ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-09-591-00
BETWEEN:
KAREN CHEETHAM
Plaintiff
– and –
TD LIFE INSURANCE COMPANY, CANADA LIFE ASSURANCE COMPANY and INGRID FORREST
Defendants
Karen Cheetham, Self-Represented
Kevin P. Nearing, for the Defendants
HEARD: June 17, 18, 19, 20, and 21, 2013
REASONS for JUDGMENT
Maranger J.
INTRODUCTION
[1] This action arose as a result of a denial of the payment of life insurance on a line of credit with TD Canada Trust. The plaintiff claims $97,500 on account of a contract of life insurance on the life of her late common-law husband John Foreman. The $97,500 is money owing on a line of credit in both the plaintiff’s and the late John Foreman’s name.
[2] The claim was denied on the basis that the application for credit line life insurance completed on November 1, 2005, contained answers to health questions that misrepresented the true state of John Foreman’s health. The defendants also take the position that the misrepresentations were material and that the application for life insurance would have been rejected had the application been properly completed.
[3] This is an unfortunate case in that litigation would have been unnecessary and the insurance proceeds would have been paid, had John Foreman passed away on November 1, 2007 instead of October 12, 2007.
FINDINGS OF FACT
[4] The following evidence was presented at the trial of this matter: testimony from the plaintiff, an insurance agent, a bank representative, an underwriting expert, the banks underwriter, and a claims manager: An expert report and two separate books of documents were also filed as exhibits. From this evidence I make the following findings of fact:
• In August 2005 the plaintiff and Mr. Foreman approached TD Canada Trust for the purposes of increasing a home equity line of credit that the plaintiff already had with the bank. The purpose was to increase the sum from $36,500 to $97,500 the reason was to pay off some debt incurred by Mr. Foreman and to help pay for some of the costs of renovations made to the plaintiff’s home.
• The bank representative that the couple dealt with was Ms. Ingrid Forrest.
• In October 2005 the line of credit agreement was prepared allowing for the increase in the amount of the line of credit. The delay in providing the line of credit was caused by waiting for an appraisal on the plaintiff’s home.
• On November 1, 2005, the plaintiff and Mr. Foreman attended at the bank for the purposes of completing an application for line of credit life insurance. The line of credit life insurance was on Mr. Foreman’s life only, the application was completed by Mr. Foreman, and in response to each of the questions contained in the application Mr. Foreman answered “no”.
• Any objective view of the evidence supports the proposition that the application was not truthfully/accurately completed. The questions are straightforward and unequivocal:
“Within the past 24 months, have you consulted a doctor, received treatment, counseling, taken any medication or been told by a doctor or health practitioner that you have or have had any of the following.”. It then lists a series of potential health difficulties an individual might have.
Mr. Foreman had several health difficulties, some of which were clearly highlighted to him by his doctor. His health difficulties included but were not limited to elevated cholesterol, asthma, and abnormal tests with respect to cholesterol. They were brought to his attention in writing well within the 24 month time frame.
• Apart from the health related questions the application also asked:
“Within the past 24 Months have you … had an application for life or critical insurance declined, assessed at a premium higher than a standard, or approved on the basis of recognition prior coverage”.
The evidence disclosed that an application for life insurance with Transamerica Life had been made within the specified 24 month period and John Foreman, because of health considerations, was assessed at a higher premium. Despite this he answered no to the question.
• I do not find that the parties acted with malfeasance here, but that an innocent or negligent misrepresentation in the occurred is an inescapable conclusion on the evidence in this case.
• The plaintiff testified that the health difficulties of Mr. Foreman were in some measure discussed with the defendant bank representative Ingrid Forrest when the application was being completed. The gist of the evidence was that they would have said they were uncertain whether the health difficulties were beyond the two years as specified in the application or at an earlier date. The plaintiff also testified that Ms. Forrest advised them not to bother confirming the time frame because she wanted to complete the line of credit application as there had already been too much delay in getting it completed. Ms. Forrest denied giving this advice and indicated that had the applicants expressed any uncertainty about the time frame she would have instructed them to answer yes on any of the health questionnaires. I accept the evidence of the bank representative over the plaintiff’s evidence in this regard. Ms. Forrest had nothing to gain in having a yes or a no answer to the application for insurance since the credit line was in place already.
