Fletcher v. Manitoba Public Insurance Co.

Fletcher v. Manitoba Public Insurance Co.
Collection
Supreme Court Judgments
Date
1990-11-22
Report
[1990] 3 SCR 191
Case number
21491
Judges
Lamer, Antonio; Wilson, Bertha; Sopinka, John; Cory, Peter deCarteret; McLachlin, Beverley
On appeal from
Ontario
Subjects
Appeal
Civil procedure
Insurance
Torts
Notes
SCC Case Information: 21491
Decision Content
Fletcher v. Manitoba Public Insurance Co., [1990] 3 S.C.R. 191
Thomas John Fletcher and
Cheryl Elizabeth Fletcher Appellants
v.
Manitoba Public Insurance Company Respondent
indexed as: fletcher v. manitoba public insurance co.
File No.: 21491.
1990: June 1; 1990: November 22.
Present: Lamer C.J.* and Wilson, Sopinka, Cory and McLachlin JJ.
on appeal from the court of appeal for ontario
Insurance ‑‑ Automobile insurance ‑‑ Duty of insurer ‑‑ Compulsory public automobile insurance plan ‑‑ Appellants not having underinsured motorist coverage ‑‑ Whether government-owned insurer obliged to inform its customers about all types of coverage available to them.
Torts ‑‑ Negligence ‑‑ Duty of care ‑‑ Compulsory public automobile insurance plan ‑‑ Appellants not having underinsured motorist coverage ‑‑ Whether government insurer obliged to inform its customers about all types of coverage available to them ‑‑ If so, whether insurer liable for failing to fulfil its duty.
Appeal ‑‑ Powers of appellate court ‑‑ Whether Court of Appeal erred in departing from trial judge's findings of fact.
Costs ‑‑ Whether trial judge erred in awarding appellants costs on a solicitor and client basis.
Both appellants suffered severe injuries as a result of an automobile accident caused by the driver of the other vehicle. That driver did not carry sufficient insurance to cover the appellants' losses. The appellants claimed for the shortfall against the respondent, a government‑owned insurance company, whose primary function was to administer a mandatory public automobile insurance scheme within the Province of Manitoba. Under the "Autopac" scheme the owner of a motor vehicle must purchase insurance which provides minimum collision and public liability coverage. In addition, "underinsured motorist coverage" (UMC) is available upon the payment of a slightly higher premium. At the time of the accident the appellants were insured by the respondent under an Autopac policy which did not provide UMC.
The trial judge found that the respondent failed in its duty to inform the appellant of the full range of coverage available to him and in particular UMC and awarded damages to the appellant to the extent of the shortfall. The Court of Appeal (Blair J.A. dissenting) reversed that decision.
The issues in this appeal are (1) whether the court of appeal erred in departing from the trial judge's findings of fact; (2) whether a government‑owned insurer selling compulsory insurance directly to vehicle owners has a duty to advise its customers of the existence, nature and extent of underinsured motorist coverage; (3) if so, whether the respondent fulfilled it in this case; (4) if the insurer did not fulfil its duty, whether it is liable for the appellants' loss; and (5) whether the trial judge erred in awarding the appellants their costs on a solicitor and client basis.
Held: The appeal should be allowed.
It was not open to the Court of Appeal to depart from the trial judge's findings of fact absent evidence of palpable and overriding error. The trial judge is in the best position to assess the credibility of testimony and his assessment of the witnesses' credibility should not be interfered with.
Reasonable reliance by a person on information provided by someone else can ground a duty of care in tort that binds the provider of the information. The sale of automobile insurance is a business in the course of which information is routinely provided to prospective customers with the expectation that they rely on it. As Autopac insurance is compulsory for all owners of motor vehicles, customers are likely to rely on the government insurer as their source of information about the kinds of additional coverage available and the nature of the protection afforded. The respondent knew or ought to have known that purchasers of insurance constitute a class of persons that may reasonably be expected to rely on the information communicated to them by its employees. It therefore owed its customers a duty of care to inform them of all available coverages, their purpose and their cost. While the duty is not as onerous as that imposed on private agents and brokers, the public insurer has the responsibility of seeing that its customers receive the information required to make intelligent decisions as to how much risk they are prepared to bear. The respondent's communication was insufficiently clear to discharge its duty of care. The initial information was inadequate and the information given with the renewal form was confusing. The purchaser was never in a position to make an informed choice about this optional coverage.
