Where the value of a loss far exceeds the insured amount an intentonal misrepresentation about value does not effect coverage
In a claim under a policy of property insurance where the value of the loss far exceeded the limits of the policy, it was determined that the plaintiff had no reason to exaggerate the value of the loss on the final proof of loss and the policy was not void due to intentional misrepresentation. The plaintiff's claim for punitive damages was also dismissed.
Sagl v. Chubb Insurance Co. of Canada 2011 ONSC 5233, September 8, 2011, Ontario Superior Court of Justice, F.N. Marrocco J.
The plaintiff's home was destroyed in a fire resulting in the loss of her extensive collection of art valued at $9.7 million and jewellery valued at approximately $1 million. The defendant insurer, Chubb Insurance Co. of Canada, had denied the claim alleging that the fire was arson and also on the basis that the plaintiff intentionally concealed or misrepresented material facts relating to the policy, before and after the loss. The plaintiff brought an action for payment of the insurance proceeds and there had already been one trial. On appeal, the Court directed a second trial to determine whether the policy of insurance was void due to intentional misrepresentation on the plaintiff's proof of loss. The plaintiff also claimed for punitive damages.
With respect to the issue of intentional misrepresentation, the judge first noted that the defendant was required to prove an intentional misrepresentation on a balance of probabilities. The judge noted that the plaintiff was aware that coverage under the policy for her fine art collection was limited to $2 million. She also knew that exaggerating her claim beyond the sum of $2 million would not only be of little assistance, but would also pose a considerable risk in that it would void her policy of insurance. The judge found that the plaintiff had no motive to exaggerate the value of her claim for her art collection on her final proof of loss and concluded that the insurance policy was not void due to an intentional misrepresentation on the proof of loss.
With respect to the issue of punitive damages, the trial judge noted that the defendant's belief from the outset that the fire was arson was based on information provided by the Ontario Fire Marshall and was reasonable. Based on this belief, it was entitled to take the steps it did. Furthermore, the defendant's decision to challenge the valuation of the plaintiff's art collection at $9.7 million was reasonable in light of a statement by an expert appraiser involved in the case that a significant portion of the art collection was reproductions. Given the defendant's suspicions of arson and the value of the art collection, its failure to advance funds to the plaintiff was also reasonable, as was the decision to report the plaintiff to the Crime Prevention Bureau. The trial judge was critical of the defendant's failure to inspect the art collection prior to the loss given that the binder of insurance had been issued eleven weeks prior to the fire. He was also critical of the defendant's failure to provide an inventory of items that were removed from the house following the fire and for making it difficult for the plaintiff to access the site. The trial judge was most critical of the defendant's failure to disclose certain evidence from its investigation which demonstrated that it did not question the value of a certain sculpture in the plaintiff's art collection, though it had the opportunity to do so during its investigation, and then challenged the plaintiff's valuation of the sculpture at trial. In light of this evidence, the trial judge gave little weight to the defendant's submissions regarding the value of the sculpture in the context of the issue of misrepresentation on the proof of loss. In the result, it was determined that imposing further adverse consequences on the defendant in the form of punitive damages would not serve any further deterrent value and the claim for punitive damages was dismissed.
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