The Supreme Court of Canada has declined to hear an appeal from an insurance consulting firm, which sought to challenge a ruling that there was no breach of fiduciary duty by an insurance brokerage that allegedly misused confidential information to take a large share of the firm’s clients — a decision that sharply reduced damages awarded by a lower court.
In 2017, the Court of King’s Bench for Manitoba handed $1.5 million damages to the consulting firm, Prairie Risk Management Inc. (PRM), after finding that a brokerage firm, Marsh Canada Ltd., was liable for breach of contract, breach of confidence and breach of fiduciary duty, in connection with Marsh’s solicitation of PRM’s clients.
According to the court’s decision, Marsh had served as a broker for PRM and its clients in accessing the Lloyd’s insurance market since 2008. However, in 2016, PRM decided to stop using the broker, and to access the market directly on behalf of members.
“Almost immediately, Marsh began contacting insured members directly to retain their insurance business,” the court noted — and, it reported that clients representing 45% of PRM’s revenues decided to go with Marsh.
PRM sued, seeking damages for alleged breach of contract, breach of fiduciary duty, breach of the duty of confidence, breach of the duty of honesty, wrongful interference in economic relations and breach of trust.
Marsh argued that it simply engaged in competition, and that it didn’t do anything wrong, despite losses incurred by PRM.
The lower court found that some of the alleged breaches did occur, including a breach of fiduciary duty, and it ordered over $600,000 in damages for revenues that PRM missed out on as a result of the clients it lost, and another $900,000 in damages for the company’s reduced value when PRM’s business was sold to another firm, BFL Canada Insurance Services Inc. in 2019.
On appeal, the original judgment was overturned by the Court of Appeal of Manitoba, which found that the lower court erred in ruling that Marsh owed a fiduciary duty to PRM.
“As found by the trial judge, that relationship created certain obligations of confidentiality. The trial judge’s imposition of a fiduciary duty, however, was in error as he failed to apply a required element of the legal test,” the appeal court said in allowing the appeal on the question of whether the firms were in a fiduciary relationship.
“What is lacking in the trial judge’s analysis is a finding that Marsh had relinquished its own self-interest and agreed to act solely on behalf of PRM,” it noted.
The appeal court also cut the damages award to $77,000 as a result — saying that, “Assessing damages on the basis that a breach of fiduciary duty took place was an error in principle and no deference is owed to the trial judge’s award.”
“While [the trial judge] made no reversible error in finding that Marsh misused PRM’s confidential information, he awarded damages well in excess of the loss that flowed from Marsh’s wrongful conduct,” the appeal court said.
PRM sought to appeal that ruling to the Supreme Court of Canada, which declined to hear the case.