A misrepresentation by one co‑insured under s.554 of the Insurance Act, RSA 2000, c I‑3, does not affect an innocent co-insured’s interests because the statutory condition does not contain express language indicating misrepresentations by one insured will invalidate the policy as against an innocent co-insured.
Haraba v. Wawanesa Mutual Insurance Co.,  A.J. No. 274, 2017 ABQB 190, Alberta Court of Queen’s Bench, March 21, 2017 ,D.L. Shelley J.
Ms. Haraba, the insured, was named as the primary driver of a car and the sole insured under a policy issued by the insurer. Ms. Haraba’s boyfriend, Mr. Gardiner, was unable to obtain a loan because of his poor credit and Ms. Haraba purchased a truck for him in her name. She then insured the truck under her insurance policy, listing Mr. Gardiner as a co‑insured and the primary driver of the truck.
Ms. Haraba had previously seen Mr. Gardiner driving vehicles at his work site and he told her he held a valid Nova Scotia driver’s licence. As part of the application to add him as an insured under the policy, Mr. Gardiner provided a Nova Scotia identification card, which both Ms. Haraba and the insurer mistook to be a driver’s licence. In fact, Mr. Gardiner’s driver’s licence was suspended at the time.
Eight days after Mr. Gardiner and the truck were added to the policy, Mr. Gardiner got into an accident in the truck.
The insurer took the position the policy was void as against both Ms. Haraba and Mr. Gardiner due to the misrepresentation.
The first issue the court considered was whether Mr. Gardiner’s misrepresentation invalidated Ms. Haraba’s coverage as a co‑insured under the policy. Section 554 of the Insurance Act, RSA 2000, c I‑3, indicates “a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited” if “an applicant…knowingly misrepresents or fails to disclose in the application any fact required to be stated in the application”. The statutory condition does not contain express language indicating misrepresentations made by one applicant will invalidate the policy as against innocent co‑insureds. The court found that s. 554 should be interpreted based on how an ordinary person would understand it. The ordinary person will generally believe that the interests of multiple co‑insureds under the same policy are several and not joint, and that the misrepresentations of one co‑insured will not affect the other co‑insured’s interests.
The court concluded Mr. Gardiner’s misrepresentations did not affect Ms. Haraba’s ability to claim under the policy because the statute and the insurance contract did not contain express language indicating that the policy would be void against innocent co‑insureds if another co‑insured made a material misrepresentation.
The court also considered whether Ms. Haraba breached statutory condition 2(2) which requires insureds to permit others to drive the insured vehicle only if they are legally authorized to do so. The court found that Ms. Haraba did not breach the statutory condition because she had a reasonable basis to believe that Mr. Gardiner was legally qualified to drive and she made inquiries to ascertain that this was the case. Ms. Haraba had observed Mr. Gardiner driving at his job site and he told her he held a valid Nova Scotia driver’s licence.
As a result, Ms. Haraba’s claim was not invalid because of her co‑insured’s misrepresentation and she was an innocent co‑insured who remained entitled to recover under the policy.
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