Whether a duty of care could also arise in contract was adverted to but not decided.
The trial judge's award of costs on a solicitor and client basis should stand. Prior to trial, the appellants filed an offer to settle which was not accepted by the respondent. One of the terms of that offer was that the appellants "shall have the right to structure all or part" of the sum. The respondent did not met its burden of showing that that offer was less favourable than the judgment award.
Cases Cited
Applied: Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465; distinguished: Fine's Flowers Ltd. v. General Accident Assurance Co. of Canada (1977), 17 O.R. (2d) 529; referred to: Wigle v. Allstate Insurance Co. of Canada (1984), 49 O.R. (2d) 101; The Sir Robert Peel (1880), 4 Asp. M.L.C. 321; Clarke v. Edinburgh Tramways Co., [1919] S.C. 35; Hontestroom (S.S.) v. Sagaporack (S.S.), [1927] A.C. 37; Prudential Trust Co. v. Forseth, [1960] S.C.R. 210; Stein v. The Ship "Kathy K", [1976] 2 S.C.R. 802; Lewis v. Todd and McClure, [1980] 2 S.C.R. 694; Edgington v. Fitzmaurice (1885), 29 Ch. D. 459; Nova Mink Ltd. v. Trans‑Canada Airlines, [1951] 2 D.L.R. 241; Donoghue v. Stevenson, [1932] A.C. 562; Haig v. Bamford, [1977] 1 S.C.R. 466; B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228; Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2; Mutual Life & Citizens' Assurance Co. v. Evatt, [1971] 1 All E.R. 150; Cherry Ltd. v. Allied Insurance Brokers Ltd., [1978] 1 Lloyd's Rep. 274; General Accident Fire and Life Assurance Corp. v. Peter William Tanter (The "Zephyr"), [1985] 2 Lloyd's Rep. 529; Banque Financière de la Cité SA v. Westgate Insurance Co., [1989] 2 All E.R. 952; Pare v. Occidental Life Insurance Co. of California (1986), 23 C.C.L.I. 288; Bell v. Tinmouth (1988), 34 C.C.L.I. 179; Norlympia Seafoods Ltd. v. Dale & Co., [1983] I.L.R. 6475; Woodside v. Gibraltar General Insurance Co. (1988), 34 C.C.L.I. 150; G.K.N. Keller Canada Ltd. v. Hartford Fire Insurance Co. (1983), 1 C.C.L.I. 34, conf. on appeal (1984), 4 C.C.L.I. xxxvii; Sjodin v. Insurance Corporation of British Columbia, [1987] I.L.R. 8319; Indemnity Insurance Co. v. Excel Cleaning Service, [1954] S.C.R. 169; Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; Scott v. Wawanesa Mutual Insurance Co., [1989] 1 S.C.R. 1445; Jacuzzi Canada Ltd. v. A. Mantella & Sons Ltd. (1988), 31 C.P.C. (2d) 195.
Statutes and Regulations Cited
Insurance Act, R.S.M. 1987, c. I40.
Manitoba Public Insurance Corporation Act, R.S.M. 1987, c. P215, s. 48.
Rules of Civil Procedure, O. Reg. 560/84, Rule 49.10(1).
Authors Cited
Brown, Craig and Julio Menezes. Insurance Law in Canada. Toronto: Carswells, 1982.
Continuing Legal Education Society of British Columbia. Insurance Law -- 1985. Material prepared for a Continuing Legal Education Seminar held in Vancouver, B.C. on April 13, 1985. Vancouver: Continuing Legal Education Society of British Columbia, 1985.
MacGillivary, Evan James. MacGillivary & Parkington on Insurance Law Relating to All Risks Other than Marine, 8th ed. By Michael Parkington, et al. London: Sweet and Maxwell, 1988.
Snow, H. "Liability of Insurance Agents for Failure to Obtain Effective Coverage: Fine's Flowers Ltd. v. General Accident Assurance Co." (1979), 9 Man. L.J. 165.
