b Changes Material to the Risk Section 549

1
(b) Changes Material to the
RiskSection 5494

• must be material to the risk
• must be within control and knowledge of insured

2
Section 5494 (con't)

• must be promptly notified in writing
• insurer can cancel, charge extra premium
• unearned premium must be returned

3
Nahayowski v. Pearl

• property sold March 8, 1958 on terms
• action for cancellation due to non-payment
  brought on Aug. 29, 1960
• plaintiff (vendors) insured ppty on Feb 2 1962

4
Nahayowski v. Pearl (con't)

• purchasers moved out on April 1962
• ppty vacant until fire on Aug. 21, 1962
• Is vacancy a change material to the risk?
• Was vacancy within control and knowledge of the
  insured?

5
Nahayowski v. Pearl (con't)

• Was vacancy condition in policy breached?
• Could section 552 assist insured with respect to
  a breach of the condition?

6
Watkins v. Portage La Prairie

• bad tenant in plaintiffs house
• tenant was told to leave by December 3
• on Dec 4 plaintiff got owners insurance for a
  single-occupancy dwelling

7
Watkins v. Portage La Prairie (con't)

• tenant didnt leave until second week in Jan.
• things missing from the house
• policy remained in force until termination and it
  was not renewed

8
Watkins v. Portage La Prairie (con't)

• Was there a misrepresentation as to the nature of
  the house when policy was taken out?
• Was the house out of coverage when it was tenant
  occupied but then back in coverage when tenant
  moved out and owner moved in?

9
Watkins v. Portage La Prairie (con't)

• Was there a material change to the risk when
  tenant did not move out?
• Was it under control and knowledge of insured?
• Did the fact that insurer did not cancel the
  policy and did not return premiums affect its
  defence?

10
Watkins v. Portage La Prairie (con't)

• Was there a nondisclosure?
• What did trial judge decide - failure to notify
  of change? non-disclosure

11
Annotation

• Can insurer cancel for misrepresentation and not
  return premiums?

12
Court of Appeal

• parties agreed to limit case to material change
  in risk defence
• not in knowledge and control that tenant was
  refusing to go
• control means physical control

13
Court of Appeal (con't)

• was knowledge and control required by common law?
• did common law apply here?

14
Marche v. Halifax Insurance

• insureds moved left house vacant
• tenant moved in
• at time of fire tenants possessions in house,
  although tenant may have left
• no vacancy at time of loss

15
Marche v. Halifax Insurance (con't)

• insurer claimed that prior vacancy was material
  change and voided policy
• tj held that even if this was breach of stat
  cond., s. 552 allowed court to declare it unjust
  or unreasonable

16
Marche v. Halifax Insurance (con't)

• SCC can s 552 relieve against unreasonable or
  unjust statutory conditions?
• how can a statutory condition which is mandated
  by legislature be unreasonable? How did SCC solve
  this dilemma?

17
Marche v. Halifax Insurance (con't)

• what were insurers arguments that sect was
  restricted to statutory conditions? - see p. 154
• What did majority of SCC decide regarding whether
  the earlier vacancy could be relied upon by the
  insurer even if the loss occurred after the
  property became unvacant? See p. 156

18
Marche v. Halifax Insurance (con't)

• Dissent
• sect 552 does not apply to statutory conditions
• dissent examined the immediate context of the
  words in s 552, the broader context of the
  section and the external context - see p. 157

19
Marche v. Halifax Insurance (con't)

• look at the four words exclusion, stipulation,
  condition or warranty - only a condition can be
  a statutory condition, others are all
  contractual, therefore all must be contractual
• look at broader context - see 158-161

20
Marche v. Halifax Insurance (con't)

• why require mandatory statutory conditions and
  allow no deviation? Is it for insureds benefit
  or insurers benefit?
• when Act refers to statutory conditions it refers
  to them as statutory conditions - not just
  conditions

21
Marche v. Halifax Insurance (con't)

• fact that no link between loss and material
  change irrelevant that is true of all breaches
• insureds ignorance that it was material and had
  to be disclosed irrelevant

22
3. Automobile Insurance(A) Non-disclosure and
Misrepresentation Section 613 (1)

• applicant gives false particulars
• applicant knowingly misrepresents

23

• applicant fails to disclose
• insured contravenes term of contract
• insured commits a fraud
• insured wilfully makes false statement re claim

24
Section 614 1

• change material to risk

25
Sleigh v. Stevenson

• son bought car, registered it in mothers name,
  transferred license to mother before insurance
  obtained
• mother insured car - stated she bought it and was
  the registered owner (which she was)

26
Sleigh v. Stevenson (con't)

• son told these things to agent when insurance was
  being obtained
• agent put in incorrect answers mother signed
  without reading
• wrong occupation of mother also put in

27
Sleigh v. Stevenson (con't)

• son was driving, was in accident, indemnity
  sought
• What arguments does insurer have to deny claim?
• was statement that mother was registered owner
  true?

