Court File and Parties

Court File No.: CV-16-56732-0000 Date: 2019-05-31 Ontario Superior Court of Justice

Between: FADIA KHALIL MOHAMMAD, Plaintiff – and – THE MANUFACTURERS’ LIFE INSURANCE COMPANY, Defendant

Counsel: M. Walter, for the Plaintiff G. Jermane, for the Defendant

Heard: March 29, 2019

Before: S.M. O’BRIEN J.

Reasons for Decision

Overview

[1] The issue on this motion is whether an insurer is entitled to information that it did not seek from an Applicant for life insurance during the underwriting process. The insurer claims that the life insurance policy is void ab initio on the basis that the deceased (1) fraudulently misrepresented his immigration status by providing a social insurance number (“SIN”) on the life insurance application form; and/or (2) fraudulently misrepresented his criminal past, by not disclosing it on the application form. The Plaintiff, who is the wife of the deceased and the beneficiary of the policy, submits that the life insurance company did not ask questions to elicit this information and, therefore, there was no obligation to disclose it. The Plaintiff brings this motion for summary judgment claiming payments of amounts owing under the life insurance policy. The Defendant, in its responding material, seeks summary judgment dismissing the action.

[2] In the spring of 1987, Mahmoud Mohammad (“Mohammad”), having recently arrived in Canada with his wife and three children, was looking to purchase a home. He was told that, in order to obtain a mortgage, he would need a life insurance policy. Accordingly, on approximately April 10, 1987, Mohammad and his wife, the Plaintiff, Fadia Mohammad (“Fadia”), met with a life insurance agent to complete an application for life insurance with the North American Life Assurance Company, a predecessor to the Defendant, The Manufacturers’ Life Insurance Company (“Manulife”). North American Life issued a policy to Mohammad dated April 21, 1987.

[3] Shortly after his arrival in Canada, the Canadian government sought to have Mohammad deported due to his past and his misrepresentation of his past when seeking status in Canada. In 1968, Mohammad and another man perpetrated a terrorist attack on an El-Al airliner in Athens, Greece. Mohammad was convicted of seven offences, including manslaughter. He was sentenced to a lengthy jail term, but was released in 1970 and pardoned as part of a deal to ensure the release of hostages on a hijacked Olympic Airways plane. In 1988, the Canadian government commenced proceedings to have Mohammad deported from Canada.

[4] In December 1988, an immigration adjudicator found that Mohammad was a permanent resident granted landing by reason of misrepresentation of material facts and ordered his deportation. Mohammad thereafter applied for refugee status. Various legal proceedings and appeals ensued. After all immigration legal proceedings were concluded, Mohammad was deported in 2013 to Lebanon.

[5] Mohammad died in Lebanon in February, 2015, of lung cancer. Fadia submitted a claim to be paid the death benefit under the life insurance policy. All required premiums had been paid under the policy. However, Manulife denied payment on the basis that Mohammad “fraudulently misrepresented his status as a legal citizen or legal permanent resident in Canada” by providing a SIN on the form. Manulife said the SIN “represented Mr. Mohammad’s status as a legal citizen or legal permanent resident in Canada.”

[6] I conclude that providing a SIN did not constitute fraudulent misrepresentation about Mohammad’s immigration status. Further, in my view, there was no duty to disclose the information about his immigration status and criminal history, as the information was not material and/or it was contrary to the insurer’s good faith duty to rely on the absence of information when they did not ask any questions to elicit it. The insurer, by way of its own application form, set out the information it deemed necessary, based on its own policies and considerations, to determine whether to insure the risk presented. In the alternative, if Mohammad did misrepresent his immigration status and criminal history, I find that he did not do so fraudulently.

Issues

[7] The issues I need to determine are:

a. Is Summary Judgment appropriate in this case? b. Did Mohammad’s inclusion of his SIN on the application form constitute a misrepresentation? c. Did the lack of information about Mohammad’s illegal entry to Canada and criminal past constitute a misrepresentation? d. In the alternative, was Mohammad’s failure to disclose information about his immigration status or criminal past fraudulent?