APPEAL from a judgment of the Ontario Court of Appeal (1989), 68 O.R. (2d) 193, 32 O.A.C. 81, 36 C.C.L.I. 157, [1989] I.L.R. 9391, reversing the judgment of McKeown J. (1987), 60 O.R. (2d) 629, 26 C.C.L.I. 236, [1987] C.I.L.R. 8608, awarding damages to the appellants against the respondent. Appeal allowed.
Earl A. Cherniak, Q.C, and Peter W. Kryworuk, for the appellants.
Donald H. Rogers, Q.C., and David Stratas, for the respondent.
//Wilson J.//
The judgment of the Court was delivered by
WILSON J. -- This appeal raises questions concerning the responsibility of a government insurer to inform its customers about the types of automobile coverage open to them and the extent of such an insurer's liability should it fail to do so. The issue is particularly topical in Canada at the present time since several provinces have instituted compulsory public automobile insurance plans which have largely replaced the previous system of private insurance.
The appellants in this case were involved in a serious motor vehicle accident. The person responsible for the accident had inadequate insurance to cover the damages. When the appellants attempted to recover the shortfall from their own insurer, they were informed that they did not have "underinsured motorist coverage" (UMC), a special form of coverage which would have protected them against this type of loss. It was in this context that the question arose as to whether and to what extent the respondent insurer was duty-bound to inform the appellants about all the types of coverage which were available to them. The facts are important.
The Facts
Both appellants suffered severe injuries as a result of an automobile accident in the Province of Ontario and the appellant Cheryl Fletcher was rendered a paraplegic. The driver of the other vehicle, a Mr. Jean Piché, was found totally responsible for the collision and the appellants' damages were assessed at $1,387,090. The insurance available to indemnify Piché, however, was $500,000, leaving a shortfall of $887,090.
At the time of the accident the appellants were insured by the respondent, a government-owned insurance company. The Manitoba Public Insurance Company (MPIC) is a Crown corporation that was created by the Manitoba Public Insurance Corporation Act, R.S.M. 1987, c. P215 (the "Act"). Its primary function is to administer a mandatory public automobile insurance scheme within the province, which is widely known as "Autopac". MPIC sells insurance coverage of two basic types. The first type, which is not relevant to this appeal, provides coverage for all drivers automatically upon paying the fee for a Manitoba driver's licence. Relevant to this appeal is the second type of coverage which, pursuant to s. 48 of the Act, must be purchased by the owner of a vehicle when he or she registers that vehicle. This compulsory motor vehicle insurance provides minimum collision and public liability coverage. MPIC also offers two additional forms of coverage that are available upon payment of a slightly higher premium: UMC and P.L./P.D. (public liability and property damage), each of which is available up to a limit of $2,000,000. The public insurance scheme for automobiles in Manitoba is therefore quite straightforward: a prescribed minimum compulsory level of coverage for all automobile owners and two optional forms of coverage that are available for a higher premium.
Both the compulsory and additional forms of coverage may be purchased either from MPIC offices directly or through private insurance agents. There is no difference in price in either case. The UMC coverage that MPIC offered first became available on March 1, 1982 at a cost of $15 per year. Although private insurance companies were allowed to sell the additional forms of coverage, only one company in Manitoba was doing so when the appellants purchased their policy in 1982 and 1983.
At the time of their accident the appellants were insured under an Autopac policy which provided third party limits of $2,000,000. The policy did not provide UMC.
The appellants sued the respondent for damages in the Supreme Court of Ontario alleging breach of contract, misrepresentation, negligence and breach of duty. At trial, John Fletcher submitted that he had relied upon the expertise of MPIC's employees who served him when he obtained the compulsory insurance policy. He said that he had asked for the maximum available coverage and had assumed that he got it. But in the application for insurance and on the insurance certificate there was no mention of UMC. Counsel for MPIC placed a great deal of emphasis on a one page flyer consisting of two columns of small print which specified that UMC was available and which was sent to the appellants along with a renewal certificate for the policy several months after Mr. Fletcher had purchased the insurance. Mr. Fletcher testified that although the flyer included a brief reference to UMC, he believed that because the words "NOT APPLIC." had been typed in the box designated on the renewal certificate for UMC, this meant that the coverage offered was not applicable to him since he already had the maximum available coverage.
