Court’s Interpretation of s. 180(1)(c) of Ontario’s Insurance Act Sets Boundaries of Life Insurance Contestability

The plaintiff, who was the beneficiary of his ex-wife’s life insurance policy, sought insurance proceeds from the insurer after her death.  The insurer denied the plaintiff’s claim pursuant to s. 180(1)(c) of Ontario’s Insurance Act, on the basis that the policy had not taken effect as there was a change to his ex-wife’s insurability between the time the application was completed and the time the policy was delivered.  The court granted summary judgment and held that the insurer could not rely on s. 180(1)(c) of the Act to deny life insurance coverage by retrospectively examining medical records and claiming a pre-delivery change in insurability after the two-year incontestability period established by section 184(2) of the Act.

Insurance law – Life insurance – Commencement of contract – Exclusions – Interpretation of policy; Practice – Summary judgments.

Trebell v. Canada Life Assurance Co., [2025] O.J. No. 2217, Ontario Superior Court of Justice, May 14, 2025, R.L. Akazaki J.

The plaintiff was the beneficiary, on behalf of his and his ex-wife’s children, of a life insurance policy on his ex-wife’s life in the face amount of $500,000.  The plaintiff’s ex-wife died of colon cancer approximately 3 years after she applied for and obtained the policy.  The insurer denied the plaintiff’s claim for the life insurance proceeds on the basis that, pursuant to s. 180(1)(c) of Ontario’s Insurance Act (the “Act”), the contract had never taken effect as there was a change to the insurability of the plaintiff’s ex-wife between the time the application was completed and the time the policy was delivered.  Section 180(1) of the Act read:

180(1)   Subject to any provision to the contrary in the application or the policy, a contract does not take effect unless,

a. the policy is delivered to an insured, the insured’s assign or agent, or to a beneficiary;

b. payment of the initial premium is made to the insurer or its authorized agent; and

c. no change has taken place in the insurability of the life to be insured between the time the application was completed and the time the policy was delivered.

The chronology and medical evidence, which were not in dispute, revealed that weeks after the policy was issued to plaintiff’s ex-wife, she attended at her family physician and complained of symptoms including rectal bleeding and pain.  The doctor’s notes indicated the symptoms had been present for several months – pre-dating her application for the policy.  The doctor recommended conservative treatments and referred her to a specialist.  The specialist saw the plaintiff’s ex-wife about one month later, and he recommended a colonoscopy to screen for colorectal cancer.  Approximately two months later, the colonoscopy was performed and a diagnosis of colon cancer was made.  The plaintiff’s ex-wife died of colon cancer approximately 3 years later.

The plaintiff brought a motion for summary judgment for the life insurance proceeds.  The insurer took the position that the motion should fail as the evidence of its medical director was that, had the insurer known of the plaintiff’s ex-wife’s medical attendances and symptoms, the insurer would have postponed the policy’s coming into effect, and that postponement would have allowed the cancer diagnosis to be revealed before the policy came into effect.  Further, the insurer argued that its medical director’s evidence, at the very least, could create a triable issue requiring trial.

The court disagreed with the insurer’s literal interpretation of s. 180(1)(c) of the Act, and its position that there was a triable issue.  In finding for the plaintiff, the court held that the insurer’s interpretation of s. 180(1)(c) defied the conventions of legislative drafting and imported absolute uncertainty into the initial phase of the insurer-insured relationship, contrary to the purpose of s. 180, which the court held was to impose certainty about the insurance.

The court held that reading the phrase in s. 180(1)(c),  “no change has taken place”, in a manner allowing retrospective treatment of the policy as never having come into effect defeats the purpose of the two other conditions in s. 180, which create certainty that the insurer is not liable to insure the life before the exchange of the policy and the premium.  The court held that, a literal reading of s. 180(1)(c)  “throws a blanket of uncertainty over the insurance…” such that it would be possible for an insured to pay premiums dutifully for decades and pass away without ever knowing for certain whether the policy came into effect.  The court stated that an insurance regime with such widespread uncertainty was not likely the legislator’s intent.

Section 184(2) of the Act prevents an insurer from contesting insurability because of failure to disclose or misrepresentation of a fact required to be disclosed where a contract has been in effect for two years during the lifetime of the person whose life is insured.  The court thus held that the reasonable expectation of life insureds is that, provided they do not lie or withhold information in a questionnaire or medical examination, and after surviving any pre-existing health conditions for two years, their life is insured.

The court held that a further consequence of the literal meaning of s. 180(1)(c) advanced by the insurer is that it would impose on the beneficiary a burden of proving a negative.  The word “unless” means the absence of change must be shown to activate the contract after the life insured’s death.  The court stated that the argument that all life insurance policies are presumptively ineffectual until it is proven that no change to insurability occurred during the initial interval potentially imperils every policy of life insurance across the country.

The court emphasized that the literal and isolated meaning or implication of a statutory provision can be rebutted if it produces absurd or extremely unreasonable results and that the insurer’s interpretation of s. 180(1)(c) defied the conventions of legislative drafting and imported absolute uncertainty into the initial phase of the insurer-insured relationship.

The court held that an insurer’s right to contest a policy under s. 180(1)(c) is narrow in scope — confined to whether the policy came into effect during the initial period — and is extinguished once the two-year incontestability period under s. 184(2) has elapsed.

This case was digested by Tricia M. Milne and edited by Steven W. Abramson of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].