Summary Judgment Is Appropriate

[8] It is first necessary to determine whether summary judgment is appropriate to dispose of this matter. I conclude that it is.

[9] The life insurance policy in dispute was issued over thirty years ago, in April 1987. The Applicant, Mohammad, died on February 23, 2015. The sole beneficiary of the policy, Fadia Mohammad, has sworn an affidavit on this motion. The amount in issue is $75,768.78.

[10] Manulife did not issue the policy itself. However, it provided its entire file regarding Mohammad to the Plaintiff, and the entirety of that file is in evidence. Neither party suggests that there is any other evidence available that would shed light on the issues between the parties.

[11] In my view, summary judgment is appropriate in this case. R. 20.04 (2) (b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 provides that the court “shall” grant summary judgment if “the parties agree to have all or part of the claim determined by summary judgment and the court is satisfied that it is appropriate to grant summary judgment.” Although the parties have agreed to summary judgment in this case, nevertheless, I must be satisfied that it is appropriate to decide the issues by summary judgment: Anjum v. John Doe and State Farm, 2016 ONSC 7784, aff’d 2017 ONCA 821; Ahmed v. Elmarsafy, 2019 ONSC 388.

[12] On a motion for summary judgment, the court is required to determine whether, on the basis of the record before it, it can make the necessary findings of fact, apply the law to the facts, and thereby achieve a fair and just adjudication of the case on the merits. Each party must “put its best foot forward.” A court is entitled to assume that the record contains all the evidence that the parties would present if the matter proceeded to trial: Sweda Farms Ltd. v. Egg Farmers of Ontario, 2014 ONSC 1200, aff’d 2014 ONCA 878, at paras 26-27, 33.

[13] Here, the parties are largely in agreement with respect to the relevant facts. There is no dispute regarding Mohammad’s criminal history, nor about the contents of the application form. The central issue in dispute is how the facts are applied to the question of whether Mohammad’s immigration status and criminal history were “material” to Manulife, and whether Mohammad fraudulently misrepresented them on the application form. In addition, the parties have provided a fulsome documentary record, which reflects the evidence that is expected to be available at trial. Further, the Applicant for life insurance, whose evidence regarding filling out the life insurance application might have been useful, is deceased. The policy is held by a successor insurer life insurance company and, with the passage of time, the employee who assisted Mohammad, if he or she ever became employed at Manulife, has not provided evidence. However, Manulife has provided a complete copy of Mohammad’s file. In addition, Fadia, the only other person with potentially relevant evidence, has sworn an affidavit on this motion. I have determined that I can appropriately determine these issues on the record before me and this would be an efficient, proportionate and just manner to resolve the matters in dispute: Hryniak v. Maudlin, 2014 SCC 7, [2014] 1 S.C.R. 87, at para 28.

Did Mohammad’s inclusion of his social insurance number on the application constitute a misrepresentation?

[14] Manulife argues that Mohammad engaged in fraudulent misrepresentation as to his immigration status when he provided his SIN on the North American Life application form. I do not agree. I find that the provision of his SIN was not a misrepresentation as to his immigration status.

Social Insurance Number, Immigration Status and Application Form

[15] Mohammad obtained his SIN shortly after arriving in Canada. Mohammad and Fadia immigrated to Canada on February 25, 1987. They had last lived in Spain prior to coming to Canada and had applied to immigrate to Canada through the Canadian embassy in Spain. They were provided with immigration visas by the Canadian Embassy in Spain and were given a Record of Landing by Employment and Immigration Canada, dated February 25, 1987. The Record of Landing recorded that they were “stateless.” After arriving in Canada, Mohammad applied for and was given a Canadian SIN.

[16] There is no dispute that Mohammad’s entry into Canada occurred illegally and as a result of a false statement. When Canada commenced proceedings to have Mohammad deported, the issue was that Mohammad had stated he had never been convicted of a crime or offence. This was clearly untrue, as set out above. He was deported in 2013.

