The Supreme Court of British Columbia (SCBC) has found that a property and casualty insurance brokerage was justified for terminating a broker who referred clients to rival firms.
Michael Meszaros sued his former firm, Victoria, B.C.-based Hendry, Swinton, McKenzie Insurance Services (Westshore) Inc. (HSM), alleging wrongful dismissal after he was terminated in July 2012. He was seeking damages from the firm in lieu of notice, along with aggravated and punitive damages, and damages for breach of privacy and defamation. The amount of the damages was unspecified.
According to the SCBC’s decision, HSM argued that it was justified in terminating Meszaros, on the grounds that he referred clients to brokers at competing firms — the beneficiaries of those referrals were his former common law spouse, and his current girlfriend. HSM also denied the allegations that it breached Meszaros’ privacy rights or defamed him when it informed the regulator, the Insurance Council of British Columbia (IC), and his former clients, about his dismissal.
The SCBC sided with HSM, ruling that the firing was justified. The two sides did not dispute that the referrals took place. The decision notes that Meszaros said that he frequently referred clients to other brokers, “usually so that the client could obtain coverage at a more competitive cost than Mr. Meszaros could offer through the insurers that HSM had access to.”
However, the court rejected that explanation saying it doubted “that his sole motivation was to help his clients find the best deal.” In certain cases, it concluded that, “he appeared to be ridding himself of unwanted clients”. Additionally, the court noted that as the referrals were made to his ex wife and current girlfriend, “he did so either to benefit them personally or because he perceived some long-term benefit for himself.”
“Mr. Meszaros paid no attention to HSM’s interests. He did not seek prior approval for any of the referrals,” the court ruled.
The SCBC also found that, while it may be general industry practice to encourage clients to shop around for coverage, Meszaros went further than that in referring clients to specific brokers, and in providing information to the other brokers that would not typically be shared by competing firms.
The court concluded that, in doing so, he breached his employment contract, and that the referrals also breached his common law duty of good faith and fidelity to his employer. “HSM has met the burden of establishing just cause for terminating Mr. Meszaros’s employment,” the court ruled.
The SCBC also dismissed claims that the HSM’s communications to the IC and to clients after his termination were defamatory. While the court acknowledged that the discussions with clients could have damaged Meszaros’ reputation, it found that some of those communications were true, and others were reasonable and not made with malice. As a result, his claims for defamation arising out of the client discussions failed as well.