ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO. CV-10-396770
DATE: 20140227
B E T W E E N:
Scott MacQuarrie
Plaintiff
Ramon V. Andal for the Plaintiff
- and -
National Bank Life Insurance Company and National Bank of Canada
Defendants
Christine G. Carter for the Defendants
HEARD: October 2-29, 2013
M.A. SANDERSON J.
Reasons for DECISION
Introduction
[1] The Plaintiff seeks payment on a policy of critical illness insurance offered to him by the Defendant (the "Insurer").
[2] In September of 2008, the Plaintiff owed the National Bank $363,750 on an all-in-one loan and $100,000 on a secured credit line. He applied to insure both on September 11, 2008.
[3] As late as August 27, 2008, he had opted not to purchase insurance on those loans.
[4] The Insurer required the Plaintiff to submit to a paramedical examination since the total amount to be insured exceeded $200,000.
[5] A paramedical examination occurred on October 1, 2008. On December 22, 2008, after some further tests were requested and provided, the Insurer notified the Plaintiff that it was prepared to offer him critical illness insurance.
[6] In May of 2009, the Plaintiff underwent surgery for suspected thyroid cancer. Papillary microcarcinoma of the thyroid was diagnosed in mid-June 2009.
[7] The Plaintiff then made a claim on his critical illness insurance.
[8] The Insurer then requested further information and obtained it for the first time.
[9] After reading the information provided, the Insurer notified the Plaintiff on October 30, 2009 as follows:
According to the medical information we obtained, you suffered and consulted between October 1, 2003 and October 1, 2008 for respiratory problems (sleep apnea). Unfortunately, our selection of risk department would have declined the life and critical illness insurance coverage due to this medical history…. Consequently we have no choice but to decline this claim, and must rescind your life and critical illness insurance coverage…
[10] At the time, the Insurer relied only on the Plaintiff's failure to disclose a sleep apnea condition.
[11] In February of 2010, the Plaintiff sued the Insurer for payment on the policy.
[12] In April of 2013 the Insurer amended its Statement of Defence, in effect to plead that if it had not been entitled to rescind the contract on the basis of undisclosed sleep apnea, it had been entitled to deny liability based on two exclusions contained in the insurance contracts (1) pre existing conditions and (2) the 90 day exclusion.
The Issues
[13] Therefore, at trial, there were two major issues:
Was the Insurer entitled to rescind the insurance contracts?
If the Insurer was not entitled to rescind them, did either or both of the above-noted exclusions apply to justify the denial of coverage liability?
The Facts
[14] In many respects, the evidence was uncontradicted.
[15] At the time of the application for coverage in September 2008, Dr. Murton had been the Plaintiff's family doctor for some time. Dr. Murton's clinical notes and records are in evidence.
[16] It is clear from Dr. Murton’s records and a summary prepared by the Plaintiff that his medical history in the five years preceding the claim had been largely uneventful. He had suffered from some lower back pain. He had had what he characterized as "sinus issues," and had received treatment from Dr. Kolenda, an ear, nose and throat specialist, for repeated sinus infections. He had had treatment from a chiropractor for back issues. He had also undergone repeated marriage counselling that he said he did not consider to be "health issues."
[17] On December 28, 2005, Dr. Kolenda wrote Dr. Murton:
Thank you for referring Scott MacQuarrie to me regarding sinus pain… This patient presents with recurrent headaches… He also snores and has had witnessed apneic episode. He has not had a sleep study in the past. He has not had a sinus CT in the past…
I will arrange for a sinus CT and a sleep study.
[18] Dr. Kolenda sent the Plaintiff for a sleep study at the Oakville Sleep Medicine Centre on February 1, 2006. Dr Awad, a diplomate of the American Academy of Sleep Study and a psychiatrist, diagnosed moderate sleep apnea, which was reported to Dr Kolenda [with a copy to Dr Murton] on March 16, 2006.
[19] Dr. Kolenda saw the Plaintiff on March 9, 2006 and reported to Dr. Murton:
His headaches are probably due to his apnea. He is not a candidate for surgery to alleviate his apnea. I recommended that he either try CPAP or dental appliance for treatment of his apnea. If his headache does not respond to sleep apnea treatment then I would consider sinus surgery with the improviso that it is not guaranteed to relieve his headache given the minimal findings on his sinus CT.
[20] Mr. MacQuarrie gave evidence he was dissatisfied with the results of the first sleep study. He believed he had a sinus problem. The people in the clinic were trying to sell him a C-PAP machine even before study started. He did not believe he had any symptoms of sleep apnea. He was not tired during the day. He asked Dr Murton to refer him for a second opinion.
[21] On July 7, 2006, Dr Kolenda wrote:
He is reconsidering the option of septoplasty … We again discussed sleep apnea issue. He is not convinced of the reliability of the results of his last sleep study…
[22] On September 10, 2007, Dr Murton referred the Plaintiff to another ear, nose and throat specialist, Dr Mabini, for nasal obstruction and septoid deviation. The Plaintiff said although sleep apnea was mentioned, they talked more about his sinusitis and snoring.
[23] On February 19, 2008 at a consultation about chronic sinusitis, Dr. Mabini referred him for another sleep study with Dr. Chau, on April 2, 2008. The Plaintiff said Dr. Mabini told him that sleep studies were not just about sleep apnea, but "a bunch of sleeping disorders."
