Commonwealth Insurance (“Commonwealth”) was successful in appealing a trial decision allowing Skuratow’s claim for the replacement value of his missing truck and trailer where the Court found that Skuratow made wilfully false statements to Commonwealth’s adjuster which were material to the claim

Skuratow v. Commonwealth Insurance Co., [2005] B.C.J. No. 2257, British Columbia Court of Appeal

Skuratow was the owner of a logging truck and trailer which were financed by CIT Financial Limited and insured by Commonwealth. The truck and trailer were in Skuratow’s name, but the business was run in all significant respects by his wife. The business experienced ongoing difficulties in making its monthly payments to CIT with respect to the truck and trailer although partial payments were made. On April 15, 2002, Skuratow’s wife was advised that the truck and trailer were missing. On the same date, knowing the truck and trailer were missing, Skuratow’s wife called CIT to discuss further payments and was advised that CIT planned to seize the truck. On April 18, 2002, Skuratow gave a statement to the adjuster representing Commonwealth and told him that the payments with CIT were up to date. The statement was false, as approximately $30,000 was owing to CIT, and made in the presence of Skuratow’s wife, who did nothing to correct Skuratow, although she knew the payments were in arrears. On July 29, 2002, Skuratow made further statements to an investigator from Commonwealth which did qualify the original statement concerning the payments to CIT on the truck but contained further misstatements.

At trial, Skuratow’s claim was allowed as the trial judge was of the view that Skuratow’s statement with respect to the total money owing on the truck and trailer were not material. Commonwealth appealed this decision.

The Court of Appeal allowed the appeal, finding that the trial judge erred in holding that the statements were not false statements that were wilfully made within the meaning of section 131(1)(c) of the Insurance Act, R.S.B.C. 1996, c. 226. This section provides that where an Insured “makes a false statement” in respect of the claim under the contract, the claim by the Insured is invalid and the right of the Insured to recover indemnity is forfeited. The Court held that a wilfully false statement within the meaning of section 131(1)(c) includes a statement which is made as a result of wilful blindness as to the truth of the facts alleged, or with reckless disregard of the true facts, citing the decision of the House of Lords in Derry v. Peek, (1889) 14 App. Cas. 337.

In this case, Skuratow had admitted on Discovery that he had no actual knowledge of the state of the accounts with respect to monies owing on the truck and trailer at the time that he made the statements. The Court found it difficult to comprehend how Skuratow’s statements could be viewed as having been made “honestly” when they were made in total and intentional ignorance of the true state of affairs and without any effort on his part to make an inquiry. The Court was satisfied that the statements were wilfully false, in the sense of having been made recklessly, and without regard to their truth or falsity and were not merely errors made through inadvertence or negligence.

The test for determining whether a statement was “material” was whether the statement had the capacity to effect the mind of the Insurer, either in the management of the claim or in deciding to pay it: Inland Kenworth Ltd. v. Commonwealth Insurance (1990), 48 B.C.L.R. (2d) 305 (B.C.C.A.). The Court of Appeal disagreed with the reasoning of the trial judge who had held that the misstatements could not possibly have affected Commonwealth’s management of the claim, because Commonwealth had proceeded as if the claim might be fraudulent in any event. The Court held that this was a misapplication of the test from Inland Kenworth which requires only that the statements have the capacity to effect the mind of the Insurer, either in the management of the claim or in deciding to pay it. The Court noted that to follow the reasoning of the trial judge would permit a person making a claim for insurance to make wilfully false statements with impunity in any case in which the Insurer had already decided to investigate the claim.

In this case, the Court held that the false statement made by Skuratow relating to the absence of debts owing by the business had the capacity to affect the nature and extent of Commonwealth’s investigation. Skuratow’s initial statement that there was no money owing to CIT was clearly material in that it had the capacity to alleviate any concerns of Commonwealth that the owners may have been driven to desperate measures, such as arranging for the disappearance of the truck and trailer, by adverse financial circumstances. Therefore, the misstatements were material.

In the result, Commonwealth’s appeal was allowed and the Order at trial was set aside and the action dismissed.

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