The Court held that the bank and insurer did not have an agency relationship with respect to line of credit life insurance. Accordingly, no contract of insurance was created by the mere submission of an insurance application to the bank. Nominal damages were awarded for the bank’s breach of contract and breach of duty of care.

True Blue Cattle Co. v. Toronto-Dominion Bank, [2004] A.J. No. 267, Alberta Court of Queen’s Bench

True Blue Cattle Company applied for and obtained a line of credit from TD Bank. The bank issued a commitment letter (“Commitment Letter”) containing a life insurance requirement. One of the partners (“Colin”) was subsequently successful in obtaining a waiver of the insurance requirement on his life. However, contrary to the terms of the Commitment Letter, that amendment was not put in writing. Colin subsequently submitted a life insurance application to the bank which was never forwarded to the insurer. After Colin died, the remaining partners brought an action for damages against the bank for breach of contract and negligence.

The Court held that the bank was in breach of the Commitment Letter in failing to put the waiver of insurance in writing. The bank was also negligent in failing to inform the partners that the application on Colin’s life would not be processed, or alternatively, for failing to process it. Although Colin would not have been insurable under group insurance, the plaintiffs had lost the chance to consider applying for other insurance on Colin’s life. The Court awarded nominal damages.

The Court further held that the bank and insurer did not have an agency relationship. Agency by estoppel did not apply. Accordingly, no contract of insurance was created by the mere submission of an insurance application to the bank.

To stay current with the new case law and emerging legal issues in this area, subscribe here.