[24] Dr. Chau reported on the April 2, 2008 sleep study, as follows:
This 43-year-old male patient underwent sleep study on 2 April 2008 for assessment of snoring. He weighed 234 pounds with a height of 76 inches… Sleep wake diary indicated regular bedtime at midnight spending seven hours in bed per night. There was no daytime napping… He slept for a total of 310 min…. There were altogether 109 respiratory events … composed of 86 obstructive apneas and 23hypopneas, for an AHI of 21.1 events per hour … The results are suggestive of modest to severe sleep apnea, especially in REM sleep and supine position. Positional treatment to avoid the supine position as well as C-PAP should be considered … No consultation was requested.
[Emphasis added.]
[25] On May 22, 2008, Dr. Mabini met with the Plaintiff. Dr Mabini's clinical note contains the following: "I did recommend a sleep study referral to Dr. Chau for him, but at this time he is not interested in it. However he is interested in surgery … we have scheduled the surgery."
[26] A CT scan report was done on August 22 re paranasal sinuses.
[27] On August 26, 2008, Dr. Mabini noted:
His CT sinus report … revealed a 1.4 cm diameter soft tissue mass protruding into the superior left antrum… An MRI was recommended….
He had many questions for me about what it could be. All I could tell him was it could be a benign lesion or a malignant lesion and the rest would just be speculation.
[28] The Plaintiff gave evidence that that discussion on August 26, 2008 had nothing to do with any thyroid issue. It was all about cysts.
[29] I note on August 27, 2008, the Plaintiff declined insurance on an additional loan.
[30] On September 8, 2008, he underwent an MRI of the neck and paranasal sinuses.
[31] The report on the MRI of the neck and paranasal sinuses contained the following: "Re 1.4 cm polyp. The findings are most compatible with a maxillary sinus mucus retention cyst…"
[32] Since the MRI had showed a cyst, the sinus surgery for deviated septum could proceed. The MRI report continued:
With respect to the neck, there are a few small lymph nodes measuring up to 8mm bilaterally unlikely of clinical significance… These could be further evaluated sonographically in the first instance. Potentially these represent juxtathyroid otherwise unremarkable lymph nodes. There is no pathologic enhancement associated with these.
[33] After she received the MRI report, Dr. Mabini recommended an ultrasound. The Plaintiff said she didn’t go into the implications of the MRI. In her evidence, Dr. Mabini confirmed she did not discuss the implications of the MRI with Mr. MacQuarrie at that time.
[34] Sinus surgery had been scheduled for September 12, 2008.
[35] Dr Nocent, an anaesthetist, in anticipation of the sinus surgery, wrote: "O.S.A. "mild" – C-PAP recommended but [patient] non compliant."
[36] On September 11, 2008 [the day before the scheduled sinus surgery], the Plaintiff made application for insurance.
[37] Section 8 of the application, Declarations and Authorization, contains the following:
I certify that all information provided is true. I understand that any concealment or false declaration could result in the cancellation of my insurance ….
I hereby authorize any physician, medical practitioner, hospital, clinic, paramedical firm, service provider, agent, insurance company, the Medical Information Bureau or other organization or institution that has any information about me or health status, to exchange information with National Bank Life Insurance Company and its reinsurers. I authorize National Bank Life Insurance Company to use any information it has on my account, including information from closed files. This authorization is valid for the period required to achieve the ends for which it was requested. A photographic copy of this authorization shall be as valid as the original.
I acknowledge having read all the provisions of this insurance application and the insurance certificate including the restrictions and exclusions.
[38] The sinus surgery proceeded uneventfully on September 12, 2008. The sinus cyst was removed, the deviated septum was corrected, and the sinus was enlarged.
[39] The sinus surgery having been completed on September 12, 2008, as had been anticipated earlier, Dr Mabini ordered a consultation with Dr Chau that was scheduled for February 23, 2009. She also scheduled a thyroid ultrasound for October 1, 2008.
[40] Early on October 1, the Plaintiff underwent a thyroid ultrasound.
[41] Later the same day, Ms. Johansson ("Johansson"), a paramedic, attended at his home for the paramedical assessment. She asked Mr. MacQuarrie a number of questions and recorded his answers:
i. Question 1. Date of last consultation? The Plaintiff said he did not tell Johansson that he had had an ultrasound that morning because he said he did not consider an ultrasound to be a "consultation." [In the original and amended pleadings, the Insurer did not allege that the Plaintiff had failed to mention that ultrasound to Johansson.] Johansson gave evidence that a consultation would include tests [whether or not they had been discussed between a patient and his doctor.] She agreed opinions might differ on this point.
ii. Question 3(a). Have you ever been treated for or had any known indication of disorder of eyes, ears, nose or throat? Answer: Deviated septum also cyst in sinus OTMH Dr Mabini removed the cyst.
iii. Question 3(c). Have you ever been treated for or had any known-indication of shortness of breath, persistent hoarseness or cough, coughing up blood, bronchitis, pleurisy, asthma, emphysema or other respiratory disorders? [The question did not specifically mention sleep apnea.] MacQuarrie gave evidence he was not aware that some have classified sleep apnea as a respiratory disorder. To him it was a sleep disorder, not a lung disease or respiratory disorder. He said he did not specifically discuss sleep apnea with Johansson. He said he had seen no physician at the sleep clinic. Johansson gave evidence she thought sleep apnea was a respiratory condition but said she was not an expert. She did not know whether there is agreement on the meaning of respiratory disorder. It was hard for her to answer what is a disorder. She did not know whether to be a disorder, a condition must have been already diagnosed.