[17] The application for insurance provided by the insurer for Mohammad to complete included a space for his SIN, but no questions about citizenship or immigration. The form did include questions about other specific types of information and activities, such as the following, with the answers indicated in brackets:

• Occupation and Duties [answer: owner]
• Employer [answer: self-employed]
• Nature of Business [answer: export & import]
• Whether the Applicant had applied for life or health insurance in the past twelve months, or whether any other application was pending or contemplated [answer: no]
• Whether the Applicant had any intention of replacing or changing existing insurance [answer: no]
• Whether any application for life or health insurance or for reinstatement had been changed, rated, declined, postponed or modified [answer: no]
• Whether the Applicant had flown in the last two years or had the intention of flying, other than as a passenger on scheduled airlines [answer: no]
• Whether the Applicant within the last two years engaged in sports or other activities which could result in physical injury, such as motor vehicle racing, scuba or sky diving, hang gliding, parachuting, mountain climbing, rodeos, etc. If so, the Applicant was required to complete an “appropriate Sports Questionnaire.” [answer: no]
• Whether the Applicant within the last two years had a driver’s licence suspended or revoked, any convictions, or more than two moving traffic violations. [answer: no]
• Whether the Applicant had any intention of changing occupation, or of travelling or residing outside Canada, United States or Bermuda. [answer: no]
• Whether the Applicant had ever smoked cigarettes or used tobacco. [answer: no]

[18] The form also included multiple questions regarding the Applicant’s health. Mohammad replied “no” to all of these questions, other than indicating that he had had a general medical examination indicating that he was in good health on November 20, 1986.

[19] Mohammad wrote down the SIN in the space provided. The only statement in the application that may have been relevant to Mohammad’s immigration status was found on the last page of the document, under the heading “Additional Information and Comments.” The information in that space reads: “Just moved to Canada from Spain.” It is not clear whether that comment was written by Mohammad or by the insurance agent, although in any event the agent’s answers bind the Applicant.

[20] Finally, the application contained the following “Declaration and Agreement,” which emphasized the importance of accurately answering the questions asked. It read:

The Owner and Insured agree that the meaning and importance of questions in the Application have been explained, and each question is fully understood. They declare that statements recorded in the Application are true and complete to the best of their knowledge and belief, and form the basis of any policy which is issued. They understand that the Company requires complete and accurate answers in order to provide Insurance and that THE COMPANY MAY CANCEL THE POLICY OR ANY RIDER OR DENY A CLAIM IF ANY ANSWERS ARE INCORRECT. (emphasis in the original)

Legal Analysis – No Misrepresentation

[21] In my view, Mohammad’s provision of his SIN as requested on the form did not constitute a misrepresentation. Subsection 183(1) of the Insurance Act, R.S.O. 1990, c. I.8 (the “Act”) sets out the Applicant’s obligation to disclose material facts to the insurer in the application and in any written statements or answers provided to the insurer. It states:

183(1) An Applicant for insurance and a person whose life is to be insured shall each disclose to the insurer in the application, on a medical examination, if any, and in any written statements 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.

[22] Subsection (2) of the Insurance Act provides that a misrepresentation of or failure to disclose such a fact will render the contract voidable by the insurer. However, when the policy has been in effect for more than two years, as in this case, a policy can only be voided by the insurer where the misrepresentation was fraudulent. Subsection 184(2) of the Act provides:

184(2) Subject to subsection (3), where a contract, or an addition, increase or change referred to in subsection 183(3) has been in effect for two years during the lifetime of the person whose life is insured, a failure to disclose or a misrepresentation of a fact required to be disclosed by section 183 does not, in the absence of fraud, render the contract voidable.

[23] I do not accept that, in providing his SIN, Mohammad misrepresented his immigration status. Mohammad did not provide his SIN as proof of anything, nor in response to a question. He wrote it in the space provided because he was asked to do so. Moreover, although a SIN may be provided only to an individual with a particular citizenship or immigration status, there is nothing in the application form to suggest that providing the SIN was a “representation” of that status. SINs play a wide variety of functions, regardless of immigration status, and are not specifically associated with immigration status. Indeed, in this case, long after the Government of Canada had started proceedings to deport him, Mohammad continued to receive Canada Pension Plan contributions referencing his SIN. Further, under immigration law, an individual can be considered a lawful permanent resident, even if the permanent residency is later revoked due to misrepresentation. The misrepresentation does not render the permanent residency status void ab initio: Jaber v. Canada (Minister of Citizenship and Immigration), [2000] 1 FC 603 (C.A.), at para 27. Therefore, Mohammad’s SIN was a valid representation that his status permanent residency status was considered legal at the time.