The trial judge found for the appellants in negligence and in contract and awarded them damages against the respondent in the amount of the shortfall. The respondent appealed and the Court of Appeal allowed the appeal and dismissed the appellants' action.
The Courts Below
Supreme Court of Ontario (McKeown J.) (1987), 60 O.R. (2d) 629
The trial judge found that when Mr. Fletcher first purchased his automobile insurance he was entitled to rely upon the respondent to explain to him the various forms of coverage that were available. He was not required to become his own insurance expert. Had the respondent not been prepared to do this it should have told its customers that they should consult a private insurance agent in order to obtain advice on insurance coverage.
The trial judge went on to find that the respondent did not inform Mr. Fletcher that UMC was available. He also found that had UMC been offered to Mr. Fletcher he would have purchased it. By failing to ensure both that the appellants were aware of the availability of UMC and that MPIC's employees were properly trained and instructed in order to be able to advise the appellants of UMC's availability and purpose, MPIC breached its duty to the appellants. When Mr. Fletcher dealt with the respondent he had a contractual right to rely on the offeror to advise him of the full range of coverage offered. But the duty was not only contractual; it sounded in negligence as well. McKeown J. therefore held that the respondent breached its duty to provide Mr. Fletcher with UMC when he requested maximum coverage, coverage which the respondent ought to have known included UMC. If it was not going to provide UMC, it had a duty to make clear to Mr. Fletcher that such coverage was available but was not being provided.
In McKeown J.'s view, Mr. Fletcher was a credible witness. McKeown J. accepted his testimony to the effect that he believed that "NOT APPLIC." on the renewal form meant UMC was not applicable to him since he already had the maximum available coverage. The trial judge found this interpretation to be reasonable.
Ontario Court of Appeal (1989), 68 O.R. (2d) 193
Finlayson J.A.
Finlayson J.A. was of the view, that much of Mr. Fletcher's evidence was self-serving and subjective. He felt that it did not support a finding that Mr. Fletcher had not been offered UMC but merely a finding that Mr. Fletcher had not read the written material designed to draw such coverage to his attention and that he had no recollection of having been told about the availability of UMC by the respondent's employees. Finlayson J.A. did not believe Mr. Fletcher's statement that he had relied upon the expertise of the respondent's employees to advise him of the coverage.
Finlayson J.A. was also of the view, at p. 198, that it would be "stretching the duty of an insurer to impose on it an affirmative obligation to ensure that each of its customers is in fact aware of the different types of insurance coverage available." The flyer received by the appellants made it clear that UMC was available and it was not the respondent's fault that the appellants failed to read it. He stated, at p. 198, that in circumstances where insurance is being sold directly to the public "it is difficult to envisage the formation of a relationship requiring the provision of unsolicited advice every time a customer comes to the counter". There was, in his view, no duty imposed upon the respondent to do any more than what was in fact done to inform the appellant of the availability of UMC.
Blair J.A. (dissenting)
Blair J.A. found no reason to interfere with the trial judge's conclusion that Mr. Fletcher's interpretation of the renewal application form was a reasonable one. He found the "NOT APPLIC." language in the UMC space on the form ambiguous and misleading. The confusion created by the renewal application form was, in his view, "compounded rather than clarified by the flyer enclosed with it".
Blair J.A. was also of the view that the evidence at trial supported McKeown J.'s conclusion both that UMC had not been mentioned to Mr. Fletcher when he attended the respondent's office to renew his coverage and that he would have purchased it had he been made aware of its availability. Moreover, little had been done by the respondent to inform the public about the existence of this type of protection. Whether customers were to be informed about the availability of UMC was left to the discretion of MPIC's employees.
Since McKeown J. had had "the inestimable benefit" of having seen and heard the testimony of all the witnesses, and since there were no manifestly unreasonable or overriding errors in the conclusions he had drawn from the evidence, Blair J.A. concluded that it was not open to the appeal court to interfere with the trial judge's findings.