iv. Question 3(g). Known indication for thyroid or endocrine disorder? Lison Boucre ("Boucre"), Senior Underwriter for the Defendant Insurer, gave evidence that the thyroid ultrasound report, not received until October 7 [i.e., after October 1] included the following:
The MR nodule is a 1.2 cm lesion which contains both solid and cystic components. No evidence of vascularity of the solid component on either ultrasound or the prior MRI. Likely of no significance. Suggest clinical followup.
Boucre gave evidence she did not know if the ultrasound report had been provided, it would have affected the Insurer's initial decision. Dr. Mabini said that when she saw those ultrasound results, she did not call the Plaintiff or discuss the implications with him. She simply ordered a needle biopsy. She said: "When it's small, I’m not concerned about it until I have the numbers in front of me. Once I have that information, I’ll discuss implications with patient." She agreed the Plaintiff did know something required further investigation.
v. Question 3(n). Any other disease or symptom not listed above? Johansson said under any other sign or symptom, any investigation would have to be disclosed. Any other disease or symptom not already listed must be disclosed under Question 3(n).
vi. Question 4. Have you within the past five years (c) been in a hospital or clinic? (d) had an electrocardiogram, x-ray or blood test? MacQuarrie gave evidence that he did not think he had been a patient because he had not been admitted to a hospital or a clinic during that time frame. Under Question 4(d), Johansson wrote "MRI done due to deviated septum…All results normal."
[42] The Plaintiff said he answered truthfully to the best of his knowledge.
[43] Johansson gave evidence that she assumed the insurer would review complete information and medical records and that part of the insurer's normal procedure would be to obtain records of family doctors. She said the form did not contain a lot of space.
[44] On October 1, 2008, the authorization MacQuarrie signed for the paramedical exam contained the following:
Authorization I authorize the Insurer and its agents, for underwriting and administration of insurance and claims payment purposes only, to gather only that information necessary for the object of the file, from any person or organization that has personal information relating to me, including other insurers, physicians and medical institutions, the Medical Information Bureau, investigation and credit reporting agencies, and all persons or organizations likely to have personal information relevant to the object of the file, to disclose only the necessary personal information it has relating to these same persons and organizations and to request a personal investigation report relating to me. This Authorization is valid for the period required to achieve the ends for which it was requested. A photocopy of this Authorization shall be as valid as the original.
[45] Dr Mabini received results of the October 1 Thyroid Ultrasound around October 7, 2008 and ordered a fine needle aspiration that was done in February 2009. She did not discuss the implications of the ultrasound report with MacQuarrie.
[46] Boucre gave evidence sleep apnea should have been disclosed under question 3(c). If not disclosed under question 3(c), sleep apnea should have been disclosed under 3(n), because in her opinion, sleep apnea is both a disease and a symptom.
[47] Boucre also said that since the sleep study had been done in a clinic or hospital, it should have been disclosed under question 4(c) if it had not been disclosed under 3(c) or 3(n). [However, I note under question 3a she said if a recent consultation had been reported under question 1, she would usually have obtained clinical notes and records.] She did not require clinical notes and records despite his disclosed sinus surgery on September 12 because it was a day surgery. He had not been hospitalized/was not necessarily a patient.
[48] Boucre gave evidence that different insurers use different forms. Some specifically mention sleep apnea. Some do not. The form Johansson completed did not.
[49] Boucre said that when she reviewed the questionnaire Johansson had completed, everything seemed normal.
[50] On November 21, 2008, two months after the sinus surgery, Dr Mabini saw the Plaintiff.
[51] Boucre saw no need to request additional information. She "rarely" asks for clinical notes and records. She approved the request for insurance on December 22, 2008.
[52] On February 19, 2009, a fine needle aspiration was done.
[53] Dr. Chau saw the Plaintiff on February 23, 2009. On February 24, 2009, before Dr. Chau knew the results of the fine needle aspiration, he wrote:
He is known to be a snorer but since sinus surgery in Sept 2008 the snoring has resolved. His wife has never reported apneic incidents and he has never woken up choking or gasping. In the morning occasionally he has a dry sensation in the laryngeal area. He denied morning headache…. He generally feels his sleep is refreshing especially since he had the nasal sinus surgery. About a third of the time in the daytime he may feel tired mid-afternoon but he does not usually nap in the daytime. He does not generally feel sleepy as such and he feels he feels he has good concentration and his work is unaffected. He does not feel sleepy driving. He does not have leg restlessness….
[54] Dr. Chau's February 24, 2009 letter is consistent with the Plaintiff's view that he had a sinus problem and didn't need C-PAP:
Recently, he was also found to have thyroid mass which was biopsied last week and the results are still pending… The sleep study was done prior to his nasal sinus surgery in September and since his surgery he has noticed improvement with resolution of the snoring… I have discussed with him positional therapy to avoid the supine position… I have also discussed CPAP therapy, an oral appliance, and surgery. At this point he would like to avoid any more interventional therapy.. He will try to lose weight and try to stay off his back and I have arranged for him to have a repeat sleep study in about six months …
[55] The February 28, 2009 report on the fine needle aspiration contained the following: "FNA from right thyroid need – follicular lesion with cystic degenerative and mild cellular atypia. Comment: A mild cellular atypia is present. Follow-up is recommended."
