Aviva Insurance Canada v. Mr. P, 2017 CanLII 148395

Tribunal File Number: 16-004349/AABS

In the matter of an Application pursuant to subsection 280(2) of the Insurance Act, RSO 1990, c I.8., in relation to statutory accident benefits.

Between:

Aviva Insurance Canada

Applicant

And

“Mr. P”

Respondent

REASONS FOR DECISION AND ORDER

ADJUDICATOR: Jeffrey Shapiro

APPEARANCES:

For the Respondent: Marni Miller, Counsel
For the Applicant: Ruslan Dimitrov, Counsel

HEARD: In-Person on April 25, 2017

OVERVIEW

1Mr. P¹ was injured in a motor vehicle accident on December 8, 2014. He applied for and received various insurance benefits from Aviva under the Statutory Accident Benefits Schedule – Effective after September 1, 2010 (the “Schedule”) including $14,514 in Income Replacement Benefits (“IRB”). Aviva, however, subsequently voided the policy because Mr. P failed to disclose that his partner, who has a poor driving record, had moved in with him a year before the accident.

2Before me is Aviva’s Application to this Tribunal for an order requiring Mr. P to repay Aviva that $14,514 and also to reimburse Aviva for $5,537 that Aviva expended on insurer examinations (“IEs”) to address Mr. P’s entitlement to the IRB.

3Aviva submits that Mr. P’s actions constitute a “wilful misrepresentation” or “an intentional failure to disclose a material change in risk to the contract” under ss. 31(1)(b), 52 and 53 of the Schedule, and so Mr. P must repay those amounts. Mr. P does not dispute the policy was properly voided, but disputes that he intentionally failed to disclose any information, pointing to his broker’s error, and so he is not required to repay the benefits.

4The matter was heard by a combination of Mr. P’s in-person testimony and written submissions. The submissions included surveillance videos, a recorded conversation with Mr. P, a written statement of Ms. M, and an affidavit of his real estate lawyer. After reviewing the evidence, I find Aviva is entitled to repayment of the IRB, but is not entitled to the expenses for insurer examinations.

ISSUES

5The parties agreed at the hearing that the issues to be decided are:

1. Is Aviva entitled to receive a repayment in the amount of $14,514 for an IRB paid to Mr. P for the period of December 15, 2014 to August 25, 2015?

2. Is Aviva entitled to reimbursement of $5,537.00 for insurer examinations of Mr. P to address Mr. P’s entitlement to an IRB?

3. Is Aviva entitled to interest on any amounts to be repaid, pursuant to s. 52(5) of the Schedule?

4. Is either party entitled to its costs of this proceeding?

RESULT

6Aviva is entitled to repayment of the $14,514 IRB under s. 52(1)(b), plus interest under s. 52(5) pursuant to the Schedule. Aviva, however, is not entitled to reimbursement of the $5,537 related to the IEs. Neither party is entitled to its costs.

BACKGROUND

7At issue in this matter is Mr. P’s failure to disclose a material change in risk to Aviva regarding his auto policy obtained in September 2013, and specifically, his relationship and residence with Ms. M, who had a poor driving record.

8Starting with an overview will be helpful in understanding the history of this claim:

• September 30, 2013 – Mr. P obtained a new Aviva auto policy;

• December 20, 2013 – Mr. P’s address is changed to the house he purchased with his partner, Ms. M ;

• January 31, 2014 – The policy is amended to cover a 2014 vehicle, replacing the 2010 vehicle;

• December 8, 2014 – The 1^st accident; Mr. P begins receiving the IRB;

• May 18, 2015 – The 2^nd accident, causing Aviva to learn of Ms. M;

• September 10, 2015 – Aviva’s voided the policy/notice of re-payment.

9Prior to September 30, 2013, Mr. P and Ms. M were paralegals, working at the same law firm, in the accident benefits field. They also had a personal relationship and a child.

10On September 30, 2013, Mr. P obtained a new insurance policy from Aviva for a 2010 vehicle through his broker. No documents were signed in the process. Previously, the vehicle was owned by Ms. M, but as she could not obtain insurance due to her poor driving record, she transferred it to Mr. P and no longer drove. I accept his testimony that Ms. M lived in a different apartment at the time.

11Within two months - on December 20, 2013 - Mr. P and Ms. M brought a house together. He moved in immediately. Aviva contends she did too. While the evidence conflicts, the evidence shows that latest she moved was within a month, i.e. January 2014.²

12In any event, effective December 20, 2013, Mr. P - through his broker - changed the address for his auto policy to the new address; Ms. M was not added as a driver. Also effective that date, through the broker, Mr. P obtained a property insurance policy for the new house with a sister company of Aviva.³ Here, too, the evidence conflicts.

