Misrepresenting the identity of the prinicipal operator of a vehicle can invalidate the insurace

Mr. Teap had been involved in six at-fault motor vehicle accidents. When renewing the insurance on his 2000 BMW under his company name, he stated that there was no principal operator assigned to the BMW. After an investigation following subsequent damage to his car, ICBC denied coverage. The Judge found that Teap knowingly misrepresented that there would be no principal operator when in fact he was the only operator of the vehicle.

Lexus Holdings Int.’s Ltd. v. The Insurance Corp. of British Columbia, [2009] B.C.J. No. 495, March 13, 2009, British Columbia Supreme Court, E.A. Arnold, Bailey, J.

Mr. Teap is the only director and shareholder of Lexus Holdings in Canada. Lexus Holdings has owned three vehicles and purchased five new policies of insurance. Teap was the principal operator named on the first three policies, then a Mr. Osagie was named on the fourth, then no principal operator was designated on the fifth. This claim arose under the fifth policy. Teap had been involved in six at-fault accidents between 1995 and 2003, which resulted in him having a +130 Claim Rated Scale, which attached a 1300% surcharge to his name.

In 2005, the BMW was vandalized and ICBC concluded that it was a total loss. The actual cash value of the BMW was assessed at $32,640.00.

ICBC advised Teap that they were denying his claim as he was in breach of s.19 (1)(b) of the Insurance Act, which states that if an applicant knowingly misrepresents or fails to disclose a fact required to be stated in it, then all claims are rendered invalid and insurance money is forfeited. ICBC’s position at trial was that Teap recognized that he would pay significantly more as the declared principal operator than if none was designated. Teap’s position at trial was that he did not generally know who the principal operator was going to be and that he did not engage knowingly in a misrepresentation. Teap argued in the alternative that if it was found that he did knowingly misrepresent the information, the Court should grant relief from the forfeiture of the insurance benefits pursuant to s.24 of the Law and Equity Act.

Knowingly making a misrepresentation is a form of fraud. The standard of proof is on the balance of probabilities, and clear and quotient evidence is required. The judge referred to a number of cases that showed that speculation, suspicion or potentially unreliable evidence from a Plaintiff who sustains a loss, constitute an insufficient basis upon which an insurer may deny a claim based on fraud or a type of fraudulent misrepresentation. The Judge found that the circumstances of this case could be distinguished from those cases as Teap was not involved in the theft of this vehicle or any other physical act in relation to it. A finding that Teap knowingly misrepresented the matter of the principal operator rests entirely on an assessment of the inherent reliability and credibility of his testimony, contrasted against the facts likely known to him at the time.

The Judge found Teap to be a highly unreliable witness whose evidence shifted frequently when he considered it in his own best interest. He was evasive, cagey and outright contradictory in many of his answers, and the Court could have no confidence in any of his assertions.

Teap had no other vehicles registered in his name during the insured period. Had he been declared the principal operator, he would have been required to pay $45,902.00 for insurance for the year as opposed to the $5,869.00 he paid.

The Judge was satisfied on a balance of probabilities that Teap knew he was a principal operator when he declared in his contract with ICBC that there was no principal operator and thus knowingly misrepresented the information. The burden was on ICBC to prove that Teap did not have an honest belief that there was no principal operator for the BMW and the burden was met.

In turning to consider s. 24 of the Law and Equity Act, the Judge held that as it is purely discretionary, and Teap has shown a blatant disregard for his obligation to be truthful, the Judge declined to grant relief.

This case was originally summarized by Neil J. MacDonald and originally edited by David W. Pilley.

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