Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

Appeal by two minor children of the deceased Insured from a decision of the Divisional Court finding that they were not entitled to a portion of the proceeds from a life insurance policy owned jointly by the Insured and his wife. 

The Insured and his wife jointly owned a life insurance policy which provided that on the death of one, the other was entitled to a lump sum payment of $109,000. The Insured was the sole owner of another life insurance policy which named his wife as the beneficiary. The Insured had made inadequate provision for his dependents, three of whom were minors at the time of his death. The three minors and the Insured's wife fell within the definitiion of "dependents" under the Ontario Succession Law Reform Act ("SLRA").

Two of the minor children brought applications against the Insured's estate claiming entitlement to a share of the proceeds under the policies. The Insured's wife brought a cross-application seeking an order directing the insurance company to pay her the proceeds of both policies. The applications judge held that both policies were caught by the wording of the provisions in the SLRA, namely s. 72(1)(f), and were therefore deemed to be part of the Insured's estate for the purpose of funding the dependents' support order. The net proceeds were ordered divided into three equal shares for the support of the three minor children. The wife's appeal to the Divisional Court was allowed in part and the jointly owned policy was excluded from the Insured's estate. An appeal and cross appeal were brought from this decision.

The Ontario Court of Appeal held that, on a proper interpretation of s. 72(1)(f) of the SLRA, the jointly owned policy was not caught because it was not "owned" by the Insured. At the instant of his death, the wife's joint ownership interest became an absolute entitlement to the proceeds of the policy. The Court of Appeal stated that an interpretation of s. 72(1)(f) which would encompass the jointly-owned policy was not consistent with the overall scheme of s. 72 of the SLRA, which was to capture property owned by the deceased. The Court of Appeal did not interfere with the exercise of discretion by the applications judge in ordering support for the three dependent children given that the policy soley owned by the deceased fell squarely within s. 72(1)(f) and was, therefore, available for the purpose of an order for dependent support.

The former agent had been employed under a contract with the Insurer from 1999 to March 2006. The contract prohibited disclosure of any confidential information obtained in the course of the employment relationship and stated that, upon termination of the contract, the agent would return the original and all copies of any "confidential information" received during the course of his employment. The contract further provided that the agent would not make use of or disclose the confidential information or cause or permit it to be used by any person. Clause 12 of the contract restricted the agent's ability for two years following his termination to either directly or indirectly induce any existing policyholder to switch insurers.

The Insurer claimed that, after the agent's termination on March 15, 2006, he had started soliciting the Insurer's policyholders, pursuading a number of them to switch carriers. The evidence showed that as of March 15, 2006, the agent had been responsible for 330 of Insurer's policies of insurance. As of November 30, 2007, 93 of those policies had been cancelled, lapsed, terminated or replaced. The Court found that while there was no direct evidence that the agent had solicited or induced policyholders to switch insurers, it was a reasonable inference from the evidence filed that he had engaged in solicitation or inducement of at least some of the policyholders who had switched insurers or cancelled their policies.

The Insurer sought an injunction to restrain the agent from inducing existing policyholders to cancel or switch policies and to require the agent to deliver up any confidential information and to restrain him from using or disclosing such information. The agent argued that his contracts with the Insurer were invalid, but assuming that the contracts were valid, there was insufficient information to show that he violated the terms of the contract.

Justice D.K. Gray reviewed the criteria for granting interlocutory injunctions as set out in the Supreme Court of Canada's decision in R.J.R. MacDonald Inc. v. Canada, [1994] 1 S.C.R. 311, noting also that an injunction is an extraordinary remedy and is not to be granted lightly. He took into account the fact that there had been an element of delay on the part of the Insurer in requesting the return of all confidential information and that the Insurer had made no effort to pursue this issue until bringing its claim in December 2007 and applying for an injunction shortly thereafter. The Court also found that the Insurer could, by due diligence, have discovered the agent's activities in soliciting policyholders and inducing them to switch insurance carriers well before August 2007.

