A wilfully false statement can void coverage to an insured, even if the insured corrected the false statement on the next business day, and the false statement had no practical effect on the manner in which the claim was handled by the insurance company
Brown v. Insurance Corp. of British Columbia,  B.C.J. No. 919, British Columbia Court of Appeal
Mr. Brown rolled his Toyota 4-Runner in a gravel parking lot on July 3, 1996. He and four passengers left the scene, one of the passengers was injured. Early the next morning Mr. Brown reported to the police, and to his automobile insurer, that his vehicle had been stolen. Over the long weekend he decided to admit that he had lied. He called the police over the weekend, and on Monday, July 8, 1996, he went to his automobile insurer’s office, and told the claims adjuster the true story. Several weeks later one of the passengers submitted a claim for injuries suffered in the accident.
Mr. Brown commenced an action claiming the costs of repairing his Toyota 4-Runner, and the automobile insurer counterclaimed for the sum of $23,665.67, the amount it paid to the passenger in settlement of her claim for personal injuries. The trial judge dismissed Mr. Brown’s claim for repairs to his vehicle on the grounds that the wilfully false statement that he had made to his automobile insurer was material to his claim for vehicle repairs and was forfeited pursuant to section 19(1)(e) of the Insurance Motor Vehicle Act (the “Act”). The trial judge dismissed the automobile insurer’s counterclaim on the basis that Mr. Brown’s false statement was not material to his claim for indemnity with respect to the injuries suffered by the passenger.
The automobile insurer appealed the dismissal of its counterclaim on the basis that the learned trial judge committed an error of mixed fact and law in finding that Mr. Brown’s wilfully false statement was not material to his claim for indemnity with respect to the injuries suffered by the passenger. A five-panel bench heard the appeal. Section 19(1)(e) of the Act states:
19(1) If …
(e) an insured makes a willfully false statement with respect to a claim under a plan,
all claims by or in respect of the applicant or the insured are rendered invalid, and his or her right and the right of a person claiming through or on behalf of or as a dependent of the applicant or the insured to benefits and insurance money is forfeited.
The court determined that in interpreting section 19(1)(e) of the Act, the wilfully false statement must be material to each individual claim. Therefore, a false statement could be material to one claim but not another, despite the fact that both claims arose from the same incident. A majority of the court concluded that in determining what constituted materiality, one must determine whether the false statement was capable of affecting the insurer’s mind as to the management of, or payment of, the claim. The majority of the court specifically stated that one does not consider what the insurer did or did not do in determining materiality. The majority determined that the trial judge fell into error in considering what steps the automobile insurer actually did or did not take in the management and payment of the claim in determining whether the false statement was material to Mr. Brown’s claim to be indemnified for the passenger’s claim. The majority determined that had the trial judge considered the question of whether the false statement was capable of affecting the mind of the insurer, he would have been driven to conclude that it was material to the claim for indemnity of the sum paid to the passenger. Therefore, the majority of the court allowed the automobile insurer’s appeal.
In dissent, two Justices agreed with the majority that in order to claim forfeiture pursuant to section 19(1)(e) of the Act, the automobile insurer must establish that Mr. Brown’s false statement was material to the passenger’s claim. However, in the dissenting opinion, it could not be said that Mr. Brown’s false statement had the capacity to effect the automobile insurer, since the insurer did not have any knowledge of the passenger’s claim until some weeks after Mr. Brown had admitted his deceit and advised the automobile insurer of the truth of the accident. The dissent noted that materiality should not be considered in a hypothetical sense, and concluded that since the evidence did not establish that the false statement was capable in any practical way of affecting any decision the insurer might have made with respect to the management of, or payment of, the passenger’s claim, the statement was not material to that claim.
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