13Mr. P and Ms. M were then represented by lawyer Jane Chung for the house purchase. Mr. P testified that Ms. Chung communicated with his broker to secure property insurance. Thus, the broker that handled his auto policy was aware of his house purchase and his residence with Ms. M. Ms. Chung’s affidavit, however, is notably silent on those key points, only stating Ms. M participated in the purchase and mortgage process with the bank and identifies several real estate documents that list Ms. M. The affidavit, however, does not state that Ms. Chung communicated with the broker.

14After the purchasing the house, Mr. P received the property insurance documents. He noticed Ms. M’s name was not listed, but stated he didn’t think about it as he was “primary.” No documents were presented to me establishing that the broker ever knew of Ms. M’s existence or her residence with Mr. P at the new house.

15A month later, on January 31, 2014, the auto policy was again revised to replace the 2010 vehicle with a 2014 vehicle. As noted above, Mr. P agrees that by this time, Ms. M resided with him. He admits that he did not specifically tell Aviva of that fact, but assumed that Aviva’s broker, who was aware that Ms. M was the co-owner of the house, had already conveyed the information when acquiring the property policy.

16Mr. P testified that he made several attempts to speak with the broker – the purpose was unclear as he claims he relied on his lawyer - but he never reached the actual broker, and only spoke with a receptionist or left messages.

17Later that year, on December 8, 2014, Mr. P was involved in the first accident – the one at issue in this proceeding. As he was employed at the time, but then unable to work, he received the IRB. At Aviva’s request, Mr. P was examined for psychological impairments in March and August 2015; the assessor opined that Mr. P had psychological impairments and was unable to return to work.

18On May 18, 2015, Mr. P was involved in a second accident; Ms. M and others were passengers. Adjusting the claims caused Aviva to learn of Ms. M’s residence with Mr. P and her three driving related convictions and one at-fault accident. Mr. P testified, and the evidence supports, that during claim for the second accident, Mr. P and Ms. M did not try to hide or mislead Ms. M’s residence with Mr. P..

19On September 10, 2015, Aviva advised that it was voiding Mr. P’s auto policy effective to the date of the house purchase, December 20, 2013, for failure to disclose a material change in risk, i.e. Ms. M’s residence with him. Aviva refunded the premium back to that date, and served Mr. P with notice for repayment of the benefits they paid out with respect to the first accident.

20Mr. P did not dispute the voiding of the policy but has filed a lawsuit against the broker for negligence and claims he is in the process of adding Aviva to that claim.

POSITIONS OF THE PARTIES

21Aviva states that because Mr. P did not dispute the voiding of the policy, he has essentially admitted that there was a “material misrepresentation” and thus the amounts paid out under this claim should be repaid. Even if not admitted, Aviva submits that the numerous policy changes that each fail to mention Ms. M’s residence establish wilful misrepresentation on the policy risk. Likewise, surveillance between April 18, 2015 and May 14, 2015 reveals that Mr. P was working.

22Mr. P accepts that the policy risk was not properly adjusted, but submits that he never wilfully withheld any information, as evidenced by (1) disclosure of Ms. M’s residence to the broker when signing up for property insurance, and (2) that Ms. M openly acknowledged her address when making a claim for the second accident.

LAW AND ANALYSIS

What must Aviva establish to be entitled to repayment under the Schedule?

23The parties agree that Aviva must prove its case. Both parties also referred to “material misrepresentation” - however, that is not the precise test that governs repayment in this matter. Rather, for the reasons that follow, I find the test in this matter is whether Mr. P “intentionally failed…to notify the insurer of a change in a risk material to the contract.” (Emphasis added.)

24S. 52 of Schedule governs an insurers’ entitlement to be repaid for benefits paid, addressing a variety of situations. The relevant wording for this matter is in s. 52(1), as follows:

“…a person is liable to repay the Insurer,

(a) any benefit described in this Regulation that is paid to the person as a result of an error on the part of the Insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud; [or]

(b) any income replacement or non-or benefit…that is paid to the person if he or she, or a person respect of whom the payment is was made, was disqualified from receiving the benefit under Part VII [i.e. s. 31];...”

25Part VII referred to above deals with general exclusions; the only section in Part VII is s. 31. Thus, S. 52(1)(b) incorporates disqualification under s. 31. Aviva cites s. 31(1)(b). It provides that an insurer “is not required to pay an income replacement benefit” for any person “who has made, or knows of, a material misrepresentation that induced the insurer to enter into the contract … or intentionally failed to notify the insurer of a change in a risk material to the contract.”

