DATE: 20000919

DOCKET: C31106

COURT OF APPEAL FOR ONTARIO

CARTHY, LASKIN and ROSENBERG JJ.A.

BETWEEN: )

MARIE LeCOUR, Executrix of the )

Estate of the late RAYMOND LeCOUR, ) John Weingust, Q.C.,

MARIE LeCOUR and SUZANNE MILLER ) for the appellants

Plaintiffs )

(Appellants) ) S. Harvey Starkman, Q.C.,

) for the respondents North

• and - ) American Life Assurance

) Company and Firstline Trust

NORTH AMERICAN LIFE ASSURANCE ) Company

COMPANY, FIRSTLINE TRUST )

COMPANY, GEORGE DANNEWALD ) J. Anthony Caldwell,

and CLIFFORD E. DRESNER ) for the respondent Dresner

Defendants )

(Respondents) ) Heard: April 18, 2000

On appeal from the Judgment of Madam Justice Susan E. Greer dated November 18, 1998.

ROSENBERG J.A.:

[1] The principal issue in this appeal from the judgment of Greer J. is whether the respondent insurer waived the age restriction for group life insurance.

THE FACTS

[2] In 1992, the appellants Suzanne Miller and Marie LeCour wished to refinance their property in Sharon, Ontario. LeCour is Miller’s mother. Through a mortgage broker, the appellants were able to obtain a commitment for a mortgage from the respondent Firstline Trust Company in the amount of $255,000. LeCour’s husband, Raymond, originally signed as guarantor. Firstline later insisted that he become a part owner of the property since the appellants did not have the resources to carry the mortgage. The mortgage broker suggested that they take out mortgage insurance.

[3] By correspondence dated August 5, 1992, Firstline delivered to the mortgage broker a mortgage commitment letter. The letter showed the names of the three applicants (Miller and her parents), the amount and terms of the loan, and a life insurance premium in the amount of $61.20 per month. The correspondence also included a schedule listing certain requirements including a signed life insurance application or a waiver. The letter listed “Luke Foster” as the contact at Firstline.

[4] The three applicants met at the mortgage broker’s office to sign the mortgage commitment letter on August 17, 1992. Miller asked the mortgage broker who was covered by the insurance. The broker called Foster and he confirmed that all three were covered. They signed the mortgage commitment letter and also indicated they had decided to get the mortgage insurance.

[5] On August 27, 1992, the applicants attended at the office of their solicitor, the respondent Clifford Dresner, to sign the various documents for the closing of the transaction, which was scheduled for September 1, 1992. All three applicants completed the applications for insurance. Firstline’s computer had partly filled out these applications using information from the mortgage application. The insurance application has room for two borrowers. There were therefore two forms. The first form was for Miller and her mother. This form shows the premium as $61.20. The second form was for Raymond LeCour. This form shows the premium as “$ .00”.

[6] Mr. LeCour’s date of birth was typed in on the front of the application as “25/Aug/24. He was therefore 68 years of age at the time of the application. Mr. LeCour had also completed the form showing that during the past five years he had been treated for cancer. There is also an indication on the front of the form that after reviewing the information provided, the insurer (the respondent North American Life Assurance Company) may decline coverage by sending written notification within 90 days of the date the application is “received and accepted by North American Life”.

[7] The back of the forms completed by the three applicants is titled “Certificate of Insurance Group Policy CR301”. The certificate purports to summarize some of the important provisions of the Group Policy. The definition of “Insured borrower” is, in part, as follows:

Insured Borrower is a Borrower:

who has given the Mortgage that does not exceed Plan Maximums; and

who applied for insurance under the Policy while he was resident in Canada and at least 18 but not yet 63 years of age [Emphasis added.]

[8] Under the heading “Insurance is in force” is included the following:

Insurance is in force from the later of the date the properly completed Application for Insurance is signed by the Insured Borrower and received by FirstLine Trust, and the date the Mortgage funds are advanced by the Policyholder until the earliest of the following dates:

The date the Insurer declines his Application for Insurance, provided written notification is sent to him within 90 days after the date his properly completed Application for Insurance is received and accepted by the Insurer…

[9] Mr. Dresner reviewed the application for insurance with the appellants and Mr. LeCour and told them that the insurer could request a medical of Mr. LeCour and thereafter could turn down the mortgage insurance. He did not review the back of the forms and they did not read it. There are three copies of the form, one of which is marked “client’s copy”. However, Mr. Dresner did not give the appellants or Mr. LeCour a copy of the application.