[56] On May 15, 2009, half of the Plaintiff's thyroid was surgically removed.
[57] On May 19, 2009, a surgical pathology report noted papillary microcarcenoma .5 mm in dimension, unencapsualted, follicular variant in type, completely confined to thyroid. No evidence of lymphovascular invision.
[58] On June 17, 2009, Dr Mabini recorded in her clinical note that the Plaintiff's pathology had come back as micro-carcinoma and that he was going to put in a claim on his critical illness insurance.
[59] On August 3, 2009, the Plaintiff made two National Bank Life Insurance and Critical Illness insurance claims. He wrote: "I was diagnosed with thyroid cancer in May of this year…."
[60] On August 27, 2009, the Insurer requested Doctors Mabini and Murton to provide additional information.
[61] Dr. Murton was asked whether between October 1, 2003 and October 1, 2008 the patient had consulted a health care professional, had a medical examination or follow up, suffered or been diagnosed with or currently being tested or treated for lung disease or respiratory problems. Dr. Murton answered no.
[62] As already noted, on October 30, 2009 an unidentified person in the claims department of the Defendant National Bank Life Insurance Company wrote declining the claim and informing the Plaintiff that his life and critical illness insurance coverage was being rescinded.
[63] The Plaintiff said he was "shocked" when he received this letter. It had never occurred to him that sleep apnea was a respiratory problem.
Analysis
1.Was The Insurer Entitled to Rescind?
[64] The basis for rescission the Insurer gave in its letter dated October 30 2009 was that the Plaintiff suffered and consulted between October 1, 2003 and October 1, 2008 for respiratory problems. Had they been disclosed, the Insurer would have declined insurance coverage.
[65] Counsel for the Insurer based its entitlement to rescind on (1) statutory provisions; (2) contractual provisions; and (3) the common law.
Statutory Provisions
[66] Section 183(1) of the Insurance Act, R.S.O. 1990 ch. I. 8 provides:
an applicant for insurance … shall disclose to the Insurer in the application, on a medical examination, if any, and in any written statement or answers furnished as evidence of insurability, every fact within the person's knowledge that is material to the insurance and is not so disclosed by the other.
[Emphasis added.]
[67] Subsection (2) provides:
Subject to section 184 failure to disclose, or a misrepresentation of such a fact renders the contract voidable by the Insurer.
Contractual Provision
[68] Counsel for the Insurer relied on provisions in (1) the application declaring that its contents were true and (2) in the certificate of insurance that any concealment or false declaration could result in the cancellation of the insurance.
Common Law
[69] Counsel for the Plaintiff submitted there was no concealment or false declaration, no failure to disclose a fact within the insured's knowledge that was material to the insurance. The Plaintiff answered the questions posed by the Insurer honestly and to the best of his ability. The Insurer created the forms. The Insurer framed the questions the Plaintiff was required to answer, including: "Have you been treated for respiratory problems?"
[70] He referred to the following passage written by Anglin J. in the Supreme Court of Canada in Ontario Metal Products, 1923 8 (SCC), [1924] S.C.R. 35 at 41:
At 41:
It is well established law that the preparation of the form of policy and application being in the hands of the insurers, it is but equitable that the questions to which they demand answers should, if their scope and purview be at all dubious, either in themselves or by reason of context, be construed in favour of the insured, especially after his death when we are deprived of the advantage of his version of what occurred upon the medical examination and of any explanation by him of his understanding of the questions and of his reasons for giving the answers to them recorded by the medical examiner. The insurers put such questions and in such form as they please, but they “are bound so to express them as to leave no room for ambiguity.” To such a case the rule contra proferentem is eminently applicable.
At 43:
In Connecticut Mutual Life Assurance Co. v. Moore, 6 App. Cas. 644:
They have stipulated that his answers shall form part of the contract which he is about to enter into. They say to him in effect, “You must answer these questions correctly; if from forgetfulness or inadvertence you answer a question incorrectly, we hold the policy void.” They have a right to make that stipulation; but it is, in my judgment, a stipulation that should be construed with great strictness. When they put a very general question under a stipulation of that kind, it is only reasonable and just to put on that general question a fair construction; …; I think that question must be read in a fair and common-sense way. If the applicant had had a headache the very day before, and had not stated it in his application, it could not be said that this policy was good for nothing simply because he had not stated that; and yet a doctor would tell you that a headache was an illness, and that it came, strictly speaking, within that term. …
At p. 44:
Now let us consider briefly the matters the non-disclosure of which is said to establish the untruth of the insured’s answers. At intervals during the years 1915, ’16 and ’17 a physician administered to the late Frederick Joseph Schuch a series of hypodermic injections consisting of a mixture of iron, arsenic and strychnine. Baldly stated, this no doubt looks formidable and would bespeak somewhat important medical treatment, probably warranting an inference that the insured had been suffering from recurrent attacks of a serious disease or illness. But the circumstances must be carefully considered before such a conclusion is reached. For them we must resort to the evidence of Mrs. Schuch, the widow of the insured, and of Dr. Fierheller, who administered the injections and was a witness for the defendants—and the evidence of the latter must be taken as a whole. The learned trial judge in his carefully considered judgment said:—
The witnesses on both sides gave evidence, as I thought, honestly and with the desire to give their sincere views.
