Executive Summary: Key Legal and Evidentiary Issues

• Ms. Sanghera sued her insurance broker, Gold Key, alleging its agent negligently failed to move her rental property from a residential dwelling policy to commercial coverage after the property was rezoned and leased to an auto repair shop.
   
• Wawanesa voided the policy after a 2014 fire for failure to report a material change in risk, and the claim against Wawanesa was dismissed by consent in February 2024.
   
• Credibility findings turned on inconsistencies between the Sangheras' trial testimony and their discovery evidence about when, how, and how often they told the agent of the changes.
   
• An argument that the agent should have noticed the change in use when driving past failed because it was not pleaded and the evidence suggested the building's exterior remained as it was when used as a family home.
   
• Expert evidence would have been needed to show that a broker's duty included regularly checking on the property at renewal, a theory that was also absent from the pleadings.
   
• Damages for lost rent and a reduced sale price went unproven because the evidence was vague and the plaintiff produced no lease, sale contract, buyer communications, or repair records.
   

Facts of the case

Kulwinder Kaur Sanghera and her husband, Jagjit Sanghera, bought 513 Clarke Road in Coquitlam, B.C., in around 2003. Their other holdings included the adjacent property at 509 Clarke, a commercial rental property at 565 Clarke where they ran a pizza restaurant, a residential rental on Farrow Street, at least one more commercial property, and their own home on Elmwood Street. For each property, Mr. Sanghera would periodically obtain quotes from various agencies and choose the one with the cheapest premiums.

Sukhdarshan Sandhu, an agent with the broker Gold Key Insurance Services Ltd. since 1999, met the Sangheras in around 2006 when they insured their rental at 715 Farrow Street. In April 2006, when 513 Clarke was a two-storey home rented to a family, he added it as a second location on Ms. Sanghera's existing Farrow policy. His application to The Wawanesa Mutual Insurance Company described the property as a "single family rental dwelling." Wawanesa insured 513 Clarke from 2006 until the fire in 2014.

Later in 2006, 513 Clarke was rezoned for commercial use. The residential tenants remained for around six months before the house was leased to the auto shop already operating at 509 Clarke, which combined its operations across both properties. Gold Key was not the agent for 509 Clarke. Mr. Sanghera testified that he phoned Mr. Sandhu twice: once on learning of the rezoning, when Mr. Sandhu congratulated him, and again after renting to the auto shop, when Mr. Sandhu said he would change the coverage and photograph the building for a new application. Ms. Sanghera said she overheard the first call. Mr. Sandhu denied that either call took place.

Each June, Mr. Sandhu mailed a renewal letter with the renewal policy and Gold Key's statement of account. Payment was made either by Mr. Sanghera dropping off a cheque at Gold Key or by "Ms. Sandhu" collecting it at the pizza restaurant [the decision refers to "Ms. Sandhu" at para 14; the context suggests Mr. Sandhu may have been intended, but the source is preserved as written]. According to Mr. Sandhu, he met the Sangheras at the restaurant three or four times over the years, while the Sangheras put it at six to 10 times a year.

A fire on March 4, 2014 destroyed most of the building. Wawanesa denied coverage by letter of March 21, 2014, and on March 27 voided the combined policy for 715 Farrow and 513 Clarke retroactive to the estimated change of use on March 1, 2007, returning $11,445 in premiums. At the time of the fire, the auto shop had not paid rent for a few months because of financial difficulties, and 509 and 513 Clarke were under contract to a buyer for a combined price of approximately $7 million. Mr. Sanghera testified that the sale closed some months later but that the buyer reduced the price by $90,000–100,000 for the loss of the building.

The Sangheras claimed around $70,000 in lost rent and $100,000 in a reduced sale price [the decision describes the claimed losses at para 2 as approximately $70,000 in rent and $100,000 on the sale, but at para 37 as $90,000–$100,000 on the sale and six to nine months' rent at $5,775/month; both descriptions are preserved as stated]. Ms. Sanghera consented to dismissal of her claim against Wawanesa in February 2024. Her claim against Gold Key was tried before Justice Coval in New Westminster from September 8 to 11, 2026.