28
Sleigh v. Stevenson (con't)

• what about statement that she purchased car?
• if not is this knowing misrepresentation?

29
Sleigh v. Stevenson (con't)

• how about the fact that mother did not put
  answers in, did not know what answers were, and
  signed without reading application?
• how about lack of insurable interest?

30
Merritt v. Merit Insurance

• Pls co owned 11 trucks
• one of trucks damaged insurance coverage claimed
• wrong year of truck given in application - 1956
  truck was described as a 1958 truck

31
Merritt v. Merit Insurance (con't)

• wrong serial number as well
• were these false descriptions to prejudice of
  insurer?

32
Moxness v. Co-operative

• insured had prior accident, ten driving
  convictions, suspended license
• spoke to agent over the phone
• told agent about tickets in general terms, did
  not tell agent about license suspension, nor
  about one minor accident while car driven by
  someone else

33
Moxness v. Co-operative (con't)

• application later signed without having been read
  over (in dispute)
• agent assured him he would follow up on the
  driving record
• driving record obtained after accident occurred

34
Moxness v. Co-operative (con't)

• was this a knowing misrepresentation on part of
  insured?
• What is Newsholme rule?
• Are there exceptions - eg. Blanchette case (p.
  168) or Stone (p. 168)?

35
(B) Changes Material to the RiskThompson v.
Allianz

• Buck Peters (a rodeo guy) bought car with loan
  and granted lien
• Thompson (pl) agreed to buy car from Buck,
  payment to be made in cows

36
Thompson v. Allianz (con't)

• Thompson did not know about the lien
• Insurance issued to Thompson - no disclosure of
  lien - 1989
• Collision damage when Buck was driving - 1993

37
Thompson v. Allianz (con't)

• Lots of people drove car, but ultimately Buck
  became main driver
• Was there a change material to the risk? What was
  it?

38
Thompson v. Allianz (con't)

• What was problematic about Bucks driving the
  car?
• Must insured know that the change is material to
  risk? What must insured know?

39
Travellers Indemnity v. Lafleche

• son bought a car using as part payment a car his
  father had given him
• car registered in fathers name, father was
  insured

40
Travellers Indemnity v. Lafleche (con't)

• son in accident
• Did insured father have insurable interest? Was
  he the owner?

41
Travellers Indemnity v. Lafleche (con't)

• Did material change in risk regarding first car
  (the one that was given) invalidate insurance on
  second car (the one bought by son), since the
  second car was paid for and driven by son? (ie.
  the circumstances surrounding the insureds
  ownership of second car was materially different
  than circumstances surrounding ownership of first
  car.)

42
Heon ICBC

• is physically altering a vehicle to turn it into
  mobile concession vehicle a material change?
• is turning a pleasure vehicle into a business
  vehicle a material change?
• why did court rule against insurer in this case?

43
Annotation

• some cases avoid material change in risk defence
  by seeing it as coverage issue, and not a breach
  issue. Thus if at time of accident, car was not
  being used as a business vehicle, there is still
  coverage. Author is critical of this.

44
4. Life Insurance(A) misrepresentation

• s. 567 disclosure of material facts
• s. 568 incontestability clause
• s. 570 misstatement of age

45
Murphy v. Sun Life

• insured lied or failed to disclose on 3 questions
• died one year later from natural causes unrelated
  to misrepresentations
• does IA require dishonest intent?

46
Murphy v. Sun Life (con't)

• does insured have to realize that the
  misrepresentations are material?
• who has onus of proof re misrep. and non-
  disclosure?
• does death have to relate to the misrepresented
  facts?

47
(B) Incontestability clauseBureau v. Mfgers
Life

• policy issued June 1932
• died Jan 1935
• insurer claimed misrepresentations - 2 years had
  passed, therefore fraud required

48
Bureau v. Mfgers Life (con't)

• if between application and delivery of policy
  there has been change in insurability is policy
  valid? See section 564(1)
• Is fraud required under s 564 (1)? Did court
  require it here? Was there a change in
  insurability during that period?

