Filling Out an Insurance Application? Don’t Leave Anything Out!
5/2/2014 12:32 PM
In the recent Nova Scotia Supreme Court decision of Linden Estate v CUMIS Life Insurance Co, 2014 NSSC 115, Wanda Linden, as personal representative of her deceased husband Patrick Linden, sought an order that CUMIS Life Insurance Company pay the full amount owing under a life insurance policy on Mr. Linden’s life. CUMIS argued that Mr. Linden had made material misrepresentations about his health in his application for the life insurance policy, thereby voiding the insurance contract ab initio. As a result, CUMIS argued that there was no amount owing to Ms. Linden.
In its decision, the Nova Scotia Supreme Court reiterated that it is well-settled that insurance contracts are contracts of utmost good faith, requiring those seeking insurance to disclose all material facts known to them. Indeed, the Insurance Act of Nova Scotia has codified the obligation for disclosure by those who are applying for disability and life insurance. The Court noted that a fact is said to be material “if it had been truly disclosed it would have caused a reasonable insurer to decline the risk or to have stipulated a higher premium.”
The Court concluded that Mr. Linden did misrepresent facts in relation to his health, specifically as it relates to his prior hospitalization and treatment. In a questionnaire Mr. Linden was asked “if he had ever been a patient in a hospital, medical facility or treatment facility,” to which he incorrectly answered “no.” He was further asked “whether he had ever received or been advised to have treatment for the use or abuse of drugs,” to which he also incorrectly answered “no.” The Court held that these were not confusing questions and ought to have led to truthful answers. They did not. It was the Court’s conclusion that a reasonable insurer, given this information, would clearly have required a higher premium or declined the risk. It is on that basis that the Court found the contract was voided by Mr. Linden’s misrepresentations and Ms. Linden’s claim was dismissed.
Linden Estate v CUMIS Life Insurance Co is an excellent reminder of an applicant’s disclosure obligations when entering into insurance contracts and the sometimes severe consequence of breaching these obligations. The full text of this case can be found at: http://canlii.ca/t/g6drv
If you have questions or would like to discuss this topic further, please contact Sandra L. McCulloch at Patterson Law at 1-888-897-2001.
Please note that this article is meant to provide information only and is not intended to confer legal advice or opinion. Please note as well that many of the statements are general principles which may vary on a case by case basis. If you have any further questions, please consult a lawyer.