Policy and legislative provisions at issue

On June 8, 2006, Mr. Sandhu mailed the endorsement certificate adding 513 Clarke to the Farrow policy for an initial term of April 21 to July 3, 2006. It described the coverage as an "Additional Residence" with rating information of "Basic Dwelling," and set limits of $188,500 for the dwelling, $18,550 for an outbuilding, and $37,100 for additional living expenses, calculated using Wawanesa's valuation tables. Renewal letters over the years sometimes referred to "protecting your rented dwellings" and sometimes carried no description. In June 2012 and 2014, the letters referred to a "Rented Dwelling Policy" and warned that coverage was restricted for business pursuits in the home, while the policy itself continued to say "Basic Dwelling."

Wawanesa's denial letter stated that the location had been occupied by Trinity Auto Center since about March 2007 as an office, storage facility, and repair operation. It took the position that the insured had failed to give prompt notice of the commercial tenancy, that Wawanesa would have declined the risk had it known, and that the policy was void for failure to report a material change in risk.

On the broker's duties, the parties agreed on the governing law. Under Beck v Johnston, 2011 BCCA 250, paras 30–33, a broker must provide relevant information about available coverage and the forms required to meet the client's needs, and on renewal must address any change in need arising from changes in the client's circumstances of which the broker is or should be aware. The plaintiff's particulars of negligence (October 12, 2021) and Amended Notice of Civil Claim (October 13, 2021) pleaded that the zoning change was promptly reported to the agent and that Gold Key and Mr. Sandhu negligently failed to update their records.

Reasoning and analysis

Justice Coval found that the Sangheras had not proven, on a balance of probabilities, that they told Mr. Sandhu of the rezoning or change in tenancy, and gave six reasons. The most likely explanation for the unchanged policy was that Mr. Sandhu never knew of the changes; it defied common sense that he would knowingly leave long-time clients exposed, particularly since a commercial policy would have earned higher premiums and commission. An allegation that he held back because commercial business would belong to Gold Key rather than to him personally was rejected, as the overall evidence did not come close to supporting such a finding against his professional integrity. Nor was it plausible that he had been told and simply forgot, given his repeated dealings with the Sangheras between 2007 and 2014.

The argument that Mr. Sandhu should have noticed the auto shop when driving by failed on two grounds. It was never pleaded or particularized, and on the photographic evidence a reasonable person could have driven past without noticing the change, since the exterior appeared to remain as it was when used as a family home and the signs and cars could easily be taken as belonging to the shop at 509 Clarke. Justice Coval accepted Mr. Sandhu's evidence that he did not notice the change.

Credibility was the fourth concern. At trial, Mr. Sanghera described two calls, but at discovery he repeatedly said there was only one, made when the lease was signed. Ms. Sanghera testified at trial that she overheard the call on the day of the rezoning, made from a landline, about a year before the commercial lease; at discovery, she placed the call after the lease and said it was made from a cellphone.

As an experienced owner of residential and commercial properties, Mr. Sanghera would also have understood that switching policies required paperwork to cancel the residential coverage, which he acknowledged in cross-examination, and new forms for a commercial application. Because neither step occurred, the court found he knew the change was never made. Finally, Justice Coval accepted Mr. Sandhu's evidence that, after the fire, Mr. Sanghera said the lack of commercial coverage should not matter because the building was still a residential house, a remark the court found revealed why he never moved to the more expensive coverage.

A submission in final argument that the broker's duty included regularly checking on the property and inquiring about it at renewal was rejected because it appeared in neither the pleadings nor the particulars. Such a standard would, in any event, require expert evidence on what a reasonable B.C. insurance representative would do, as the point was not so obvious as to make expert evidence unnecessary (Schellenberg v Wawanesa Mutual Insurance Company, 2020 BCCA 22, paras 36, 63).

Damages were separately unproven. Mr. Sanghera could not specify the actual price reduction, how it was negotiated, the exact purchase price, or its allocation between the two properties, and he conceded the tenant had not paid rent for a few months before the fire. No lease, rent records, sale contract or amended contract, buyer communications, or repair invoices were produced, even though most if not all would have been in the plaintiff's possession or control when the suit began in 2015 and were specifically requested at discovery in 2017. Such documents might have shown a smaller loss or none at all, for instance if the tenant had agreed to leave early in exchange for free rent, or if the developer never intended to use the building. Justice Coval held it would be unfair to Gold Key to find the losses proven when the plaintiff had not met her disclosure obligations.

Ruling and overall outcome

Ms. Sanghera's claim was dismissed, leaving Gold Key as the successful party. Gold Key was awarded its costs at Scale B unless either party chose to make submissions on costs, and the decision does not quantify those costs, so no exact monetary amount can be determined.