49
35445 Alberta v. TransAmerica Life

• 2 years had passed
• tj found fraud
• pl argued that insurers doctor knew of truth of
  fact

50
35445 Alberta v. TransAmerica Life (con't)

• C of A affirmed tj - drs knowledge re insureds
  prior activities as pilot of ultra light planes
  not knowledge of insurer

51
CHAPTER 3 THE INSURANCE POLICY

• A. FORMATION OF CONTRACT

52
Davidson v. Global

• insured had policy with Global (March 1)
• previously had discussed policy with Ocean
• received letter from Ocean on Feb. confirming
  policy but premium, term not agreed to yet

53
Davidson v. Global (con't)

• fire occurs March 1 Global seeks contribution
  from Ocean
• Was there a policy wit Ocean on March 1?
• What are essential terms of a contract of
  insurance?
• definition of risk duration of contract
  premium amount insured

54
McCunn Estate v. CIBC

• Mr. and Mrs. McCunn had separate lines of credit
  with CIBC
• Mutual Life Ass insured lines of credit (in
  co-operation with CIBC)
• CIBC changed its policy -no longer provided the
  insurance without cost

55
McCunn Estate v. CIBC (con't)

• existing customers were in, unless they opted
  out, until age 70
• Mr. and Mrs. consolidated the two lines of credit
  into one insurance co was informed
• monthly premiums debited to the unified line of
  credit

56
McCunn Estate v. CIBC (con't)

• Mrs. turned 70, but CIBC continued debiting line
  of credit until her death, 16 months later
• CIBC admitted it was its mistake, reversing the
  charges
• bank refused to apply insurance to reduce line of
  credit

57
McCunn Estate v. CIBC (con't)

• Chadwicj J had rejected arguments of estoppel or
  reasonable expectation but held that Bank had by
  its conduct extended the term of the insurance
  contract
• BORINS J (majority)

58
McCunn Estate v. CIBC (con't)

• no offer to extend or acceptance - therefore no
  contract
• no intention to extend on banks part
• no reliance by Mrs. M
• FELDMAN (dissenting)

59
McCunn Estate v. CIBC (con't)

• offer and acceptance was present
• Mrs. M knew money was being deducted and her
  silence connotes acceptance
• no detrimental reliance necessary
• this was not a computer error - computer was
  programmed to continue deducting

60
B. Cover Notes

• a cover note is immediate, temporary cover

61
Buske v. Potter

• insured obtained cover note on July 6. Paid
  premium requested. Cover note said that coverage
  was for July 7 - Jan. 7.
• insurer claimed that cover was good for 15 days,
  that agent told him this, that premium was too
  low, that they sent insured notice requesting
  app. premium

62
Buske v. Potter (con't)

• insured denied that he received anything
• accident Aug 13
• Was there coverage?

63
Buske v. Potter (con't)

• see s. 612 insurer can issue certificate instead
  of policy
• where premium and application form received and
  retained by insurer, strong presumption that
  proposal has been accepted

64
Bordeniuk v. Co-Operative Fire

• s. 635 action
• policy termination date April 27
• auto renewal notice sent April 6 offering 6 month
  renewal if premium paid

65
Bordeniuk v. Co-Operative Fire (con't)

• pink card sent having dates April 27 - May 11 (14
  day grace period after termination)
• second notice sent April 24 - auto expiry
  notice, required premium to be paid within 10
  days of expiry
• accident May 5

66
Bordeniuk v. Co-Operative Fire (con't)

• insured did not renew or give notice of accident
• is pink card a motor vehicle liability policy
  under s 635(5)?

67
Bordeniuk v. Co-Operative Fire (con't)

• is a renewal certificate under s. 612(5) a policy
  under s. 635(5)?
• what is a pink card - see s. 821 et s.

68
C. Duration of CoverLumbermens Mutual v. Stone

• s. 614 8
• what happens if registered letter is sent to app
  post office but not received by insured?

69
Ellis v. London Canada

• policy issued Sept. 1
• Sept. 15 insured asked to return policy for
  cancellation
• Sept. 20 policy returned, premium refunded and
  cashed

70
Ellis v. London Canada (con't)

• Sept. 23 accident
• Does 15 day notice requirement of s. 6148 apply?

71
Krupich v. Safeco (con't)

• registered letter to cancel sent Feb. 26
• not received
• premium refunded April 10

72
Krupich v. Safeco (con't)

• fire April 26
• was policy terminated before fire?
• did Court agree with Lumbermens Mutual?