26I find that s. 52(1)(a) is not triggered because the IRB was not paid “as a result of” a willful misrepresentation. In other words, whether or not Ms. M was or was not disclosed did not cause Mr. P to receive the benefit.

27Thus, only s. 52(1)(b), which incorporates the language from s. 31, could be relevant. The first clause of s. 31(1)(b) is not triggered because no misrepresentation “induced the insurer to enter into the contract” - Mr. P lived alone when the contract began. The second clause is relevant because it concerns a non-disclosed change in a risk. Aviva must show, therefore, Mr. P “intentionally failed…to notify the insurer of a change in a risk material to the contract.”⁴

28I note that neither party provided cases directly interpreting ss. 52 or 31, but did provide cases addressing misrepresentation, materiality, and coverage issues generally under insurance law and an older version of s. 52 (then s. 48). Those cases are helpful background, but how those terms are used and tests articulated in the Schedule are paramount.⁵

Is Mr. P permitted to dispute this application?

29Aviva argues that because Mr. P did not object to the voiding of the auto policy, he should not be permitted to dispute this application. I disagree.

30Aviva argues that this Tribunal does not need to decide if Mr. P made a material representation on his application for insurance, but “whether as a result of the material misrepresentation [Mr. P] ought to repay, pursuant to section 52…monies that the insurer paid…”⁶

31I disagree with Aviva’s argument on this point because Mr. P has not admitted that he made a “material misrepresentation” or even that he “intentionally failed to notify” Aviva of material information. The authority to order repayment is limited to the words articulated in s. 52 (and by reference to s. 31). It is Aviva’s obligation to establish that Mr. P intentionally failed to notify Aviva of a change of risk. Proving that Mr. P did not object to the policy being voided is not the same as proving that he intentionally failed to disclose information.

Is the non-disclosed information a risk material to the contract?

32The parties agree that had Aviva known Ms. P resided with Mr. P, knew her driving record, and properly adjusted the risk, the premium of $2,640 would have had a surcharge applied of more than 15%, or an increase of $400 per year.

33Aviva submits that Ms. M’s new residence with Mr. P is a change is risk material to the contract, and the corresponding change in the premium amount reflects that. Mr. P’s position is less clear. He testified that it is a small amount to engage in misrepresentation at the risk of losing his policy. It appears that his testimony on that point was not to dispute that the Ms. M’s residence with him is material or the amount is “material” for purposes of the Schedule but rather to support the overall finding that he did not act with intention because it would not make sense to engage in deception over such a minor amount – less than $35 a month.

34As noted above, the 52(1)(b), by reference to 31(1)(b), creates grounds for repayment of an IRB where the insured "intentionally failed to notify the insurer of a change in risk material to the contract.” Thus, under that clause, the focus is materiality to the contact – i.e. on the premium risk, as opposed to other clauses, which focus on the inducement to enter into the contract or to receive the particular benefit.

35Materiality is not defined in the Schedule, nor defined in case law interpreting s. 52(1)(b) and 31(1)(b). Generally, a fact is material if it would influence a prudent insurer to determine the amount of the premium.⁷ Considerations include whether the premium would have increased, would the risk be accepted, and what would have been the extent of coverage offered.⁸

36In this case, I find that non-disclosure of Ms. M, a licenced driver with three convictions and an at-fault accident, is “a change of risk material to the contract”. In fact, Mr. P and Ms. M agree that Mr. P does not let her drive, and there is no dispute that Aviva would have increased the premium by 15% or roughly $400 per year. The Schedule does not say major but rather material change in risk.⁹

Did Mr. P knowingly misrepresent or intentionally fail to disclose information?

37Aviva’s basic argument is that Ms. M moved in with Mr. P, but Mr. P intentionally failed to notify Aviva of that fact. As he is a sophisticated party, working as a paralegal in the insurance context, and made several policy changes from September 2013 to January 2014, it was not an innocent mistake. In contrast, Mr. P does not dispute he had a duty to inform Aviva that Ms. M moved in with him. Mr. P’s basic argument is that he notified the broker of the house purchase through his lawyer, so there cannot be an intentional misrepresentation or failure to notify.

38On a balance of probabilities, I find Mr. P intentionally failed to notify Aviva of the change in risk material to the contract – i.e. that Ms. M had moved in – for the reasons as follows.