Despite these facts, the Court found that the Insurer had made out its case for an injunction and ordered that the agent be restrained from soliciting and inducing the Insurer's policyholders, but only for the balance of the two-year period prescribed by the terms in the contract. The Court limited the injunctive relief concerning return of confidential information to the return of the physical manifestations of the confidential information in the agent's possession. The injunction did not prohibit the agent from utilizing his own knowledge of who the policyholders were and when their policies might expire.

The Plaintiff was the beneficiary of proceeds under a life insurance policy obtained by her late husband, who was insured under that policy. She brought an action against the Insurer to recover death benefits upon her husband's passing. The Insurer sought a dismissal of the Plaintiff's claim on summary trial application on the basis that the Insured had knowingly or recklessly made false representations to the Insurer at the time he applied for insurance coverage and that the policy was therefore void.

The alleged false representations were made by the Insured in respect of the medical history he provided to a nurse acting for the Insurer around the time of his application for life insurance. In particular, the Insured had answered "No" to questions concerning whether, to his knowledge, he had ever been told that he had any problem with his heart or blood vessels, including whether he had heart disease, heart murmer, shortness of breath, high blood pressure, angina or chest discomfort or other related conditions. The Insurer claimed that the Insured's medical records were inconsistent with his answers and that they indicated a history of shortness of breath, chest discomfort, asthma, allergies and irregular electrocardiograms or other heart investigations.

The Court considered the medical evidence presented at the summary trial to determine whether the Insured had misrepresented his medical history in answering in the negative to the impugned questions and whether he had made the misrepresentation with knowledge of its falsehood or recklessly, without belief in its truth, with the intention that it should be acted upon by the insurer.

The Court held, largely based on the clinical notes made by the Insured's physicians, that he did not have any knowledge that he had a heart problem and that his answers to the questions were thus truthful. There was no need for the Insured to have advised his Insurer of symptoms which he had been led by his doctors to believe were unrelated to a heart problem. Similarly, the Insured was not required to answer "Yes" to questions concerning allergies or problems with his nose, throat or lungs given his understanding of the problem he suffered from as being related to reflux, again based on what his doctors had told him.

The Court concluded that the Insured had not misrepresented his medical history and that he had an honest belief in the truth of his responses based on the information and advice he had received from his physicians. Accordingly, the Insurer's application for dismissal of the Plaintiff's claim was dismissed.

Ms. Silva worked for Teknion. RBC Life Insurance Company (“RBC”) became her disability insurer when Teknion purchased employee disability insurance on her behalf (the “Policy”). Ms. Silva was injured in an accident in the Fall of 1996. On December 12, 1996, she ceased working as a spot welder at Teknion due to injuries suffered in a motor vehicle accident. On January 12, 2000, she was terminated by Teknion. On October 7, 2004, almost eight years after the accident, Ms. Silva submitted an application for disability insurance to RBC Life. 

On January 21, 2005, RBC advised Ms. Silva that her claim for benefits was denied because it was out of time. On June 16, 2006 Ms. Silva commenced an action against RBC for a declaration of entitlement to benefits (the “Action”). The action was commenced more than ten years after the accident, nine years after the date by which proof of claim was to be submitted under the Policy, and six years after the last time the Action could have been commenced under the relevant limitation legislation. The Plaintiff sought relief from forfeiture to remedy her failure to comply with both the notice requirements in the Policy and the statutory limitation period. Section 328 of the Insurance Act, R.S.O. 1990, c. I-8, provides relief from forfeiture as follows:

328. Where there has been imperfect compliance with a statutory condition as to any matter or thing to be done or omitted by the insured, person insured or claimant with respect to the loss insured against and a consequent forfeiture or avoidance of the insurance in whole or in part, and any court before which a question relating thereto is tried deems it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it deems just.

