Court upholds insurer’s denial of life insurance coverage after insured’s overdose

Insurance law – Life insurance – Criminal offences – Exclusions – Duties and liabilities of insurer – Practice – Summary judgments

Jantzen Estate (Personal Representative of) v. TD Life Insurance Co., [2022] S.J. No. 171, 2022 SKQB 113, Saskatchewan Court of Queen’s Bench, April 18, 2022, D.G. Gerecke J.

The insurer applied for summary judgment of the plaintiff estate’s claim arising from two life insurance policies which covered the life of the deceased insured. One policy covered the amount owed by the insured under a line of credit, while the other policy covered the amount the insured owed under a mortgage. The insurer argued that the insured died as a result or while committing a criminal offence (possession of cocaine) and denied coverage pursuant to exclusion clauses in the policies.

The coroner’s report found the insured’s cause of death was an overdose of cocaine and alcohol. Lethal quantities of cocaine were found in the insured’s system but there was no suspicion of foul play. An autopsy report stated that the insured had a corner of a plastic bag containing white powder suggestive of cocaine in his wallet. However, this white powder was not tested. There was no other evidence indicating any substance suspected or confirmed to be an illegal drug was found in the insured’s home or on his person.

On the mortgage policy, coverage is excluded if the insured dies as a result of committing a criminal offence or if the insured dies while committing a criminal offence.  On the line of credit policy, coverage is excluded in the above two instances and also if the insured’s death is associated with committing a criminal offence.

The insurer argued that the white powder in the insured’s possession was cocaine such that he died while committing a criminal offence. The insurer further argued that the insured died of an overdose of cocaine and alcohol, after consuming a lethal quantity of cocaine and therefore died as a result of the criminal offence of possession of cocaine. The estate submitted that once the cocaine was ingested, there ceased to be a possession offence and the consumption of cocaine is not a criminal offence.

The Court drew an inference from the surrounding circumstances and the fact that the insured placed the small quantity of white powder in his wallet in concluding it was more likely than not that the white powder was cocaine. The Court found that based on the description of the white powder in the autopsy report, there was a sufficient quantity of cocaine such that the threshold for possession of cocaine was met. Further, if the white powder was probably cocaine, the insured was familiar enough with cocaine such that he would have known what it was.  On this basis, the Court found that the insured died while committing a criminal offence which triggers the exclusion clauses in both policies. The Court dismissed the plaintiff’s claim.

The Court commented that with respect to the cocaine consumed by the insured, possession of the cocaine did not inevitably lead to its consumption thereby leading to the insured’s death. As possession did not cause his death, the Court found he did not die as a result of committing a criminal offence. Further, the insurers failed to establish that the insured died while possessing the cocaine he ingested. The Court did find that the insured’s death was associated with a criminal offence as, had he not died, it would be possible that the insured would be convicted of possession of cocaine. Therefore, had the Court not found in favour of the insurer with respect to the white powder found in the insured’s wallet, the Court would have ruled in favour of the estate with respect to the denial of coverage under the mortgage policy.

This case was digested by Dominic Wan, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Dominic Wan at [email protected].

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