At p. 46:
In my opinion, Schuch might very well, as a reasonable man, Joel v. Law Union and Crown Insurance Co.[13] have considered that during these years he had not an illness, Yorke v. Yorkshire Ins. Co.[14], which the insurance company would expect him to mention in answering question no. 17 and that he had not consulted or been prescribed for or treated by a physician within the meaning of question no. 18.
At p. 49:
In the view I have taken, however, that by its requisitions for information the company elected to relieve the insured from any duty to disclose matters in regard to his past health which its questions did not cover (having by an express provision of its policy agreed that only the statements contained in the written application should avail it as matter of defence; Joel v. Union and Crown Ins. Co.^21; Ayrey v. British Legal and United Provident Ass. Co.[24]), and that there was in fact no misrepresentation or concealment of anything required to be disclosed by questions nos. 17, 18, 19 and 20 it would seem to be unnecessary to pass upon the question of materiality.
[71] Mignault J. in the same decision reasoned as follows at pp. 52-53:
Moreover the true meaning of the questions submitted by the medical examiner must be considered, especially as they would impress the person examined, assuming him to be a reasonable man, before coming to the conclusion, as the Appellate Court did, that the answers were untrue and fraudulent.
In my opinion, questions 17 and 18 must be read together. The insured is, by the latter question, asked to state every physician or practitioner who has prescribed for or treated him or whom he has consulted in the past five years. Obviously what is meant here—and any reasonable man would so understand it—is prescription, treatment or consultation in connection with the illnesses, diseases, injuries or surgical operations which the insured was asked to mention by question 17, the more so as the last words of question 18 refer back to question 17. Then consultations are emphasized by the heading “When consulted” under question 18, as they are emphasized in question 20, and here there is no evidence that Schuch ever consulted about any illness Dr. Fierheller, who cannot say that he did.
At p. 54:
And at page 884 [of Joel v. Law Union and Crown Insurance Co., [1908] 2 K.B. 863 at 883], Fletcher Moulton L.J. adds
The question always is: Was the knowledge you possessed such that you ought to have disclosed it? Let me take an example. I will suppose that a man has, as is the case with most of us, occasionally had a headache. It may be that a particular one of these headaches would have told a brain specialist of hidden mischief. But to the man it was an ordinary headache undistinguishable from the rest. Now no reasonable man would deem it material to tell an insurance company of all the casual headaches he had had in his life, and, if he knew no more as to this particular headache than that it was an ordinary casual headache, there would be no breach of his duty towards the insurance company in not disclosing it. He possessed no knowledge that it was incumbent on him to disclose, because he knew of nothing which a reasonable man would deem material or of a character to influence the insurers in their action. It was what he did not know which would have been of this character, but he cannot be held liable for non-disclosure in respect of facts which he did not know.
[Emphasis added.]
[72] Counsel for the Plaintiff also relied on the following passage from "Norwood on Life Insurance in Canada" (3rd ed. at pp. 384-385)
GENERIC DISEASE QUESTIONS
Where the insurer's questions refer not to factual events but couch its enquiries about medical conditions in generic terms, the life insured's knowledge and comprehension of the nature of the disease generically described becomes elusive. The questions use medical terminology and ask the applicant, not about diseases specified by name, but about broad categories of diseases.
… If it can be shown that the facts and information reached the insured and the insured should reasonably have understood the information, the insurer is not left left to the mercy of the insured's idiosyncrasies of memory or comprehension. The test here is whether the life insured "did or should have characterized" the condition as the disease named, which certainly connotes that reasonable insured should have recognized it.
The test is subjective only in the sense that the nature of the information has to be shown, and that the information given to the deceased insured was cogent information, but it would appear that in the last analysis it is an objective test whether a reasonable person provided with the same information about a given medical condition would have recognized the category of the disease. Where there is a medical for the insurance, it would seem that the medical examiner's questions honestly answered would bring out the presence of an identifiable category of disease, but where the insured is left to answer broad questions on their own, the courts are more than willing to accept that the insured may not have recognized what is and what is not a particular "disease" by its generic description.
It is noteworthy that many creditor's group insurance cases have consistently held that the deceased insured did not recognize the disease which was the subject of the insurer's broadly-worded question where the insured is asked to answer questions about categories of diseases without a medical examination or an experienced insurance agent on hand. … If the insurer can establish that sufficient medical information was given to the insured to enable a reasonable person in the insured's shoes to identify the generic disease, it would seem that the insured's failure to disclose innocently or inadvertently, is still misrepresentation, whether it is due to honest forgetfulness or miscomprehension.
However, where the insurer's questions are generic in nature, the courts are prone to give the deceased the benefit of the doubt that the disease was not identified in the insured's mind. In cases where the insurer's questions allowed for different interpretations, non-disclosure has been excused as not being a misrepresentation. In what seems to be an extreme example, an insured with a history of lung problems, including emphysema medication, regular X-ray and sputum tests, and a suspicious shadow on the lung, was held not to know he had consulted for or was being treated for a "respiratory" disease.
