The insured plaintiff was successful in an action for payment under the policy against the defendant insurer because the insured was found not to have made wilfully misleading statements to the defendant. While the statements made by the insured’s wife to the insurer were found to be misleading, the statements were not within the scope of the wife’s authority as an agent. Moreover, nothing of an incorrect or misleading nature said by either the insured or his wife were material to the claim.

02. September 2004 0

Skuratow v. Commonwealth Insurance Co., [2004] B.C.J. No. 1823, Supreme Court of British Columbia

The plaintiff, Mr. Skuratow, owned a logging truck which was insured in his name. He contracted the truck’s services to various logging companies through his sole proprietorship (the “Business”). The plaintiff’s wife Mrs. Skuratow operated the Business.

The truck was financed through C.I.T. Financial Ltd. (“C.I.T.”) and insured through the defendant, Commonwealth Insurance Co. (“Commonwealth”). The Business was having trouble meeting some of the payments on the truck and had received three demand letters from C.I.T. Mrs. Skuratow opened all of these letters and usually offered part payment causing C.I.T. to forebear on each occasion.

On April 15, 2002 Mrs. Skuratow was informed that the lock on the compound where the truck was stored had been cut and that the truck had been stolen. Mrs. Skuratow informed her husband and reported the truck stolen to the police.

That same day, Mrs. Skuratow also called C.I.T. to negotiate for more time to make payments. A representative of C.I.T. responded by saying they would have to seize the truck. Mrs. Skuratow told the C.I.T. representative that it was fine with her that they take the truck. Mrs. Skuratow denied having this conversation; however, the Court accepted the evidence of the C.I.T. representative that this conversation took place.

Mrs. Skuratow did not inform C.I.T. that the truck was stolen until April 17, 2002.

On April 18, 2002, Mr. Skuratow gave a statement to the insurer that he was up-to-date on the truck payments. He confirmed that the truck payments were up-to-date as of the end of the Business year. He thought the year end was December 31; however, it was July 31.

On July 27, 2002, Mr. Skuratow gave a statement to the R.C.M.P. that he never missed a payment but sometimes he was short. He also indicated that C.I.T. was not really putting pressure on him to make payments.

On July 29, 2002, Mrs. Skuratow gave a statement to the R.C.M.P. that the Business was approximately $19,000 behind in its payments on the truck when it was actually closer to $30,000 behind. She denied that C.I.T. was pressuring her to make payments.

On July 31, 2002, Mrs. Skuratow completed a proof of loss form which the insurer refused to accept because she was not the insured. Mr. Skuratow then completed the same form later.

The insurer denied the claim on the basis that Mr. Skuratow and his agent, Mrs. Skuratow, made wilfully false statements about the state of the finance payments on the truck. Authority for denying a claim if the insured wilfully makes a false statement in respect of a claim is found in s.137(1)(c) of the Insurance Act, R.S.B.C. 1996, c. 226. Mr. Skuratow brought an action for payment under the policy and denied that he made any false or misleading statements.

The court addressed four issues.

The first issue was whether the insured wilfully made false statements to the insurer. The court found that while Mr. Skuratow did not tell the insurer the true state of affairs of the Business, he did not know the true state of affairs and therefore he did not wilfully make false or misleading statements. He also was not wilfully blind or reckless.

The second issue was whether Mrs. Skuratow was an agent of the insured for the purposes of the insurance claim. The court cited R. v. Strand Electric Ltd., [1969] 1 O.R. 190 (C.A.) for the proposition that in order for Mrs. Skuratow’s conduct to affect the claim, she would have to have been an agent of Mr. Skuratow with respect to the claim. According to the case law, employees are generally only agents of their employers with respect to a statement if making the statement is part of the employee’s job duties. While Mrs. Skuratow was akin to an employee and clearly an agent of Mr. Skuratow’s for much of the Business’s affairs, in her dealings with the insurer she was not acting in the course of her regular duties. Moreover, she was on a frolic of her own when she told C.I.T. to repossess the truck and even more so when she denied making that statement. In addition, the insurer did not consider Mrs. Skuratow an agent to Mr. Skuratow as they would not accept her proof of loss claim form because it had to be completed by the insured. For these reasons the court concluded that Mrs. Skuratow was not acting as an agent when she made the statements to the insurer.

The third issue was whether, assuming that Mrs. Skuratow was an agent of the insured, she wilfully made false or misleading statements. The Court found that Mrs. Skuratow’s failure to correct Mr. Skuratow that he was up to date on his truck payments was not a wilfully misleading statement because she was not asked at any time if Mr. Skuratow’s responses were correct. It was apparent she was not trying to mislead the insurer. Her statement to C.I.T. that she was agreeable to the truck being repossessed was not made in relation to the claim nor was it misleading. However, her subsequent denial of making the statement was wilfully misleading.

The fourth issue was whether the misrepresentations made by Mrs. Skuratow were material to the claim. The classic test of materiality in insurance law is whether a statement is capable of affecting the mind of the insurer. The court concluded that none of Mrs. Skuratow’s misstatements were material to the insurance claim because the insurer had the correct information with which to properly manage the claim before the claim was fully assessed. Furthermore, the insurer was already proceeding as if the claim might be fraudulent independent of any statements made to it by the Skuratows.

In the result, the court found in favour of the plaintiff and made a declaration that the insured was entitled to the replacement value of the truck payable when it is replaced.

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