Blair J.A. had no doubt that had Mr. Fletcher obtained the insurance policy through an independent agent, that agent would have been liable to him in tort. He stressed that the fact that all motor vehicle owners in Manitoba were required to obtain their prescribed minimum insurance from MPIC imposed upon it a strict duty "to inform the public adequately of its available additional coverage". He said, at p. 211:
Autopac ... enjoyed an almost complete monopoly in automobile insurance. It seems not too much to hold that no less can be properly expected from a publicly owned corporation, established to provide compulsory insurance to all motor vehicle owners as an essential public service, than from private insurance agents in adequately informing owners of the policy options available to them. This is particularly true where the same premium is payable whether the insurance is sold directly or through an independent agent. The law must respond in a practical way to the new reality of the sale of motor vehicle insurance compulsorily and directly by a governmental agency.
He therefore agreed with the trial judge that the respondent had failed in its duty to inform Mr. Fletcher of the availability of UMC when he purchased his insurance. In Blair J.A.'s view, the respondent was directly, and not merely vicariously, liable for its negligence in failing to do so.
He declined to rule on the arguments in support of a contractual basis for the duty owed by MPIC. "Whether and to what extent the decision of this court in Wigle v. Allstate Ins. Co. of Canada (1984), 49 O.R. (2d) 101 ... and other cases on the doctrine of reasonable expectations apply to dealings between direct insurers and their insureds can be left to another day."
Morden J.A. (concurring in the result with Finlayson J.A.)
Morden J.A. agreed with Finlayson J.A. that the appeal should be allowed. He stated that he was prepared to assume the correctness of the trial judge's finding that the respondent had a duty to advise the appellants about UMC. He did not think, however, that the evidence supported McKeown J.'s conclusion that the respondent had breached that duty. Morden J.A. noted that it was clear from the evidence that, if the appellant had read the flyer when he received it, he would have found out what UMC was, that it was available, and that he did not have it. In his mind Fletcher's failure to read the flyer was the decisive factor that defeated the appellants' claim.
The Issues
This appeal raises five issues:
1.Did the Ontario Court of Appeal err in departing from the trial judge's findings of fact?
2.Does a government-owned insurer selling compulsory insurance directly to owners of motor vehicles in the province of Manitoba have a duty to advise its customers of the existence, nature and extent of underinsured motorist coverage?
3.If such an insurer has such a duty, did it fulfil it in this case?
4.If the insurer did not fulfil its duty, is it liable for the appellants' loss?
5.Did the trial judge err in awarding the appellants their costs on a solicitor and client basis?
Analysis
1.Did the Ontario Court of Appeal err in departing from the trial judge's findings of fact?
It is essential that one have a clear picture of the facts in this appeal. In my view, we must therefore deal with a preliminary issue: in what circumstances is it appropriate for an appellate court to depart from a trial judge's findings of fact?
In The Sir Robert Peel (1880), 4 Asp. M.L.C. 321, James L.J. said at p. 322:
The Court will not depart from the rule it has laid down that it will not overrule the decision of the Court below on a question of fact in which the judge has had the advantage of seeing the witnesses and observing their demeanour, unless they find some governing fact which in relation to others has created a wrong impression.
In Clarke v. Edinburgh Tramways Co., [1919] S.C. (H.L.) 35, Lord Shaw confirmed that primacy must be given to the trial judge's findings of fact. He said, at pp. 35-36:
When a Judge hears and sees witnesses and makes a conclusion or inference with regard to what is the weight on balance of their evidence, that judgment is entitled to great respect, and that quite irrespective of whether the Judge makes any observation with regard to credibility or not. I can of course quite understand a Court of Appeal that says that it will not interfere in a case in which the Judge has announced as part of his judgment that he believes one set of witnesses, having seen them and heard them, and does not believe another. But that is not the ordinary case of a cause in a Court of justice. In Courts of justice in the ordinary case things are much more evenly divided; witnesses without any conscious bias towards a conclusion may have in their demeanour, in their manner, in their hesitation, in the nuance of their expressions, in even the turns of the eyelid, left an impression upon the man who saw and heard them which can never be reproduced in the printed page. What in such circumstances, thus psychologically put, is the duty of an appellate Court? In my opinion, the duty of an appellate Court in those circumstances is for each Judge of it to put to himself, as I now do in this case, the question, Am I -- who sit here without those advantages, sometimes broad and sometimes subtle, which are the privilege of the Judge who heard and tried the case -- in a position, not having those privileges, to come to a clear conclusion that the Judge who had them was plainly wrong? If I cannot be satisfied in my own mind that the Judge with those privileges was plainly wrong, then it appears to me to be my duty to defer to his judgment.