The essence of Ms. Silva’s claim was that she had a very poor grasp of the English language; the highest grade she completed in school was Grade 4 in Portugal, and that she was unaware of the existence of the Policy. Her counsel noted that permanent disability claims are continuing claims and for that reason are not susceptible to be extinguishment by limitation periods in the way that other actions may be. RBC relied upon Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., (1989), 62 D.L.R. (4th) 236 in which the Saskatchewan Court, in dealing with a provision similar to section 328 of the Insurance Act, noted as follows:

The case law has generally treated failure to give notice of a claim in a timely fashion as imperfect compliance whereas failure to institute an action within the prescribed time period has been viewed as non-compliance or breach of a condition precedent. Thus the courts have generally been willing to granting relief against forfeiture where notice of claim has been delayed.

On the other hand, cases in which failure to meet a time requirement has been held to be non-compliance rather than imperfect compliance have largely been cases in which the time period was for the commencement of an action rather than for the giving of notice: [authorities omitted]

Hoilett J. determined that RBC suffered real prejudice due to Ms. Silva’s delay. Nearly a decade had passed without RBC having the opportunity to conduct reasonable medical investigations in relation to Ms. Silva’s health. Granting of relief from forfeiture, assuming it was even available for failure to comply with the limitation period, would render the whole concept and purpose of limitation periods nugatory. Hoilett J. dismissed the Plaintiff’s claim.

The 45-year old male Insured suffered a permanent injury to his spinal cord with resulting paraplegia after being infected with Herpes Simplex Virus Type-2 ("HSV-2"). It was agreed for the purpose of the special case that the infection was likely caused by the Insured having unprotected sex with three women during the months of January and February 2003.

The Insured had obtained insurance coverage through his employer, which became effective on February 1, 2003. The policy provided benefits for accidental disease/dismemberment, including a $200,000 payment for paraplegia or loss of use of both legs "resulting directly and independently of all other causes from bodily injuries occasioned solely through external, violent and accidental means, without negligence on the Plaintiff’s part".

The issue for the Court was whether the Insured had sustained his paraplegia "directly and independently of all other causes" within the meaning of the policy. The Court reviewed case authority dealing with the word "accident" in an insurance policy and concluded, based on the reasoning in the recent Supreme Court of Canada decision of Martin v. American International Assurance Life Co., [2003] 1 S.C.R. 158, that the pivotal question was whether the Insured had expected to become a paraplegic as a result of having unprotected sex. Mr. Justice Cole held that the Insured did not expect to become a paraplegic as a result of having unprotected sex. His Lordship noted that while the Insured’s actions were foolish, the unexpected consequence of these actions was accidental. Accordingly, the Insured’s paraplegia was caused by "accidental means" within the meaning of policy and the Insurer was required to pay the Insured accident benefits in the amount of $200,000.

 Of note, the Court rejected the Insurer’s argument that insurers in general would be unduly prejudiced if, in these circumstances, they had to provide compensation for insureds who recklessly engage in unprotected sex and become infected with sexually transmitted diseases. In response, the Court noted that it was open to the Insurer in drafting the policy to provide an explicit exclusion clause to exclude coverage for such cases.

The Insured was a 52 year-old woman who had a long-standing problem with alcohol, but had never been diagnosed as being an alcoholic. She purchased a policy of travel insurance from the Insurer prior to travelling from her home in Vancouver to Denver, USA. At the time she purchased the policy, the Insured made a declaration that she was "in good health" and knew of "no reason to seek medical attention …".

The evidence adduced by the Insurer at trial showed that the Insured had been hospitalised the night prior to making the declaration after she had taken a prescription narcotic while in a state of a gross intoxication. The Insurer denied the Insured’s claim on the basis that she had failed to properly disclose the state of her health at the time the policy was purchased.

 The trial judge found that a reasonable person would interpret the declaration made by the Insured as meaning that the Insurer was only interested in health conditions serious enough to warrant medical attention that was more than routine or non-emergency medical treatment. She therefore found that the Insured was entitled to make the declaration that she was in good health and knew of no reason to seek medical attention.