[10] The mortgage transaction closed on September 1, 1992. On September 7, 1992, Mr. LeCour died of complications from an accident that occurred after the closing. Several weeks later, Ms. Miller advised Mr. Foster of her father’s death and he told her that it looked like the mortgage would be paid off under the insurance. Ms. Miller called North American Life to advise them of the death. The person she spoke to said that all three parties were covered by the insurance and that she would be sent a claims form. Some time later, when the form had not arrived, Ms. Miller again called North American Life and on this occasion was told that North American Life was not honouring the claim as there was an age restriction on the policy of insurance.

[11] On October 1, 1992, the first payment of the mortgage and the life insurance premium was made by automatic bank withdrawal. By letter dated October 14, 1992, Firstline informed the appellants that Mr. LeCour was not eligible for life insurance as he exceeded the maximum insurable age of 62 years and that North American Life would not be processing the claim for Mr. LeCour. North American Life never itself sent a letter declining the application for insurance.

[12] The appellants commenced their action on September 18, 1995[1] against inter alia North American Life, Firstline and Mr. Dresner. The claim against Mr. Dresner was in negligence. The claims against North American Life and Firstline are also put in terms of negligence although there also appears to be an assertion of breach of contract.

THE CLAIM AGAINST DRESNER

[13] At the conclusion of the appellants’ argument, the court indicated that it did not need to hear from counsel for Mr. Dresner. The trial judge, relying upon expert evidence called by Dresner, found that his conduct did not fall below the standard of a reasonably competent solicitor since his only instructions were to obtain a signed waiver of insurance or a signed application. She found that the fact that none of the applicants for insurance read the back of the application form did not make Dresner negligent. In our view, there was no basis upon which we could interfere with the trial judge’s findings.

[14] Moreover, there is another insuperable barrier to the appellants’ making any recovery in negligence. The appellants did not adduce evidence that had they been advised of the age restriction and that Mr. LeCour was not insured, Mr. LeCour could have obtained insurance from some other source. There was therefore no proof of any damages flowing from the alleged negligence by Dresner or, for that matter, any of the other respondents. The appeal in relation to Mr. Dresner is therefore dismissed with costs.

BREACH OF CONTRACT BY NORTH AMERICAN LIFE AND FIRSTLINE

[15] The trial judge found that the only enforceable contract with respect to insurance coverage was for the appellant Miller since her parents were both over the age of 62 years at the time of the application. She also found that Foster was not an agent for North American Life and had no authority to waive the age restriction in the application for insurance. She accepted the evidence from the representative of Firstline that the $61.20 premium shown on the application was only in relation to Ms. Miller. She also found that had Mr. and Mrs. LeCour fallen within an insurable age range of 58-62 years, their premiums would have been in excess of $260 each per month.

[16] The appellants argue that the trial judge erred in finding that there was no enforceable contract. They submit that the proper interpretation of the “Certificate of Insurance” shows that there was a contract as of the date of closing that was in force until, inter alia, North American Life declined the application by providing written notification within 90 days.

[17] In my view, this argument cannot succeed. It depends upon the term under the heading “Insurance Is In Force”. For convenience, I repeat the term relied upon:

Insurance is in force from the later of the date the properly completed Application for Insurance is signed by the Insured Borrower and received by FirstLine Trust, and the date the Mortgage funds are advanced by the Policyholder until the earliest of the following dates:

The date the Insurer declines his Application for Insurance, provided written notification is sent to him within 90 days after the date his properly completed Application for Insurance is received and accepted by the Insurer… [Emphasis added.]

[18] The appellants can rely upon this term only if Mr. LeCour is an “Insured Borrower” and he clearly did not fall within the definition since he was over 62 years of age. I would not give effect to this argument.

[19] The appellants’ alternative submission is that North American Life waived the age restriction. As noted, the trial judge found as a fact that Mr. Foster of Firstline had no authority to waive the age restriction and, in any event, was not an agent for the insurer North American Life.