Lord Sumner approved of this approach in Hontestroom (S.S.) v. Sagaporack (S.S.), [1927] A.C. 37 (H.L.), where he said at p. 47:
None the less, not to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case. The course of the trial and the whole substance of the judgment must be looked at, and the matter does not depend on the question whether a witness has been cross-examined to credit or has been pronounced by the judge in terms to be unworthy of it. If his estimate of the man forms any substantial part of his reasons for his judgment the trial judge's conclusions of fact should, as I understand the decisions, be let alone. [Emphasis added.]
This proposition has been repeatedly endorsed in Canada: see, for example, Prudential Trust Co. v. Forseth, [1960] S.C.R. 210, at p. 217, per Martland J. Recent cases have gone on to refine the principle set out in The Sir Robert Peel and The S.S. Hontestroom. In particular, Ritchie J. provided a thorough history of the principle's evolution in Stein v. The Ship "Kathy K", [1976] 2 S.C.R. 802, at pp. 806-8 and concluded:
These authorities are not to be taken as meaning that the findings of fact made at trial are immutable, but rather that they are not to be reversed unless it can be established that the learned trial judge made some palpable and overriding error which affected his assessment of the facts. While the Court of Appeal is seized with the duty of re-examining the evidence in order to be satisfied that no such error occurred, it is not, in my view, a part of its function to substitute its assessment of the balance of probability for the findings of the judge who presided at the trial. [Emphasis added.]
And in Lewis v. Todd and McClure, [1980] 2 S.C.R. 694, Dickson J. (as he then was) reiterated that a trial judge's findings of fact should not be interfered with unless he or she had made a "palpable and overriding error". He stated at p. 700:
It is trite law that an appellate court should not readily interfere with the findings of a trial judge, for reasons so often adumbrated but resting largely upon the advantage which a judge at trial enjoys over an appellate court, in having seen and heard the witnesses in the atmosphere of the arena.
These authorities, in my view, make crystal clear the test for determining when it is appropriate for an appellate court to depart from a trial judge's findings of fact: appellate courts should only interfere where the trial judge has made a "palpable and overriding error which affected his assessment of the facts." The very structure of our judicial system requires this deference to the trier of fact. Substantial resources are allocated to the process of adducing evidence at first instance and we entrust the crucial task of sorting through and weighing that evidence to the person best placed to accomplish it. As this Court and the House of Lords have repeatedly emphasized, it is the trial judge who is in the best position to assess the credibility of testimony. An appellate court should not depart from the trial judge's conclusions concerning the evidence "merely on the result of their own comparisons and criticisms of the witnesses": see Lord Sumner in The S.S. Hontestroom, supra, at p. 47.
In the appeal now before us Finlayson J.A. departed from the trial judge's findings of fact on at least two counts. He did not accept McKeown J.'s finding that Mr. Fletcher had relied on the respondent's employees for information and advice. Nor did he accept McKeown J.'s finding that had Fletcher been offered UMC, he would have purchased it. Yet at no point did Finlayson J.A. apply the test that this Court set out in "Kathy K", supra, and Lewis v. Todd and McClure, supra. No attempt was made to spell out whether and in what respects the trial judge's findings of fact constituted "palpable and overriding errors". Instead, Finlayson J.A. explained his decision to depart from the trial judge's findings of fact by observing that the trial judge had "stretched the evidence in favour of Fletcher". He refused to give much credence to the testimony of Fletcher, calling it "self-serving" and "entirely subjective", and concluded by observing that he did not propose to give much weight to the trial judge's findings of fact.
