Saskatchewan Court of Appeal finds lower court appropriately dismissed action summarily but erred in assessment of exclusion clauses

Insurers properly denied coverage because the insured died as a result of committing the crime of possession of the cocaine that he consumed.

Insurance law — Life insurance — Criminal offences — Exclusions – Duties and liabilities of insurer – Practice — Summary judgments – Leave to appeal

Jantzen Estate v. TD Life Insurance Co., [2023] S.J. No. 237, 2023 SKCA 76, Saskatchewan Court of Appeal, July 5, 2023, R. Leurer, J.A., Tholl and M. McCreary JJ.A .

Following the death of the insured, the insured’s estate applied under two of the insured’s life insurance policies for payment of debts to Toronto-Dominion Bank (“TD”). One policy covered debt owing pursuant to a line of credit (the “LOC Policy”), while the other policy covered debt owing under a mortgage (the “Mortgage Policy”). The insurers denied coverage on the basis that the insured died as a result of, or while committing, a criminal offence (possession of cocaine) and the claims were therefore excluded by the policies’ exclusion clauses. The estate commenced an action against the insurers and the insurers applied for summary judgment dismissing the estate’s claim.

The LOC Policy included an exclusion that no benefit would be payable if “your death is a result of, associated with, or happens while you are committing a criminal offence”. The exclusion found in the Mortgage Policy stated that no benefit would be paid if “your death is a result of or while you were committing a criminal offence”.

The Court of Queen’s Bench broke down the exclusion clauses into three different exclusions: (1) the insured dies as a result of committing a criminal offence (“Result Exclusion”); (2) the insured dies while committing a criminal offence (“While Exclusion”); and (3) the insured’s death is associated with committing a criminal offence (“Associated Exclusion”).

The lower court found that the insured died from an overdose of cocaine and alcohol, and at the time of his death, he was in possession of cocaine which was a criminal offense. The lower court concluded that the While Exclusion applied because the insured died while in possession of cocaine and that the Associated Exclusion applied because the insured’s death was associated with his possession of the cocaine that he ingested.  However, the Result Exclusion did not apply because ingesting cocaine is not illegal and the insured’s death was not caused by his mere possession of cocaine.  Accordingly, the lower court dismissed the estate’s claim because the exclusion applied to negate coverage on both policies.

The Court of Appeal agreed with the result that there was no coverage under the policies but disagreed with the application judge’s analysis. The Court of Appeal disagreed with the analysis of the While Exclusion and the Result Exclusion. With respect to the While Exclusion, the Court of Appeal found that the lower court erred in finding that the insurers properly denied coverage simply because the insured died while in possession of cocaine. This interpretation would allow an insurer to deny coverage whenever there is a coincidence in the time when a crime occurs and when an insured dies. The Court of Appeal found that a more sensible interpretation of the exclusion requires that the death occur at the same time as a criminal offence and that the actions that constitute a criminal offence be connected in some way with the death of the insured. The Court of Appeal found that coverage could not denied pursuant to the While Exclusion.

With respect to the Result Exclusion, the Court of Appeal held that the lower court erred when it found that the insured’s death was not the result of his commission of a crime. The Court of Appeal found that the insured’s possession of cocaine was a cause of his death in the sense that, but for the act that he possessed it, he could not have consumed it and, had he not consumed it, he would not have overdosed and died. The causal connection between the crime and death existed in this case because the action leading to the death only occurred because of the criminal act. Accordingly, the Court of Appeal found that the insured’s death was the result of his illegal possession of cocaine and the insurers were entitled to deny coverage under the two policies.

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 acatalano@harpergrey.com.

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