Insured’s Material Misrepresentations Resulted in Denial of Disability Benefits

Insured found to have made material misrepresentations during his application for a life and disability policy.

Linden Estate v. CUMIS Life Insurance Co., [2014] N.S.J. No. 153, April 4, 2014, Nova Scotia Supreme Court, D. Boudreau J.

The applicant, as personal representative of her deceased husband, sought an order that the respondent insurer pay the full amount owing under a life insurance policy and monthly disability insurance benefits for a period of time prior to her husband’s death. The insurer responded that the deceased had made material misrepresentations as to his health in his application for insurance thereby voiding the contract abs initio.

The Court reviewed the deceased’s application for insurance, the answers he gave on the initial application and on a supplemental health questionnaire which consisted of a telephone interview conducted by an underwriter to ask more detailed questions. The Court concluded that the deceased had misrepresented facts in relation to his health to the insurer. The Court also concluded that the misrepresentations were material in that they would have affected either the premium or the risk for the insurer. The deceased’s misrepresentations were the subject of specific questions and related to fundamental issues relating to a person’s health, i.e., hospitalization and treatment, and the use/abuse of drugs. Accurate answers to these questions would have lead the insurer to details and information relating to the extent of the deceased’s health difficulties. The Court concluded that a reasonable insurer given the accurate information would clearly have required a higher premium or declined the risk. On this basis, the application was dismissed.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

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