An insured may not void his disabiity insurance policy by failing to provide proof of a continued total disability.
Application by the beneficiary for judgment against the insurer for insurance benefits. The insurer requested proof of the insured’s continued total disability. This was not provided and the insured’s policy was terminated. Application allowed. The insurer did not take clear steps to invoke the medical reporting clause in the insurance policy and did not make it clear to the insured that failing to provide the requested information could result in termination of his coverage.
Burns v. Assumption Life [2011] N.B.J. No. 364, October 26, 2011, New Brunswick Court of Queen's Bench, F. Ferguson J.
The insured had a basic life insurance policy applicable to all qualifying New Brunswick public servants. The insured became totally disabled in 1995 at age 43 for the required four month period. In the event of “total disability”, the policy allowed ongoing medical oversight by the insurer in cases where it was deemed prudent to do so.
The insurer requested confirmation of the insured’s “total disability” in 1996 and 1997. In both instances, the insured completed and returned the medical questionnaire. On May 3, 1999, the insurer requested further medical verification that the insured’s “total disability” was continuing. On May 10, 1999, a group claims representative had a telephone conversation with the insured. The representative took the following notes of her conversation:
Mr. Burns telephoned to know what this form was about. According to him, he has always to make [complete] these forms for the insurance companies. The cost is expensive. I told him that perhaps when he completes the form he could make copies in case another company asks from him the same thing. At that time, in that case, that would avoid the cost for each form. If we don’t receive the form by 15-05-99 perhaps we will cancel it. He wasn’t sure if he was going to complete it.
The insured passed away in May of 2009 and the beneficiary sought the insurance benefits. The insurer denied liability on the basis that the insured breached a condition of the policy and thus ceased to have coverage. The insurer argued that the insured breach the policy by failing to provide satisfactory evidence of his total disability when asked to do so.
The Court recognized that where a condition of a life insurance contract requires performance of or adherence to a condition by the insured party, noncompliance with a term or condition can, in proper circumstances, result in the termination of coverage absent statutory exception. However, in this case there was never a fundamental question of entitlement. The insured met the employment qualifications and throughout the relevant period he was in fact “totally disabled”. Therefore, contractual disentitlement could only arise if the insurer took a clear step to effectively invoke the medical reporting clause in the policy and the insured did not meet his contractual obligation to report.
The Court found that a clear and unambiguous request was required in order to engage the reporting requirement. The group claims representative’s letter of May 3, 1999 and telephone conversation on May 10, 1999 did not make it clear that failing to provide the medical questionnaire by the specified date would result in termination of coverage.
The Court concluded that the May 10, 1999 telephone conversation between the insured and the group claims representative left the insured with the impression that he had an option of disregarding the medical questionnaire. In the result, the Court held that the sum of the representations by the insurer did not satisfactorily convey to the insured that the medical report update was an invocation of the medical reporting clause in the policy that was obligatory in nature. Therefore, the insured was not in breach of the policy and the termination was improper.
This case was originally summarized by Aaron D. Atkinson, and originally edited by David W. Pilley of Harper Grey LLP.