39In general insurance law, the duty to disclose all material facts applies even in the absence of questions from the insurer, although the absence of questions may be evidence that the insurer does not consider a fact to be material.¹⁰ A decision addressing an older version of s. 52 reasoned that the failure to disclose material information – silence – could show an intention to mislead, but only if supported by relevant evidence.¹¹

40Absent an insured’s deceit or fraud, however, a misrepresentation that was, or should have been, known to the insurer or agent, is binding on the insurer.¹² For example, in Venner, an insurer was held to have knowledge of information provided to the broker, but which the broker failed to provide to the insurer. In Coronation Insurance,¹³ the Supreme Court even held that an insured’s false answers about prior accidents were not a basis to disclaim coverage, because a “basic check” of the insurer’s own files or public records would have easily revealed the accidents. The insured’s misrepresenting the amount of passenger seats, however, was different, as that fact was only within the insured’s knowledge.

41Applying these principles, I accept Mr. P’s testimony that he did not live with Ms. M when the policy began on September 30, 2013, and doubt she had moved in on December 20, 2013 when the house was formally purchased, and thus Aviva has not established a withholding of information at that point. By the time Mr. P acquired a new vehicle in January of 2014 and updated the policy, Ms. M did reside with him – and that fact was not disclosed.

42Unlike Venner and Coronation, the evidence does not establish Aviva or the broker actually knew that Mr. M co-purchased the house. While Mr. P testified his lawyer was to instruct the broker, the lawyer’s affidavit does not support Mr. P’s testimony, no evidence was produced from the broker, and Mr. P himself testified that the property insurance documents did not list Ms. M as an insured.

43Even if either the broker or Aviva’s sister company (‘Aviva Property’) knew of the co-purchase, the situation is still unlike Venner or Coronation where the information was directly and obviously relevant to the new policy. Here, this was not a new policy, and the address was correctly changed to reflect Mr. P’s new address with him as the only driver. The relevant records were not easily obtainable in Aviva’s own records. It is difficult to conclude that when the insured vehicle changed, because of the co-purchase of a property handled by Aviva’s sister company, Aviva was expected to inquire if there was a new driver. Mr. P had a duty to actively disclose the information.

44Even if I were to accept Mr. P’s basic premise that he told the real estate lawyer to work with the broker, I do not find a good-faith¹⁴ intention to ensure that the information was properly disclosed or received. In fact, given the totality and ongoing nature of the events, on a balance of probabilities, it appears that his overall intention was not to disclose the information, for the following reasons:

• Mr. P, an accident benefits paralegal, is a reasonably sophisticated party. He knew the information was important, and at the very least, the lack of increase in his insurance premium once Ms. M moved in with him, would have alerted him that Aviva was unaware of the change in circumstances.

• Mr. P only obtained policy because of Ms. M’s inability to get her own insurance, causing her to transfer the 2010 vehicle, thus making her driving record a very notable event to Mr. P, and not an afterthought.

• Mr. P actively thought about Ms. M’s risk, as he testified she did not drive despite living with him, thus further showing he knew her residence was important.

• Mr. P acknowledges that he did not contact Aviva directly to relay that Ms. M moved in with him. I find his explanation that he tried to call the broker suspect, as it conflicts with his testimony that he relied on his lawyer.

• It is not credible that he never checked if the insurance policy was correct or Ms. M’s presence was properly addressed, given her record.

• Even if I accept that Mr. P relied on his lawyer or broker, when he received the property insurance and noticed that Ms. M was not listed, it difficult to accept that he innocently ignored that error. On a balance of probabilities, I find it intentional.

45In coming to my conclusion that Mr. P intentionally failed to disclose material information, I acknowledge that following the second accident Mr. P and Ms. M openly disclosed Ms. M’s address to Aviva and their co-residence. That fact provides some support that they were proceeding on the basis that Ms. M was covered, or at least that there was nothing improper with the policy. Still, I am not persuaded by this fact given the entire context.¹⁵

46Likewise, while I agree that Mr. P would not have failed to disclose Ms. M’s residence over a premium increase of $35 per month, the $35 figure is an amount only known in retrospect. In fact, his failure to secure a quote at the relevant time supports a finding that he intended not to list her on the policy.

47Thus, in sum, on a balance of probabilities, I find that Mr. P intentionally failed to disclose material information, and Aviva did not reasonably know of the information through other means.¹⁶

Was Mr. P working during the period he was receiving the IRB?

48Aviva also argues that Mr. P was working during the period that he received the IRB. I disagree. The surveillance videos do create a concern that Mr. P may have been working, but they are far from conclusive. They do not show him working or regularly attending the law office for extended hours. I accept his testimony that he occasionally visited the office for social reasons. Aviva also alleged he was involved in other business activities, based on Mr. P’s name appearing in business searches. Aviva’s evidence on those activities amounted to conjecture, and conversely, I also accept his testimony explaining those other suspected activities as non-events.

