When a person applies for life insurance, and is then diagnosed with cancer after she has applied for the policy but before the policy has been delivered and paid for, the potential insured has an obligation to advise the insurer that she has been diagnosed with cancer. Failure to advise the insurer will void the policy.

Anderson v. Sun Life Assurance Co. of Canada, [2005] S.J. No. 230, Saskatchewan Court of Queen’s Bench

On November 19, 1999, Mrs. Anderson completed and submitted an application form to Sun Life for $100,000 of life insurance. She provided Sun Life with a medical report from her doctor indicating that she was healthy given her age of 80 years and had several medical problems that were identified in the application. Sun Life approved Mrs. Anderson’s application and issued the policy for the base amount of $100,000. Sun Life sent the policy documents to Mrs. Anderson’s broker, Mr. Hornung. Mr. Hornung received the documents on December 13, 1999 and forwarded them to Mrs. Anderson. Mrs. Anderson executed the documents on December 16, 1999 and returned them to Mr. Hornung on December 18, 1999. On December 15, 1999, Mr. Hornung received $15,000 from Mrs. Anderson as a premium for the life insurance policy. Sun Life received the cheque and the documents executed by Mrs. Anderson on December 31, 1999.

On December 5, 1999, Mrs. Anderson attended at the Red Deer Regional Hospital complaining of lower abdominal and back pain, and a hardening of her stomach. On December 5, 1999, Mrs. Anderson underwent an ultrasound that confirmed the presence of a large mass arising from her pelvis which was diagnosed as cystadenocarcinoma of an ovary. On December 29, 1999, Mrs. Anderson’s doctors concluded she had inoperable ovarian cancer. Mrs. Anderson received intermittent hospital treatment following that diagnosis until she died on December 11, 2000.

Mrs. Anderson’s estate commenced an action against Sun Life for payment of the benefits under the life insurance policy. Sun Life argued that the life insurance policy was void pursuant to section 142(1) of the Saskatchewan Insurance Act. Section 142(1) states that a contract does not take effect unless:

(a)   the policy is delivered to an insured, his assign or to a beneficiary;

(b)   payment of the first premium is made to the insurer or its authorized agent; and

(c)   no change has taken place in the insurability of the life to be insured between the time the application was completed and the time the policy was delivered.

Counsel for Mrs. Anderson’s estate argued that a clause contained in the life insurance policy was inconsistent with section 142 of the Act and as such, Mrs. Anderson’s estate was entitled to the benefits. The material part of the disputed clause in the insurance contract read:

Sun Life will not incur any liability pursuant to this application unless and until (a) it has approved the issue of a policy, (b) it has received the first premium, in full, and (c) the answers and statements made on this Application are complete and true as of the date the first premium is paid in full.

The trial judge determined that there was no direct conflict between section 142 of the Act and the clause, and that the clause in the contract was not ambiguous. The action commenced by Ms. Anderson’s estate was dismissed.

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