73
D. Interpretation of Terms

• Two types of interpretation issues
• was the risk that occurred (eg fire, theft,
  accidental death) covered?
• did the loss claimed result from that risk?

74
Jesuit Fathers of Upper Canada v. Guardian
Insurance

• claims made policy - ie. if claim is made while
  policy is in force, it is covered
• occurrence based policy - if the wrong arose
  during the period of policy it is covered, even
  if claim is made later
• this was claims made general liability policy

75
Jesuit Fathers of Upper Canada v. Guardian
Insurance (con't)

• issue here when were the claims made for
  residential school abuse?
• when there is ambiguity in policy contra
  proferentem applies coverage is interpreted
  broadly exclusions are interpreted narrowly

76
Jesuit Fathers of Upper Canada v. Guardian
Insurance (con't)

• give effect to reasonable expectations of parties
• consider the context of the risk
• Court held that claims made referred only to
  claims that were filed against the insured during
  policy period

77
Jesuit Fathers of Upper Canada v. Guardian
Insurance (con't)

• here claim was made in letter Jan 27, 1994
• insurer was informed of other possible claims on
  March 18, 1994

78
Jesuit Fathers of Upper Canada v. Guardian
Insurance (con't)

• policy terminated Sept 30 1994
• only Cs claim was made during term of policy
  therefore only duty was to defend against that
  claim

79
Brissette Estate v. Westbury Life

• hus and wife had joint policy, proceeds payable
  to survivor
• hus murdered wife 2 yrs and 2 months after policy
  came into effect
• executor sought to claim proceeds on behalf of
  wifes estate

80
Brissette Estate v. Westbury Life (con't)

• MAJORITY
• contract not ambiguous - payment is made to
  survivor - wife was not survivor
• hus was survivor - but not entitled to the money
  because of public policy

81
Brissette Estate v. Westbury Life (con't)

• whether constructive trust should be created
  depends on principles of equity not on
  interpretation of contract - here no constructive
  trust

82
Brissette Estate v. Westbury Life (con't)

• DISSENT
• insurance contract is a contract of adhesion (
  see p. 211 for characteristics)
• reasonable intention of parties must be taken
  into account

83
Brissette Estate v. Westbury Life (con't)

• policy is ambiguous - does not deal with this
  scenario
• public policy does not dictate that wifes estate
  should be disentitled
• however Cory would not apply accidental death
  double indemnity provision

84
Amos v. ICBC

• appellant shot by gang while driving his car
• was this an injury caused by an accident that
  arises out of the ownership, use or operation of
  a vehicle?
• look at prior jurisprudence regarding this phrase

85
Amos v. ICBC (con't)

• two part test did accident result from ordinary
  and well known activities to which cars are put
  ie purpose test?
• was there sone nexus or causal relationship
  between the injuries and the ownership, use or
  operation or was the connection merely incidental
  or fortuitous ie. causation test?

86
Amos v. ICBC (con't)

• was the purpose test met here?
• was causation test met?
• need not be direct or proximate

87
Amos v. ICBC (con't)

• why was the appellant shot and attacked in his
  car? Was this merely coincidental or was it
  related to their attempt to get the car? There
  was a connection between the use of the car and
  the injury.

88
Citadel v. Vytlingam (SCC)

• vehicle struck by boulder thrown by F and R from
  overpass
• F was inadequately insured motorist
• insureds sought to recover from their own insurer
  damages they obtained in civil judgment against F
  pursuant to inadequately insured motorist
  coverage in their policy

89
Citadel v. Vytlingam (SCC) (con't)

• were these compensatory damages in respect of
  bodily injury to an insured person arising
  directly or indirectly from the use or operation
  of an automobile ( ie Fs automobile)?
• Lower courts relied on Amos case gave coverage

90
Citadel v. Vytlingam (SCC) (con't)

• SCC reversed.
• purpose test met causation test not met
• F was using his car as a car when transporting
  rocks to overpass no problem here

91
Citadel v. Vytlingam (SCC) (con't)

• tort was intervening act severable from the use
  and operation of Fs vehicle
• relaxed test of Amos re no fault benefits cannot
  be applied in indemnification insurance context
• here F was liable not as a motorist but as
  tortfeasor who dropped boulder

92
Herbison v. Lumbermens (SCC)

• victim creditors action against insurance co of
  tortfeasor
• same reasoning as Citadel
• the tortfeasors act of negligently shooting
  victim was independent from his use and operation
  of his vehicle to get to place where he got out
  of his car to hunt.