[24] In any event, there is nothing on the insurer’s application form to suggest that the request for an SIN (which, again, can have many functions), was intended as a check of the Applicant’s citizenship or immigration status. There are no questions on the application form that ask anything about the Applicant’s immigration status or citizenship. Had the insurer considered this important, it could have asked.

[25] In addition, the evidence is that Manulife itself also was not clear about the degree to which a SIN represented information about immigration and citizenship. Manulife’s underwriting director wrote as follows in an internal e-mail after Fadia made her claim under the policy:

The [application] has very little ‘meat’ and so if we are challenged it will be difficult to defend. Eg if we don’t ask about criminal history then this can be thrown back at us. I agree there will be little public sympathy but we might have to fight this on legal grounds.

Have therefore focused on the only disclosure that I think is material, ie the SIN. Have done some research and seems that the numbering system has been in use since the SIN was introduced in 1964, ie numbers starting with 9 are temp workers, 1-8 have permanent status, with the first digit representing the province. In this case the SIN starts with a 4, which is Ontario. If we do focus on the SIN we might need confirmation of it’s [sic] meaning in 1987.

[26] In other words, Manulife needed to search for a meaning they could attribute to the SIN. There is no evidence that the reason North American Life requested the SIN in 1987 was related to immigration status or that North American Life relied on the SIN in the underwriting process. Manulife’s claim of misrepresentation only arose after the claim was submitted. Mohammad simply filled in the field in the application form when asked to do so. I conclude that Mohammad’s inclusion of his SIN did not constitute a misrepresentation of his immigration status.

Did the lack of information about Mohammad’s illegal entry to Canada and criminal past constitute misrepresentation?

[27] Even if the SIN itself did not constitute a misrepresentation, Manulife submits that Mohammad had a duty to disclose both his immigration status and his criminal past to the insurer. It relies on the Applicant’s duty to disclose material facts, set out in s. 183 of the Act. It further argues that an Applicant for life insurance has a duty of “utmost good faith” to disclose all material information to the insurer. In Manulife’s submission, this would have included the validity of Mohammad’s landed immigrant status, his truthfulness in entering Canada, and his criminal past, including that it related to terrorist activities.

[28] I do not agree with this position. There is no question that an Applicant for life insurance owes a duty of good faith, which includes a duty to disclose all material facts. The duty goes beyond the duty not to misrepresent and includes a duty to make full disclosure of relevant information: Gregory v. Jolley et al (2001), 54 O.R. (3d) 481 (C.A.), at para 31. A fact is relevant or material if it would influence a prudent insurer in deciding whether to issue the policy or in determining the amount of the premium: Sagl v. Chubb Insurance Company of Canada, 2009 ONCA 388, at para 51.

[29] While an Applicant for insurance has a duty to disclose all material facts, an insurer’s conduct may be relevant to the analysis of whether a particular fact is material. An Applicant must disclose material facts, whether or not the insurer has asked about them, but an insurer’s failure to ask a question may be evidence that the particular insurer does not consider the issue to be material even if, objectively, the information would have been regarded as relevant by a prudent insurer: Sagl, at para 59. Further, the Court of Appeal, quoting from Newsholme Bros v. Road Transport and General Insurance Co. [1929] 2 K.B. 356, has said that insurance companies “run the risk of the contention that matters they do not ask questions about are not material, for, if they were, they would ask questions about them.” (Sagl, at para 59).