The Court of Appeal disagreed with the trial judge’s construction of the words "medical attention" and found that, on the evidence, the Insured could not properly have made the declaration of good health that she had made in order to obtain the policy. The Court of Appeal therefore concluded that the Insurer was entitled to deny the claim by the Insured’s estate. The Insurer’s appeal was allowed and the claim dismissed.

The case reference is: Quinn v. Canada Life Assurance Co. [2006] B.C.J. No. 3271, the British Columbia Court of Appeal.  December 21, 2006.

Here is a link to the decision.

This was an appeal by the Insurer, Canada Life Assurance Co. from a Trial Court decision in which it was held liable to pay Mr. Quinn, the husband of the Insured, $150,000 as the beneficiary of a life insurance policy for his deceased wife. The Insurer argued that the Insured failed to disclose material facts in her application which would have resulted in it refusing to issue the policy.  

The issue was whether inclusion of the words “other than above” in the questions asked of the Insured were either ambiguous or misleading and, if either, whether, in view of the questions, the Insured could be said to have adequately responded to them. On the application form, the Insured had been asked whether she had been treated for any known indication of abnormal blood pressure and in a subsequent question, had been asked, “other than above, have you within the past 5 years: had an x-ray?”. The trial judge noted that the Insured failed to advise that she had been treated for her enlarged heart by having chest x-rays conducted. The Insured ultimately died of heart disease.

The Court of Appeal found no ambiguity in the words, “other than the above” and noted that it is not the function of courts, when construing a document, to search for an ambiguity. Here, it was clear that the words used were intended to shorten the application process by eliminating repetition. That is, if there had been disclosure in an earlier section of the application, then the same information did not have to be repeated. As this had not been done by the Insured, the application was inadequately completed, the appeal was allowed, the Supreme Court Order set aside, and the action dismissed.

Mr. Sylvester (the "Insured") had a life insurance contract that provided a $100,000 death benefit payable to his beneficiaries. The Insured was a member of the Outlaws Motorcycle Gang in Manitoba. He disappeared on May 29, 1998. He was never found. Pursuant to a consent order made seven years after his disappearance, the Insured was declared presumed dead as of May 29, 1998. Following the declaration, the insurance company paid out the insurance proceeds of $100,000 and returned the premiums paid from the date of the disappearance to the date of the presumption of death. The beneficiaries commenced this action in an attempt to recover the interest on the $100,000 death benefit for those seven years.

The policy of insurance was silent as to whether interest should be paid during this period. In reviewing the matter, Kennedy J. noted that the Insured was clearly associated with an outlaw gang and that he was associated with persons and activities that led him to criminal activity. His disappearance was mysterious. When his close acquaintance was shot to death by bullets to the head, it is possible that an inference could be raised that the Insured probably suffered a similar fate. There was no evidence that the Insured intended to disappear-- he had made plans for his children, started a business, which was deserted, and his financial and other possessions were left unattended. In addition, police information indicated that they believed that the Insured had been killed.

The Estate argued that well before the passage of seven years, the insurance company ought to have acted on the available evidence and paid out the insurance proceeds. Since the insurer did not do so, the insurer should now pay interest on the death benefits. Kennedy J. noted that counsel for the Estate had advised their client of the cost of applying for a death certificate and the uncertainty that may arise with that application before the expiration of seven years. The Estate, based on the advice of their lawyer, elected to wait until the expiration of seven years.

Kennedy J. could not conclude that the insurance company’s actions warranted the entitlement to interest, as the option to proceed earlier was available to the Estate and they chose to delay the application until the expiration of seven years. However, the evidence demonstrated that the insurance company did not take a particularly helpful approach to the beneficiaries. While the Estate made the decision not to proceed before the expiration of seven years, the insurance company had informal evidence, which in Kennedy J.’s view, could have supported a successful interim application for presumption of death. In the result, the application was dismissed without costs.