With respect, I do not think that it was open to the Court of Appeal to depart from the trial judge's findings of fact absent evidence of a palpable and overriding error. An appellate court should not substitute its views about the facts for those of the trial judge without carefully applying the strict test which has been developed over the years by the highest courts in England and Canada. Absent some manifest and palpable error, the trial judge's assessment of the witnesses' credibility must be allowed to stand.
In the case at bar, the witnesses' testimony and credibility were carefully considered by the trial judge. John Fletcher testified in chief that, "I was there to purchase insurance. I relied upon their expertise to advise me." McKeown J. was of the view, at p. 632, that Mr. Fletcher was "a very careful and honest and credible witness [who] answered all questions in a straightforward manner" and he therefore found that Mr. Fletcher had relied upon the respondent's employees for advice.
Mr. Fletcher also testified that if he had been advised about the availability of UMC, he would have purchased it for additional safety. McKeown J. commented, at p. 632, that "This is credible since the cost was only $15. He had always followed his insurance broker's advice in Ontario, and [his former insurance broker] said that he was an insurance conscious person." In summarizing his findings McKeown J. said: "I find that if John Fletcher had been offered underinsured motorist coverage he would have purchased the coverage."
McKeown J.'s findings were based on an appreciation of the appellant's state of mind when he purchased the insurance and it was for the trial judge to assess the evidence with respect to that state of mind. As Bowen L.J. observed in Edgington v. Fitzmaurice (1885), 29 Ch. D. 459, at p. 483:
... the state of a man's mind is as much a fact as the state of his digestion. It is true that it is very difficult to prove what the state of a man's mind at a particular time is, but if it can be ascertained it is as much a fact as anything else.
McKeown J.'s findings of fact must stand. There is no reason to believe that he made a "palpable and overriding error". He concluded, as he was entitled to do, that Mr. Fletcher was an extremely credible witness. On that basis he found that Mr. Fletcher relied on the respondent's employees for information and advice and that he would have purchased UMC had it been offered. These findings are entirely reasonable and it is no more open to this Court than it was to the Court of Appeal to depart from them.
2.Did the respondent, a government-owned insurer selling compulsory insurance directly to owners of motor vehicles in the province of Manitoba, have a duty to advise its customers of the existence, nature and extent of underinsured motorist coverage?
The appellants submit that the respondent owed them a duty to inform them of the availability of UMC. They argue that this duty sounds in both tort and contract, that there was a breach of this duty, and that they are entitled to damages in the amount of their loss.
A determination as to whether a duty is owed in either tort or contract in the circumstances of this case and, if so, the scope of that duty will have several important implications for publicly owned and operated insurance plans. For example, decisions about the type of training given to employees who deal directly with customers will almost certainly have to be made with an eye to the content of the duty imposed by law on such insurers. If the law requires them not only to advise customers of the different options available but also to explain the nature of the protection these options provide, then insurers will have to make sure that their employees are equipped to do this. If the content of the duty is even greater and the insurer is obliged to advise the customer whether he or she should acquire such additional coverage, even more extensive employee training may be required.
I propose to consider first whether a duty sounds in tort and thereafter, if necessary, whether it sounds also in contract.
(A) Tort
(a) Is there a duty of care?
The question raised by this appeal is whether MPIC owes a duty of care in the provision of information to its customers about optional forms of insurance coverage. To answer this question we must focus on the relationship between insurer and insured. In other words, we need to consider whether there is anything about the context in which customers purchase a policy from the public insurer which might be thought to give rise to a duty to provide information and to advise them of their options. I begin by reviewing the principles of law applicable to determine whether a duty of care exists and then turn to consider the application of those principles in the context of this appeal.
In Nova Mink Ltd. v. Trans-Canada Airlines, [1951] 2 D.L.R. 241, a mink ranch operator sued an airline for damages when the noise created by one of their pilots flying low over the operator's ranch caused the female mink to eat the young. MacDonald J. found that the defendant airline had no duty to the plaintiff because the pilot did not know and could not reasonably have foreseen that there were mink farms in the area. MacDonald J. approached the case by first posing himself the question at pp. 253-54:
Does the evidence establish that the defendant was under a legal duty to use care to avoid injury to the plaintiff's business as a mink ranch operator?