[30] Here, Manulife claims that information was material, even though it failed to ask any questions about it. Manulife relies on an expert underwriting opinion, which concludes, well after-the-fact, that Mohammad’s immigration status and criminal history were material to his risk, and would have influenced a prudent insurer in assessing and accepting his application. However, this opinion is not convincing when considered in the context of Manulife’s own underwriter raising concerns about the relevance of the information. That is, when Manulife’s own underwriter reviewed this file, as set out in the e-mail excerpted above, he was concerned that Manulife could not demonstrate the information was material because North American Life had not asked about it. He said: “The [application] has very little ‘meat’ and so if we are challenged it will be difficult to defend. Eg if we don’t ask about criminal history then this can be thrown back at us.”

[31] I also note that Manulife did not rely on the failure to disclose this information in its letter denying coverage. When Manulife denied payment to Fadia, it relied on the SIN as the basis of its misrepresentation claim, not on the failure to disclose other information.

[32] Manulife further argues that Mohammad was well aware of the connection between his criminal activity and his life expectancy, relying on statements in legal filings, in which Mohammad stated that his life would be in danger if he were to be deported. The flipside of this is that Canada ultimately did deport him, stating on at least one occasion that his concerns were speculative. Mohammad eventually died of causes that had nothing to do with his criminal activity. Rather, he did not die until 28 years after he applied for life insurance, from lung cancer.

[33] In my view, this case is similar to Sagl. There, an Applicant for homeowner’s insurance, failed to disclose to the insurer information that the insurer later claimed was material. The Applicant’s agent had presented her to the insurer as a wealthy individual. However, in reality, she was experiencing financial difficulties. The insured obtained insurance with respect to two adjoining homes, one of which subsequently was destroyed by fire. When the insured made a claim under the policy, the insurer said that she failed to disclose important facts to them, including that she was a joint owner and not sole owner of one property, that there were mortgages on both properties, with the mortgagee pursuing judgment and possession, and that, rather than being wealthy, she was in financial distress.

[34] The Court of Appeal concluded that the insured in that case had not misrepresented material facts. It noted that the application form did not contain any questions regarding ownership of the property, nor ask specific questions about mortgages or mortgage default, nor about any other debts. The court was of the view that it runs contrary to the good faith obligation that the insurer owes to the insured for the insurer to agree to insure a risk, when it knows or should have known that there is information relevant to the risk that it does not have and that it did not even inquire into, and then to raise the lack of information as a defence to the claim under the policy (at para. 62). The Court of Appeal endorsed the trial judge’s inference that the undisclosed facts were not material, as follows: “Through his reasons, the trial judge implicitly put the following question to [the insurer]: if it regarded these facts as material, why did it not ask about them?” (at para. 63).

[35] Similarly, in this case, there is no suggestion on the application form that North American Life considered any information about immigration status, nor criminal history, to be relevant. There are no questions related to these topics, other than the question about convictions specific to driving violations. North American Life also asked a number of questions about activities it presumably considered dangerous. It could have asked about criminal activities, charges, or violations but did not. Similarly, if North American Life had considered immigration status to be important, it would not have been difficult to ask about it. Although the application form did include a space for “additional information and comments,” this is a very broad heading, with no indication of the type of additional information that was required. It is well established that, as the insurer prepares the application form, any ambiguity is to be interpreted against it. If the “scope and purview” of the questions “be at all dubious…the rule of contra proferentem is eminently applicable.” (Ontario Metal Products Co. v. Mutual Life Ins. Co., [1924] S.C.R. 35, at p. 41; Taylor v. National Life Assurance Co. of Canada, at p. 7).

[36] Manulife relies on Gregory v. Jolley and Vrbancic v. London Life Insurance Co. (1995), 25 O.R. (3d) 710, both cases in which the Court of Appeal raised concerns about the Applicant not having met his duty to disclose. However, in my view, the facts of those cases are significantly different. In Gregory v. Jolley, when the Plaintiff applied for disability insurance, he stated his earnings were $100,000 and $90,000 (over two years), when in fact he had no income and had sustained losses. When he applied to have his policy reinstated after it had lapsed, he continued to have no insurable income. At that time, the insurer did not require a written application for renewal. The Plaintiff argued that, without an application form for renewal, there was no misrepresentation and that he was under no obligation to disclose the truth about his income. The Court of Appeal rejected that argument, finding a duty to disclose in the distinct circumstances of that case, where having insurable income was fundamental to obtaining insurance. The Court of Appeal acknowledged that “[i]n some cases, there may be a question about whether a fact must be disclosed,” but said that “in the present case, no such doubt arises.” They reasoned that having some amount of insurable income was “one of the most basic facts of insurability for disability.” At a minimum, “there is an implicit representation that one is at the very least insurable, in other words, that one is earning income that can be insured, whether or not the insurer asks for a written application.” (at para. 36).