Footnotes omitted.
[73] MacQuarrie answered truthfully according to what he understood. He disclosed his sinus condition and hypertension. He had not specifically requested a sleep study. One had been done in conjunction with his sinus condition. Further discussion about his sleep apnea had been deferred until after his sinus surgery.
[74] He had reported to Dr. Chau in February 2009 that his sinus surgery had resolved his snoring problem. Dr. Chau had reported before he received results of the fine needle aspiration re his thyroid:
but since sinus surgery in Sept 2008 the snoring has resolved. His wife has never reported apneic incidents and he has never woken up choking or gasping. … He denied morning headache…. He generally feels his sleep is refreshing especially since he had the nasal sinus surgery. … He does not generally feel sleepy as such and he feels he feels he has good concentration and his work is unaffected. He does not feel sleepy driving. He does not have leg restlessness….
[75] I have accepted the Plaintiff's evidence he did not understand sleep apnea to be a respiratory disorder. He answered the questions asked truthfully according to his understanding of the meaning of respiratory disorder. He would have mentioned it had he been asked whether he had a sleep disorder. He was not asked.
[76] I find the question on respiratory disorders when read in context [especially considering the evidence of the Plaintiff which I accept, the reinsurer's definition of sleep apnea as a sleep [not a respiratory] disorder and Dr Murton's response to the Insurer's request for further information in which he identifies no respiratory disorder] is ambiguous. The Insurer formulated the questions that the Plaintiff was asked and could have made its question 3(c) clear by specifically mentioning sleep apnea.
[77] Whether he had been a patient in a hospital or clinic was a question subject to more than one interpretation. Boucre said the Plaintiff was not hospitalized for the sinus surgery in September 2008. Had he been, the practice would have been to obtain clinical notes and records but that was not necessary because he was not hospitalized. Given that answer, it does not seem unreasonable for the Plaintiff to have understood "patient in hospital or clinic" to include a formal admission.
[78] The basket question 3(n) is likewise ambiguous. The Plaintiff gave evidence he had had no symptoms of sleep apnea. He had asked Dr Murton why he had directed the sleep study when he was not tired etc. I accept that he genuinely understood he had no symptoms of sleep apnea. In his medical records, there was disagreement as to whether his headaches were a result of sleep apnea.
[79] The questions used on the Insurer's form were ambiguous when taken in context here.
[80] The Insurer assumed the Plaintiff would have a level of knowledge that many lay people and even doctors do not have. I have noted that Dr Murton [who had referred the Plaintiff to Dr Kolenda and had seen Dr Awad's report] did not associate sleep apnea with a respiratory disorder.
[81] Boucre's statement that if he did not understand he had only to ask, assumed the Plaintiff knew enough to think sleep apnea might be a respiratory condition. Again, if Dr Murton did not know or say it was a respiratory disorder, how could the Insurer expect the Plaintiff to know that sleep apnea was a respiratory disorder?
[82] I cannot and do not find the Plaintiff failed to disclose known facts to the Insurer. It follows the Insurer it was not entitled to rescind the contract.
[83] In case I am incorrect, I shall consider whether the information about sleep apnea was material.
[84] Counsel for the Insurer referred to the decision of the Ontario Court of Appeal in Vrbancic v. London Life 1995 1055 in submitting the Plaintiff had an obligation to disclose all known information about his health and medical condition whether or not he had been asked about it. In that case, Morden A.C.J.O. for the Court of Appeal reasoned:
In general terms, what is material is not for the applicant to determine. In Mutual Life Insurance Co. of New York v. Ontario Metal Products Co., 1924 336 (UK JCPC), [1925] A.C. 344 at pp. 350-52, [1925] 1 D.L.R. 583 (P.C.), an appeal in an Ontario action, Lord Salvesen said:
The main difference of judicial opinion centres round the question what is the test of materiality? …
In their [Lordships'] view, it is a question of fact in each case whether, if the matters concealed or misrepresented had been truly disclosed, they would, on a fair consideration of the evidence, have influenced a reasonable insurer to decline the risk or to have stipulated for a higher premium. [Emphasis added.]
This test was applied by the Supreme Court of Canada in Henwood v. Prudential Insurance Co. of America, 1967 17 (SCC), [1967] S.C.R. 720, 64 D.L.R. (2d) 715.
The trial judge also appears to have held that simply giving full answers to the questions of the insurer's agent amounted to full disclosure. This is not necessarily so. "As a general rule the fact that particular questions relating to the risk are put to the proposer does not per se relieve him of his independent obligation to disclose all material facts":MacGillivray and Parkington, Insurance Law, 8th ed. (1988), at p. 259; see also Norwood and Weir, Life Insurance in Canada, 2nd ed. (1993), at p. 307.
This does not mean that the particular form, or course, of the questions asked may not have a bearing on the scope of the duty of disclosure. "It is more likely . . . that the questions asked will limit the duty of disclosure, in that, if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on matters kindred to the subject matter of the questions": MacGillivray and Parkington, op cit., at p. 260.
[85] Vrbancic would only have been relevant if this Court had concluded that the Plaintiff had not disclosed all material facts.
