At the outset of the insurance application process, the applicant should take great care to answer all questions accurately. Even so, there are many disputes that arise because the questions are ambiguous or overbroad.
There are two distinct issues relating to an applicant’s duty to disclose. Examples are identified in the Ontario Insurance Act (sections 180 and 183) and the Saskatchewan Life Insurance Act (sections 142 and 145). The first issue deals with the concept of insurability and material changes. The second deals with misrepresentation.
With respect to the insurance broker or agent, a separate issue arises concerning who is responsible for a miscommunication between insurer and insured. This will be discussed in our next post.
Insurability and Material Changes
Material changes to insurability (such as Ontario’s section 180 and Saskatchewan’s section 142) are those that, if known by the insurer, would require either a rated premium or an exclusion rider for the same coverage.
If an applicant who is insurable at the time of application becomes uninsurable by the time the policy is issued, what is material or not material is a matter for the Court to determine. For example, in the 1999 Newfoundland Court of Appeal decision in Ryan v. Canada Life, deterioration in the applicant's vision was deemed to not be material to insurability for a life insurance policy application. If the application had been for disability illness coverage including loss of eyesight, the deterioration might have been deemed material.
In the issue of misrepresentation, it is up to the insurer to ask any questions deemed relevant as evidence of insurability. Some provincial legislation (such as Ontario’s section 183 and Saskatchewan’s section 145) obliges the applicant to answer truthfully any questions that are asked. Simply put in the legislation, "a failure to disclose or a misrepresentation of such a fact renders the contract voidable by the insurer."
This suggests that materiality is not relevant at the time of the application. A false answer may sink the contract, whether material or not. The Ryan v. Canada Life, facts might have allowed the insurer to escape liability if the vision question had been falsely answered.
It is therefore important to identify the timing of the event in question. If the event occurs before the application and is covered by one of the insurer’s questions, any falsehood may prevent the recovery. If it occurs after the application, only material changes may impact liability.
If your client requires timely and effective legal advice from the experienced lawyers at MBC Law Professional Corporation, we are professionals who are already on your side. Contact Harold Geller or John Hollander toll-free at 1-888-288-2033 ext. 234 or by email.