[37] I do not accept that facts related to the Applicant’s immigration status and a criminal history that arose almost twenty years earlier, in a different country, are material to a life insurance application in the same way that the existence of at least some insurable income is material to a claim for disability insurance.

[38] Vrbancic is also distinguishable. There, the deceased applied for life insurance without disclosing certain facts pertaining to his health, including that he had been treated for alcoholic liver disease and advised to stop drinking. He ultimately died of terminal liver failure. The evidence was that the agent had filled in the application form and that the erroneous answers on it did not originate with the Applicant. However, in that case, the trial judge did not make all of the necessary finding of facts to determine what exactly the Applicant and his wife had disclosed to the agent. The Court of Appeal was concerned that it was not sufficient for the trial judge to consider only whether the erroneous answers on the form emanated from the Applicant and his wife. He also needed to consider whether “there was any material gap in the information that was disclosed.” (at p. 28) The Court of Appeal therefore ordered a new trial.

[39] While the court in Vrbancic enunciated the principle that the Applicant owes a duty of disclosure, in view of the absence of factual findings, it did not determine whether that duty was breached. Even if it was breached in that case, the application form there included questions specifically relevant to liver disease and the use of alcoholic beverages. This is very different from the case before me, where no remotely related questions were asked.

[40] It is also important that, in this case, as set out above, the North American Life application form actually emphasized the importance of answering the questions asked, rather than providing all material information. In my view, in not asking any questions remotely related to immigration status or criminal history, and in emphasizing the importance of accurately answering the questions asked, North American Life signaled that these issues were not material. As in Sagl, there is an absence of good faith on the part of the insurer to fail to raise the issues in any way, to emphasize the importance of answering the questions on the form, and then to rely on the Applicant’s non-disclosure to deny coverage.

In the alternative, was Mohammad’s failure to disclose fraudulent?

[41] If I am wrong in this conclusion, in any event, I would find that Mohammad did not engage in fraudulent misrepresentation, as required by s. 184(2) of the Act. I recognize that fraudulent misrepresentation in this context includes being reckless in failing to disclose material facts. The Applicant need not intend to defraud, or make statements calculated to mislead or misrepresent: Gregory v. Jolley, at para 20. I find, however, that Manulife has not proven that Mohammad was reckless in failing to disclose the information they now say is material. Where the Applicant is not aware of the materiality of the information, there is no fraud in the failure to communicate it. (Chenier et al v. Madill et al (1974), 2 O.R. (2d) 361 (HCJ)). I do not dispute that Mohammad was well aware of his criminal past and his misrepresentation on entry into Canada. However, I am not satisfied that he knew this was material to life insurance and needed to be disclosed. I have set out above that in my view, the information was not material. At a minimum, it was not sufficiently clear that it was material that I consider Mohammad’s failure to disclose it as intentional or reckless.

Costs

[42] The parties reached an agreement that if the Plaintiff was successful on this motion, the Defendant would pay her costs in the amount of $9,500.00.

Disposition

[43] The Plaintiff’s motion for summary judgment is allowed and the Defendant’s motion is dismissed. The Plaintiff is entitled to payment of the death benefit pursuant to her husband’s policy. Therefore, I order Manulife to pay the Plaintiff the amount of $75,768.78. In accordance with the agreement between the parties, the Defendant is to pay costs in the amount of $9,500.00, all inclusive, to the Plaintiff.

S.M. O’BRIEN, J. Released: May 31, 2019