[86] Was Boucre's evidence that National Bank Life Insurance would have declined the risk or stipulated for a higher premium sufficient evidence of materiality that a reasonable insurer would have declined the risk or stipulated for a higher premium?
[87] Counsel for the Insurer submitted the Plaintiff had an obligation to reveal that the MRI had revealed the existence of a thyroid nodule. If he had done so, the underwriting exercise would have been different. However, as noted earlier, Boucre gave evidence she did not know whether, had the ultrasound report been provided, it would have affected the Insurer's initial decision.
[88] The question to be decided here is whether the Insurer has established that if the possible sleep apnea had been disclosed, a reasonable Insurer would have declined the risk.
[89] Counsel for the Insurer submitted that Boucre's evidence was sufficient to prove that a reasonable insurer would have declined the risk.
[90] The RGA (General Underwriting Manual Guideline) of the reinsurer includes the following:
Sleep apnea is a common sleep disorder… The most common type of sleep apnea is obstructive sleep apnea (OSA), caused by relaxation of soft tissue in the back of the throat that blocks the passage of air… the hallmark symptom of the disorder is excessive daytime sleepiness. Additional symptoms include restless sleep, loud snoring (with periods of silence followed by gasps), falling asleep during the day, morning headaches, trouble concentrating, irritability, forgetfulness, mood or behavior changes, anxiety and depression … Severity of OSA is described by the apnea index ("AI") which measures the number of apneas lasting longer than 10 seconds per hour of sleep…
[Emphasis added.]
[91] I note it does not characterize sleep apnea as a respiratory disorder. It mentions that severity of OSA is described by the AI (not the AHI) Index.
[92] Here it is uncontested the critical loss insurance policy offered to the Plaintiff was a group policy. Had it not been rescinded, MacQuarrie and all members of the group of the same age and sex regardless of risk would have paid the same premium.
[93] Counsel for the Insurer pointed to the RGA General Underwriting Manual at page 2 re sleep apnea under the heading "Critical Illness." She submitted that the Plaintiff's AI being 21 and untreated (see Dr. Chau's April 2, 2008 sleep study) [i.e., over 20], the guideline clearly provided that the insurance should be declined.
[94] However, as already mentioned and as Boucre conceded in cross-examination, the guidelines refer to AI, not AHI. The April 2, 2008 sleep study results of Dr. Chau to which the Insurer was referring, referred to AHI of 21.1, a different standard. [In the 310 minutes he had 86 apneas per hour for an AI index per hour, not of 21.1 but of 16.645 (86/5.1667 = 16.645.)]
[95] Therefore, the only insurer guidelines entered into evidence did not make it clear that had it been applied, insurance would have been declined.
[96] Counsel for the Plaintiffs objected when, during the course of her evidence Boucre attempted to say that in the case of Critical Illness Coverage, she would have declined everything rated 49 or higher. (When the reinsurer's guideline had been provided to counsel for the Plaintiff, counsel for the Insurer had not given no notice of any evidence to be given about a +50 rating on a reasonable insurer.) Had the Insurer wished to rely on this evidence, prior notice should have been provided before the trial.
[97] In any event, even if the evidence were admissible, I would not have found it sufficient to prove what a reasonable insurer would have done. Evidence about this Defendant's practices, without more, would not have provided sufficient proof that if the rating had been +50, a reasonable insurer would have declined the risk.
[98] In the circumstances here, I am of the view that the Insurer should have called the evidence of someone with knowledge on general practice in the insurance industry, not the underwriter who had made the initial decision to insure.
[99] Here we know this group insurance was offered with similar rates for insureds of the same age and sex. Nothing in the written guidelines suggests that a rating of 50 or higher would automatically result in a decision not to insure.
[100] On the evidence before me, Boucre's mistaken application of the AHI results rather than the AI results apparently resulted in a decision to rescind based on an incorrect application of the guidelines. In the absence of evidence about practices of reasonable insurers to an AI of 16.645 or a +50 rating, I am not prepared to find without further evidence that a reasonable Insurer would have declined coverage if it had had that information [i.e., that the Plaintiff had an AHI index of 21.1 per hour].
The Insurer's Submission it was Entitled to Rely on Exclusion Clauses
[101] I note that the Insurer did not initially rely on either exclusion and only sought to do so when it amended its Statement of Defence on April 18, 2013.
[102] Counsel for the Insurer now relies on two exclusions: (1) Pre-Existing Conditions and (2) the 90 day exclusion.
[103] Counsel for the Plaintiff submits that, having repudiated the contract by claiming recission when it was not entitled to do so, the Insurer should be precluded from relying on the terms of the contract, including the exclusion clauses. It would be unconscionable, unfair, unreasonable or otherwise contrary to public policy in all the circumstances here to enforce the exclusion clauses. Guarantee Company v. Gordon Capital, [1999] 3 C.R. 423 at 453.
[104] While I accept that in some circumstances it would be unconscionable or unreasonable to apply exclusions after a party has wrongly purported to altogether rescind a contract, I am of the view that it would not be unconscionable to do so here. The contract said what it said. If an exclusion clause applied, it provided a basis for the insurer to refuse payment. I reject that submission.
[105] Generally, the onus is on the insured to prove that his claims fall within the initial grant of coverage. If he does; the onus then shifts to the insurer to demonstrate an exclusion clause or clauses preclude coverage. The insurer must discharge its burden by showing the exclusions clearly and unambiguously apply.