[20] North American Life did not set up either Firstline or Mr. Foster as its agent. This was the effect of the testimony from the respondents and is consistent with the contract between Firstline and North American Life, which indicates that any amendment to the contract must be agreed to in writing by North American Life and Firstline. Further, only certain named executives of North American Life have the authority to waive any part of the policy.

[21] However, the appellants argue that North American Life held Firstline out as its agent and that Foster as the contact person at Firstline had ostensible authority to waive the age restriction. The trial judge did not expressly deal with this issue.

[22] There is some authority for the view that in the case of a group plan, such as this, the insurer (here North American Life) will be held to have made the policy holder (here Firstline) its agent. In Norwood & Weir, Norwood on Life Insurance Law in Canada, 2nd ed. (1993) at 150, the authors state:

In group plans self-administered by the group policyholder, the insurer has delegated many of the functions of taking applications from eligible members of the group, processing applications, deciding amounts of coverage, calculating premiums and remitting to the insurer on a bulk basis. Here it is more obvious that the insurer has made the group policyholder its agent and should be vicariously liable for its errors. [Footnotes omitted.]

[23] The authors rely upon the decision of the Nova Scotia Supreme Court (Appeal Division) in London Life Insurance Co. v. Baker (1987), 1987 5309 (NS SC), 24 C.C.L.I. 38 for this statement. That case involved group employee long-term disability insurance. After the plaintiff employee was laid off, a company representative informed him that his insurance would continue as long as he paid the premiums. The employee continued to pay the premiums. In fact, under the terms of the policy, the insurance terminated 31 days after the lay off. The employee became disabled, but outside the 31-day period.

[24] After reviewing a number of authorities, Matthews J.A., speaking for the court, upheld the decision of the trial judge that the employer was the agent of the insurer and the insurer was bound by the information furnished to the employee by the employer. He held at p. 68 that whether the employer will be deemed to be the agent of the insurer will depend upon the particular circumstances including “all of the facts and the relevant documents including the group insurance certificate where applicable, and the relevant responsibilities thereunder”. Relying in particular on the wording of the certificate given to the employees he held at p. 70 as follows:

In the circumstances, with the instruction to the insured employee that “Information regarding the benefits will be furnished upon request by the Employer…”, the respondent [employee] had the right to rely upon those words and the appellant [insurer] the duty to properly instruct the employer as to the methodology of furnishing such information. The appellant is bound by the words as used in the certificate and the information furnished to the respondent by the employer.

[25] Few of the indicia of agency relied upon in London Life are present in this case. However, assuming that Foster and therefore Firstline was agent for North American Life, in my view, the appellants failed to prove that Firstline waived the age restriction. The test for waiver of a restriction on eligibility for insurance was set out by Major J. in Saskatchewan River Bungalow Ltd. v. Maritime Life Assurance Co. (1994), 1994 100 (SCC), 115 D.L.R. (4th) 478 (S.C.C.) at 484:

Waiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them. The creation of such a stringent test is justified since no consideration moves from the party in whose favour a waiver operates. An overly broad interpretation of waiver would undermine the requirement of contractual consideration.

[26] The appellants did not prove waiver. The premium for Mr. LeCour was shown as “$ .00” on the face of the document. Unlike the London Life case, the insurer did not collect any premium for Mr. LeCour. The trial judge found as a fact that the premium shown on the application form was only for the appellant Miller and that a premium for Mr. LeCour, if he had barely met the age requirement, would have been several times greater. There was no evidence of an “unequivocal and conscious intention” to abandon the age restriction. In my view, the claim based on breach of contract fails as there was never an enforceable contract in respect of Mr. LeCour.

[27] Assuming that Firstline and North American Life could be held liable for Mr. Foster’s negligence in advising the appellants and Mr. LeCour that they were covered, this claim founders on the lack of proof of any damages for negligence.

DISPOSITION

[28] Accordingly, I would dismiss the appeal with costs.

(signed) “M. Rosenberg J.A.”

(signed) “I agree J. J. Carthy J.A.”

(signed) “I agree John Laskin J.A.”

RELEASED: September 19, 2000

[1] The respondents also rely upon the two-year limitation period in s. 38 of the Trustee Act, R.S.O. 1990, c. T.23. In view of my conclusions on the other issues raised, it is unnecessary to deal with this submission.