• The court heard expert evidence from Ms. Josee Malboeuf on the issue of underwriting, as well as from the bank’s underwriter, Mr. Sheldon Gomes. Both underwriters indicated that the application for line of credit life insurance would have been denied had the true state of Mr. Foreman’s health been disclosed. While some of the factual underpinnings concerning Mr. Foreman’s specific health problems were debatable, even accepting the plaintiff’s interpretation of some of the medical evidence, the application would still have been denied.
• The application was completed on November 1, 2005. Mr. Foreman passed away as a result of brain cancer on October 12, 2007. The cause of Mr. Foreman’s death was unrelated to any of the health questions erroneously answered in the credit line life insurance application.
ANALYSIS
[5] The life insurance company in this case denied the claim following an investigation into the health history of Mr. Foreman. They did so on the basis that Mr. Foreman’s death occurred within what is called the “contestability period” ,that is, that the individual died within 24 months of the completion of the application.
[6] Regrettably, as difficult and tragic as the facts of this case are, the insurance company was within its rights to deny the claim, and I am left with no choice but to dismiss the plaintiff’s claim for the following specific reasons:
• The application for credit line life insurance contained information that misrepresented the health of the applicant and a prior life insurance application.
• Section 184 subsection 3 of the Insurance Act RSO 1990 c. 18 stipulates ‘In the case of a contract of insurance, a failure to disclose or a misrepresentation of such a fact in respect of a person whose life is insured under the contract does not render the contract voidable, but, if evidence of insurability is specifically requested by the insurer, the insurance with respect to that person is voidable by the insurer unless it is been in effect for two years during the lifetime of that person, in which event it is not, in the absence of fraud, voidable’.
• Regardless of the allegations levied against Ingrid Forrest by the plaintiff, an individual who makes an application for life insurance is responsible for the contents of the application. See Vrbanic v. London life Co, (1995) 1995 1055 (ON CA), 25 O.R. (3d) 710, and Silva v. Sizoo, (1997) 1997 26880 (ON CJ), 50 C.C.L.I.(2d) 293.
• The test to determine whether full and complete disclosure was made, requires the court to ask whether a reasonable person with knowledge of the medical background of Mr. Foreman would conclude that the answers to the questions in the application were answered accurately. Here the evidence clearly supports the answer no to that question. See Hagey v. Colonial Life Insurance Co, (1998) 1998 31628 (ON CJ), 7 C.C.L.I.(3d) 45.
• Applicants who complete insurance forms have a duty to answer the questions accurately a contract between an insurer and an insured requires the utmost of good faith: see North American Life Assurance Co. v. Caputo, 1989 10433 (ON SC), 1989 41 C.C.L.I. 104 (Ont.H.C.) para.16.
• The test of materiality is what a “reasonable insurer” would have done had the concealed information been revealed. It is a question of fact. In this case I have found as a fact that the insurance company would have declined the insurance had the application been properly completed: see Henwood v. Prudential Insurance Co. of America, 1967 17 (SCC), [1967] S.C.R. 720 paras. 7,14,19, and 20.
[7] The denial of the insurance claim in this case was justified on the basis of a strict application of the law and what I consider to be the only reasonable findings of fact. Therefore, I am left with little choice but to dismiss the plaintiff’s claim.
Conclusion:
[8] The Plaintiff lost her partner 23 months and 12 days after completing an application for credit line life insurance. The death of Mr. Foreman was unrelated to any of the inaccurately answered questions contained in the application for life insurance. Had he passed away a month later the insurance would have been paid out. While it was a case of misrepresentation I certainly do not find that there was a fraud.
[9] The court recognizes that the defendants were successful and have the right to claim costs, and I will entertain a request for costs if one is made; and this regard I will accept one page written submissions to be served on the plaintiff and filed within 15 days of the release of this decision. The plaintiff shall have seven days thereafter to reply. Failing which there will be no order as to costs.
Maranger J.
Released: August 30, 2013
COURT FILE NO.: CV-09-591-00
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
KAREN CHEETHAM
Plaintiff
– and –
TD LIFE INSURANCE COMPANY, CANADA LIFE ASSURANCE COMPANY and INGRID FORREST
Defendants
REASONS for judgment
Maranger J.
Released: August 30, 2013