[106] Exclusion clauses are to be construed narrowly: Reed Crowther v. Simcoe & Erie, 1993 150 (SCC), [1993] 1 S.C.R. 252 at 269.
[107] Insurers must use language that clearly expresses the extent and scope of the exceptions and limitations imposed. Any ambiguity must be resolved in favour of the insured.
1. Pre-Existing Conditions
[108] The first exclusion clause upon which the Insurer relies provides as follows:
Pre-existing conditions: the effects of a Sickness and/or symptoms or Accident when Death, Disability, Critical Illness or Accidental Dismemberment occurs during the 12 months following the effective date of the Insurance and for which Sickness and/or symptoms, injury or any related cause, resulting directly or indirectly from the Accident or Sickness, the Insured, during the 12 months that preceded the effective date of the insurance, had consulted or received treatment from a physician or other health care professional, underwent tests, took medication or was hospitalized.
[Underlining emphasis added.]
[109] Here the critical illness, thyroid cancer, was diagnosed in May of 2009 within twelve months of September 11, 2008. However, I am not satisfied that before September 11, 2008, the effective date of the insurance, the Plaintiff had exhibited any symptoms of thyroid cancer. The evidence was that the thyroid nodule was accidentally discovered in the course of investigating the Plaintiff's sinus condition.
[110] Dr. Mabini wrote: "Asymptomatic, but thyroid nodule picked up on MRI Sept 8 2008. The first consultation for this condition was November 11, 2008.
[111] Before September 11, 2008, the effective date of the insurance, the Plaintiff had not consulted a physician or health care professional to discuss the possibility of thyroid cancer. He had not received treatment for thyroid cancer before September 11, 2008.
[112] Counsel for the Insurer submitted the Plaintiff underwent a test on September 8, an MRI for thyroid cancer during 12 months before September 11 and was diagnosed within 12 months on May 8, 2009. In my view, here the Insurer cannot demonstrate there were consultations, tests or medication for thyroid cancer or the effects of thyroid cancer prior to September 11, 2008. Any tests done before September 11, 2008 were not specifically targeted at thyroid cancer. They were targeted at the Plaintiff's sinus issues. The Plaintiff understood a "cyst" had been found.
[113] On the Additional Information Form, which Dr. Murton completed after the Plaintiff made his claim, Dr. Murton wrote: "diagnosis of a thyroid nodule and of thyroid carcinoma May 2009."
[114] I note the report on the October 1, 2008 ultrasound read as follows:
The MR nodule is a 1.2 cm lesion that contains both solid and cystic components. Fairly well developed. No evidence of vascularity of the solid component – on either ultrasound or the prior MRI. Likely of no significance. Suggest clinical follow up. Incidentally noted are some small nodes bilaterally.
[115] Whether Dr. Mabini's note of first consultation November 11, 2008 or Dr. Murton's note of diagnosis of thyroid nodule on October 8 is used, both were after September 11, 2008. The exclusion re Pre-Existing Condition does not apply.
2. The 90-day Exclusion
[116] The second exclusion upon which the Insurer seeks to rely, the 90 day exclusion, reads as follows:
A [critical illness] resulting from any health problem, sign or symptom beginning before the ninety-first (91st) day after the certificate came into effect and which prompted an examination that led to a diagnosis of Cancer.
[Underlining emphasis added.]
[117] According to Dr. Murton, a thyroid nodule was diagnosed in October 2008. Dr. Mabini wrote "thyroid nodule picked up on MRI Sept. 8 2008." The September MRI of a sinus cyst incidentally picked up small lymph nodes unlikely of clinical significance. The first consultation for this condition was November 11, 2008. Dr. Mabini said she did not specifically advise the Plaintiff after she received the results of the October 1 ultrasound why she had ordered it. The October ultrasound was likely of no significance.
[118] The real question here is whether the September and/or the October ultrasound were a sign beginning before the 91st day after September 11, 2008, which prompted an examination that led to the diagnosis of cancer. Could the results of the MRI and ultrasound be a sign of any illness or health problem or did it have to be a sign of thyroid cancer? Was an examination that led to the diagnosis of cancer prompted by the MRI or ultrasound?
[119] I am of the view that the nodule incidentally picked up on the September MRI and further investigated on the October 1, 2008 ultrasound was a sign of possible thyroid cancer, among other things. Neither pointed conclusively to that diagnosis. However, the September 2008 MRI prompted the October ultrasound which prompted the February 2009 fine needle aspiration which prompted the February surgery and the diagnosis of thyroid cancer in May of 2009.
[120] The sign of thyroid cancer began before the 91st day after September 11, 2008 and prompted an examination that led to the diagnosis of cancer.
[121] The Insurer has met the onus of discharging the burden of showing that the 90 day exclusion applies.
Disposition
[122] Therefore, the Plaintiff's action will be dismissed.
[123] Counsel may make brief written submissions on costs on or before March 14, 2014.
M.A. SANDERSON
Released:
COURT FILE NO. CV-10-396770
DATE: 20140227
Scott MacQuarrie
Plaintiff
- and -
National Bank Life Insurance Company and National Bank of Canada
Defendants
Reasons for DECISION
M.A. SANDERSON J.
Released: February 27, 2014