Life insurance policy declared valid and payable to plaintiff beneficiary due to no evidence of material or fraudulent misrepresentation

Insurance law – Life insurance – Misrepresentation in obtaining insurance – Fraud – Criminal offences – Duties and liabilities of insured – Policies and insurance contracts – void Ab Initio

Costanza (Litigation guardian of) v. Desjardins Financial Security Life Assurance Co., [2022] O.J. No. 226, 2022 ONSC 432, Ontario Superior Court of Justice, January 18, 2022,E. Chozik J.

The 13 year old plaintiff sought a declaration that his father’s life insurance policy was valid, subsisting, and binding on the insurer. The insured was shot and killed in December of 2017.  The insurer refused to pay the insured’s son on the basis that the insured made a material and fraudulent misrepresentation on his application for insurance.

The insurer claimed the insured lied on the application by representing that he had not been convicted or pled guilty to a criminal offence in the three years preceding his application, which was made on January 9, 2012. The insurer argued that the insured was convicted of assault causing bodily harm on March 11, 2009, which was 2 years, 9 months, and 29 days prior to the day the insured submitted the application for insurance.  Accordingly, the insurer argued that the policy was void ab initio because of fraud.

The Court held that the insurer failed to make out, on a balance of probabilities, actual fraud by the insured. The Court was not satisfied that the insured was convicted or pled guilty to the criminal offence on March 11, 2009, and found that the evidence presented by the insurer only showed that the insured was convicted at some point no later than March 11, 2009, but did not prove how long before March 11, 2009 he was convicted. The Court found that it was possible or even likely that March 11, 2009 was the date of sentencing rather than the date of conviction, and that sentencing was not covered by the application.

The Court noted that even if the insured was convicted or pled guilty on March 11, 2009, the insurer had not proven the insured’s intent to deceive that is required to prove a civil fraud. The Court found that the time of the conviction fell at the outer edge of the three year time frame in question, and that it was possible that the insured could have been mistaken in calculating when his conviction was in relation to the date of his application. In these circumstances, the Court was not satisfied that any misrepresentation by the insured was done knowingly or recklessly.

The Court also considered the insurer’s argument that the insured had an obligation to disclose the fact that he had a criminal history or criminal background when applying for insurance, but concluded that the media reports the insurer used to support its contention were inadmissible. The Court was not satisfied, on a balance of probabilities, that the insured had a criminal history or background or that the policy was voidable because of his failure to disclose it.

The Court concluded that the insurer had not proven on a balance of probabilities that the insured had obtained the life insurance policy through material misrepresentation or fraud, and thus the policy was valid and payable to the plaintiff.

This case was digested by Alicia Catalano, 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 Alicia Catalano at [email protected].

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