Ms. Pekarek was insured under a disability insurance policy issued by Manufacturers Life Insurance Co. ("Manufacturers"). On December 16, 1993, she applied for long term disability benefits. On June 1, 1994, Manufacturers wrote to Ms. Pekarek and advised her that her doctor reported that she would be ready to return to work on December 1, 1994, and that her benefits would be terminated thereafter. In August of 1994, Ms. Pekarek provided a note to Manufacturers from her doctor indicating that she was incapable of returning to full time work until December. Manufacturers followed-up with the doctors requesting more information. On October 12, 1994 Manufacturers advised the Plaintiff that it was denying her appeal to provide ongoing disability benefits and that her file would remain closed. In July of 2000, Ms. Pekarek filed a Writ of Summons for a Declaration of Entitlement to Benefits. Manufacturers brought a Summary Trial Application to have the matter dismissed due to the expiration of the limitation period. The application was dismissed on the basis that the one year limitation period commenced on October 12, 1994, and that the action was out of time.

On appeal, Ms. Pekarek argued that she was not given clear and unequivocal notice of the denial of her benefits and the commencement of the limitation period. In Dachner Investments Ltd. v. Laurentian Pacific Insurance Co. (1988), 22 B.C.L.R. (2d) 254, the British Columbia Court of Appeal noted that:

…where a policy of insurance stipulates that the time within which an action may be commenced runs from the time when the cause of action accrues, the limitation period will commence to run from the time when the insured has notice of a clear and unequivocal denial of coverage by the insurer.

Thackray J.A., for the Court, noted that although in Dachner Investments Ltd. the Court reflected that if an Insurer wished to avoid the possibility of misunderstanding "in its [denial of benefits] letter it can expressly draw attention to the limitation period", this was only a suggestion, and falls short of the proposition that an Insurer is obliged to advise an Insured that their limitation period has commenced.

The Court of Appeal noted that Manufacturers made it clear to Ms. Pekarek that there had been a denial her insurance coverage. The fact that Manufacturers reviewed additional medical evidence did not postpone the running of the limitation period. In addition, the fact that Manufacturers did not advise Ms. Pekarek that the limitation period had commenced did not estop them from invoking the limitation period against her. The Court of Appeal noted that the same reasonings as were applied by this Court in Esau v. Co-operators Life Insurance Company applied in this case.

Hall J.A., concurred with Thackray J.A.’s opinion, and followed-up on the comments of Levine J.A. in Esau v. Co-operators Life Insurance Company, noting that it would be useful for the legislature to consider amending the legislation to parallel the discoverability principle codified in ss. 6 and 7 of the Limitation Act, R.S.B.C., 1996, c. 266. This would enable a Court dealing with such cases to bring into consideration the type of reasoning found in Novak v. Bond, [1999] 1 S.C.R. 808. Hall J.A. went on to note that while this might diminish, to some degree, the rigorous certitude manifested under the current legislative regime, such legislation could afford a greater amount of flexibility to a Court to grant relief, where appropriate, in cases of possible hardship. A unanimous Court dismissed the appeal.

The insurer declined to pay the death benefit under a life insurance policy on the basis that the contract never took effect due to a change in the deceased’s health between the time the application was completed and the time the policy was delivered. The trial judge held that s. 142(1)(c) of the Saskatchewan Insurance Act was applicable and that there was nothing in the proviso that was inconsistent or in conflict with that subsection. As such, the contract never took effect.

The Saskatchewan Court of Appeal dismissed the appeal. The trial judge properly concluded that there was no ambiguity in the proviso in the policy. The trial judge also did not err in finding that there was no conflict between s. 142(1)(c) of the Saskatchewan Insurance Act and the proviso in the policy. The subsection dealt with changes in insurability, a subject not addressed in the proviso in the policy.