The Court of Appeal for Ontario recently released its decision in Jakab v. Clean Harbors Canada Inc., 2023 ONCA 377. Corporations will undoubtedly be affected by this legal analysis of negligent misrepresentation, particularly as it impacts any special relationship between the individual and the corporation, as well as the ability to contract out of negligent misrepresentations.
The appellants were Mr. Jakab and Ontario Heavy Express Ltd. (“OHEL”), a corporation wholly owned by Mr. Jakab. Mr. Jakab leased a transport truck through OHEL and operated the truck solely for a waste disposal company, the defendant Clean Harbors Canada Ltd. (“Clean Harbors”). After OHEL purchased the truck outright, it caught fire and was destroyed. The truck could not be repaired, and the appellants suffered appreciable losses. The appellants had not purchased any insurance for the vehicle, and Clean Harbors did not insure the truck for first party damage caused by fire.
The appellants claimed that the defendant had breached its contractual obligation to provide first-party insurance coverage for damage by fire, and advanced an alternative claim that, after the contract had been signed, an employee of Clean Harbors negligently misrepresented that the truck was “fully covered”. The appellants lost on both claims at trial.
Breach of Contract
The Court of Appeal upheld the trial judge’s dismissal of the breach of contract claim, essentially confirming that contractual terms should not be interpreted in a manner that renders the other terms within the contract meaningless.
Here, the contract between the OHEL and Clean Harbors contained a clause requiring Clean Harbors to “make available” all insurance to the appellants for the purposes of insuring the truck. This was interpreted to mean that the defendant was obliged to make available to the appellants only the coverage that it carried. And because the defendant did not carry first-party coverage for damage by fire, it was not required to make such coverage available to the appellant. Therefore, the defendant bore no contractual obligations for the damages that the appellant sustained. It was the appellants’ obligation to satisfy themselves as to the adequacy of that coverage.
Negligent Misrepresentation
The negligent misrepresentation claim, however, was sent back by the Court of Appeal for a new trial, as the Court did not agree with the findings of the trial judge. Mr. Jakab claimed that an employee of the defendant advised him in response to a question he posted about insurance, that the truck was “fully covered”. In discussing whether this amounted to an actionable misrepresentation, the Court clarified the five elements that must be shown to establish a negligent misrepresentation:
(1) There is a “special relationship” between the person making the statement and the person hearing it;
(2) it is reasonable for the person hearing the statement to rely on it;
(3) the statement is untrue;
(4) the person was careless in making the statement; and
(5) the person who reasonably relied on the statement suffered damages.
A relevant clarification for corporations is that the individual need only establish, on a balance of probabilities, that they spoke to someone with ‘some authority’ to make relevant representations on behalf of the corporation. An individual need not accurately pinpoint which employee made the representation on the part of the corporation.
It does not matter whether the representative of the corporation intended the representation to be negligent, it is only enough if the representative was negligent in causing the individual to believe the representation.
Here, the representative advised the appellant that he was “fully covered” without any specifics, leading the appellant to believe fully covered would include damage by fire. The representative may have assumed that the appellant would understand it was meant to be full coverage for all that was offered by the corporation, however it was the representative’s obligation to clarify and provide specifics for the understanding of the individual, who would therefore be relying on this information.
Further, this matter dealt with the concept of a duty of care owed and/or special relationship owed by the corporation to the individual. The defendant provided a contract that specifically noted that the appellants had the responsibility of satisfying themselves as to the adequacy of the insurance coverage. As a result, the appellants were dependent on receiving accurate information from the defendant. This contractual term created a special relationship between the defendant and the individual whereby the defendant had a duty of care to convey accurate information relating to the coverage as the individual was therefore dependent.
Implications
Ultimately, corporations ought to be cautious in advising individuals of their insurance coverage as there will be consequences for providing vague answers that may be relied on by individuals to their detriment. An individual need only believe the misrepresentation, and there need not be any intent to act negligently by the representative.
It would be beneficial for corporations regularly engaging in representations to ensure detailed records are kept, and that representatives are advised to provide fulsome details of the coverage, rather than broad statements.
Corporations will likely not be able to contract out of consequences for making negligent misrepresentations if the contract creates a special relationship with the individual and the negligent misrepresentation is made after the contract is formed. The onus may be on the individual to satisfy themselves as to the adequacy of the coverage provided but the corporation should endeavor to provide specifics rather than broad statements concerning coverage.