Ontario Court of Appeal upholds decision that insurer did not establish, on a balance of probabilities, that insured made material and fraudulent misrepresentations on application for insurance and therefore insured’s life insurance policy was valid

Insurance law – Life insurance – Misrepresentation in obtaining insurance – Fraud – Criminal offences – Duties and liabilities of insured – Policies and insurance contracts – void Ab Initio – Practice – Leave to appeal

Costanza (Litigation guardian of) v. Desjardins Financial Security Life Assurance Co., [2023] O.J. No. 373, 2023 ONCA 54, Ontario Court of Appeal, January 26, 2023, K.M. van Rensburg, L. Sossin and J.M. Copeland JJ.A.

Following the death of his father, the 13 year old plaintiff sought a declaration that his father’s life insurance policy was valid and binding on the insurer. The insurer refused to pay the plaintiff on the basis that the insured made a material and fraudulent misrepresentation on his application for insurance. The insurer argued that the policy was void ab initio because the insured represented on the application that he had not been convicted or pled guilty to a criminal offence in the three years preceding the application when, in fact, he was convicted of assault causing bodily harm 2 years, 9 months, and 29 days prior to submitting the application for insurance. The insurer also argued that the insured had an obligation to disclose the fact that he had a criminal history or background when applying for insurance, and that the policy was voidable because he failed to do so.

The Superior Court found that it was possible the insured could have been mistaken in calculating the time between his conviction and the date of his application, and thus the insurer had not proven on a balance of probabilities that the insured had obtained the policy through material misrepresentation or fraud, or that he had a criminal history or background. The Superior Court also found that the insurer had not established that the insured had a criminal history or background and held that the policy was valid and payable to the plaintiff.

On the issues of the insured’s criminal conviction, the Court of Appeal held that the insurer failed to show any palpable and overriding error in the findings of fact of the Superior Court judge and that the findings were entitled to deference. On the issue of the insured’s criminal history or background, the insurer attempted to introduce fresh evidence to advance this argument which was rejected by the Court of Appeal. The Court of Appeal held it was not appropriate to allow the insurer on appeal to fundamentally change the basis on which this argument was made. The appeal was dismissed.

This case was digested by Alicia Catalano, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Alicia Catalano at [email protected].

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