He then explained at p. 254 how this question is to be answered:
The common law yields the conclusion that there is such a duty only where the circumstances of time, place, and person would create in the mind of a reasonable man in those circumstances such a probability of harm resulting to other persons as to require him to take care to avert that probable result.
He continued at p. 256:
Many attempts have been made to generalize the circumstances which create a legal duty of care.... What is common ... is the idea of a relationship between parties attended by a foreseeable risk of harm .... That relationship may arise out of circumstance of physical proximity; but it is not that circumstance per se which gives rise to duty but the probability of harm inhering in the relationship of parties, spatial or otherwise. If such a relationship does exist in fact, or in contemplation, and is fraught with the likelihood of harm to another in that relationship, the basis of duty exists; and it is immaterial that the locus or date of the occurrence of the apprehended harm be unknown. [Emphasis in original.]
MacDonald J. in Nova Mink Ltd. was applying the classic formulation in Lord Atkin's famous dictum in Donoghue v. Stevenson, [1932] A.C. 562, at p. 580:
At present I content myself with pointing out that in English law there must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances .... You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be -- persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question.
English and Canadian courts have applied Lord Atkin's "neighbour principle" to many types of relationships, including those involving the communication of information. There is now ample authority for the proposition that reasonable reliance by a person on information provided by someone else can ground a duty of care at common law that binds the provider of the information. For example, in Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465, the House of Lords considered the liability of bankers who had negligently provided references concerning the solvency of one of their clients to the plaintiff company. The plaintiff company relied on these references and subsequently suffered significant losses when the client went into liquidation. The Law Lords held that in certain cases involving the provision of information or advice by one person to another, despite the absence of any contract between them, a special relationship can arise so as to impose on the provider of the information a duty of care towards the person who received it. Lord Morris of Borth-y-Gest said at pp. 502-3:
My Lords, I consider that it follows and that it should now be regarded as settled that if someone possessed of a special skill undertakes, quite irrespective of contract, to apply that skill for the assistance of another person who relies upon such skill, a duty of care will arise. The fact that the service is to be given by means of or by the instrumentality of words can make no difference. Furthermore, if in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it, then a duty of care will arise. [Emphasis added.]
Courts in England and Canada have applied the Hedley Byrne principle to other relationships of proximity where it was foreseeable that one party would reasonably rely on the information or advice given by the other: see, for example, Haig v. Bamford, [1977] 1 S.C.R. 466 (chartered accountants/investors), B.D.C. Ltd. v. Hofstrand Farms Ltd., [1986] 1 S.C.R. 228 (courier company/client), and Kamloops (City of) v. Nielsen, [1984] 2 S.C.R. 2 (municipal building inspectors/homeowners).
In Mutual Life & Citizens' Assurance Co. v. Evatt, [1971] 1 All E.R. 150, Lord Diplock discussed at p. 154 the type of circumstances which give rise to a relationship of reliance and a concomitant duty to take care:
In Hedley Byrne itself and in the previous English cases on negligent statements which were analysed in the speeches, with the notable exceptions of Fish v. Kelly, (1864) 17 CBNS 194, Derry v. Peek, (1889) 14 App Cas 337, [1886-90] All ER Rep I, and Low v. Bouverie, [1891] 3 Ch 82, [1891-94] All ER Rep 348, the relationship possessed the characteristics (1) that the maker of the statement had made it in the ordinary course of his business or profession and (2) that the subject-matter of the statement called for the exercise of some qualification, skill or competence not possessed by the ordinary reasonable man, to which the maker of the statement was known by the recipient to lay claim by reason of his engaging in that business or profession.
The editors of MacGillivary & Parkington on Insurance Law (8th ed. 1988), commenting on the evolution of the Hedley Byrne principle, state at p. 231:
Although the grounds and scope of the duty to take care in the making of statements cannot be said to be definitively settled, there is no doubt that the duty would apply to parties in negotiations for a policy of insurance.
Indeed, English and Canadian courts have not hesitated to apply the Hedley Byrne principle to the relationship between insurance agents and their clients: see, for exampl