal and ordered Kouri to pay ecclesiastical the amounts received from his clients as premiums for coverage renewal.
The Court invoked Section 402 of the Insurance Act, which provides that a broker or broker who receives money as a premium for an insurance contract is considered a fiduciary benefit to the insurer. [ii] According to the Court, Kouri`s unilateral sending of insurance certificates has taken the road to valid contracts. The question was not whether Kouri could hire the insurer; Given the sub-brokerage agreement, Kouri did not have such authority. However, an insured who received a certificate was not aware of the terms of the sub-brokerage contract and had no reason to question its validity. Accordingly, the Court finds that « the alleged power of the Court of Justice was sufficient to create compulsory insurance contracts in the name of Ecclesiastical. » In the recent decision of Mr.B Kouri Insurance Brokers Ltd. v. R.L. Gougeon Ltd., the Ontario Court of Appeal ruled that a broker could issue a mandatory renewal of an insurance policy when a broker had agreed that he did not have that power. [i] Unusually, the insurer argued that the extension was binding because it wished to recover the premiums collected by the broker for the unauthorized extension.