Is Aviva entitled to be reimbursed for the insurer examination expenses?

49In its written submissions, Aviva claimed that Mr. P must reimburse the amounts it spent on insurer examinations. I asked Aviva at the commencement of the in-person portion of the hearing to point out the basis for this claim under the Schedule. Aviva has not presented me with any case law or statutory basis to support its position that these expenses are recoverable.

50I find that regardless of whether a material misrepresentation, intentional failure to disclose, or similar is found, insurer examination expenses are not subject to repayment under s. 52. The relevant subsection, s. 52(1)(b), specifies IRB and non-earner benefits as the only items that can be repaid, not other expenses incurred in adjusting the file. Similarly, s. 52(1)(a) specifies repayment for “any benefit described in this Regulation that is paid to the person…” An insurer examination is not a “benefit”, nor is it “paid to the insured”. Thus, the plain reading of both s. 52(1)(a) and (b) does not allow for reimbursement of those type of expenses under the Schedule.

Is either party entitled to its costs of this proceeding?

51Costs are governed by Rule 19 of the Licence Appeal Tribunal (LAT) Rules of Practice and Procedure, Version 1 (April 1, 2016). Aviva has prevailed on the main claim regarding repayment but has not shown that Mr. P acted “unreasonably, frivolously, vexatiously, or in bad faith” in this proceeding, and thus, it is not entitled to costs. Although Aviva has not prevailed on its claim for reimbursement of the IE expenses, and I found the plain reading of the Schedule doesn't permit it, neither party cited me to a decision addressing it. Accordingly, Mr. P is not entitled to costs.

ORDER

52Pursuant to the authority vested in this Tribunal under the provisions of the Insurance Act, I order that (1) Mr. P repay Aviva $14,514.00 plus s. 52 interest, which amount relates to the IRB paid to Mr. P for the period of December 15, 2014 to August 25, 2015, (2) Mr. P shall not pay or reimburse Aviva $5,537.00 for the insurance examinations, and (3) Neither party is entitled to costs.

Released: December 18, 2017

___________________________

Jeffrey Shapiro

Adjudicator

Footnotes

1. 1The Tribunal anonymizes AABS decisions to protect the privacy of injured persons. To assist that process, I have abbreviated names in the decision. At times, I will refer to both Aviva and Mr. P as “the parties.”
2. 2Mr. P testified that she moved in January 2014. Her written statement (from June 30, 2015) supports that date, adding that she is a licenced driver but does not drive. In contrast, during a recorded phone call with Aviva in June 18, 2015, Mr. P implied that they lived together immediately, and Aviva’s September 10, 2015 letter to Mr. P – which he didn’t dispute - states Mr. P had confirmed Ms. M lived there as of the purchase date.
3. 3The record is clear that the property insurance was obtained through a related “Aviva” company, but is not clear as to what is the exact relationship between the “auto” and “property” Aviva. From Mr. P’s testimony, and the representations of counsel on this point, I understand that Mr. P doesn't dispute that they are separate corporate structures, but related.
4. 4The plain language of this section relates the “material change is risk” to “the contract” – not to the circumstances of a claim. In other words, this exclusion does not focus on the fact that Ms. M was not actually involved in the first accident.
5. 5Aviva also reads ss. 52 and 53 together. However, 53 does not logically modify or provide insight into s. 52.
6. 6See the Reply Submissions of the Applicant, at paragraphs 1 -3.
7. 7Sagl v. Chubb Insurance Company of Canada, 2009 ONCA 388.
8. 8Coronation Insurance Co. v. Taku Air Transport Ltd., [1991] 3 S CR622, 1991 CanLii 16 (SCC) at Tab 20.
9. 9To be clear, I don’t not find that a certain percentage - be it 15% or otherwise - is always material.
10. 10Sagl at para. 52.
11. 11Michalowski v. St. Paul Fire & Marine Insurance Co. (FSCO A98-001492, July 9, 1999).
12. 12Venner Woodworking Ltd. V Wawanesa Mutual Ins. Co., [1996] O.J. No. 132.
13. 131991 CanLII 16 (SCC), [1991] 3 R.C.S. 622, at 627.
14. 14Sagl v. Chubb Insurance Company of Canada, 2009 ONCA 388.
15. 15Also, once Ms. P was involved in the second accident, it seems to me that the alternatives to openly disclosing her address are equally problematic, i.e. giving a false police report or engaging in active misrepresentations,
16. 16In reaching this conclusion, I do not intend to imply an overly nefarious intention. It appears that Mr. P did not intend for Ms. P to drive on his policy or be uninsured, but merely for her be not listed and not drive.