Estate of Donald Farb by its Executor Robin Farb- Eckler v. The Manufacturers Life Insurance Company et al.

[Indexed as: Farb Estate v. Manufacturers Life Insurance Co.]

Ontario Reports Ontario Superior Court of Justice Belobaba J. June 22, 2020 151 O.R. (3d) 591 | 2020 ONSC 3037

Case Summary

Insurance — Accident insurance — Insurer denying travel insurance coverage for false answers given during policy application by telephone — Insured's estate claiming that insurer could rely only on written statements to deny coverage — Insured had been sent written application form for review and correction following telephone application — Insurer's telephone application process complied with written application requirements and met consumer protection objective of Insurance Act — Insurance Act, R.S.O. 1990, c. I.8, s. 300, Statutory Condition 2.

Insurance — Cancellation — Insurer denying travel insurance coverage for false answers given during policy application by telephone — Insured's estate claiming that insurer could rely only on written statements to deny coverage — Insured had been sent written application form for review and correction following telephone application — Insurer's telephone application process complied with written application requirements and met consumer protection objective of Insurance Act — Insurance Act, R.S.O. 1990, c. I.8, s. 300, Statutory Condition 2.

Insurance — Interpretation and construction — Insurer denying travel insurance coverage for false answers given during policy application by telephone — Insured's estate claiming that insurer could rely only on written statements to deny coverage — Insured had been sent written application form for review and correction following telephone application — Insurer's telephone application process complied with written application requirements and met consumer protection objective of Insurance Act — Insurance Act, R.S.O. 1990, c. I.8, s. 300, Statutory Condition 2.

Insurance — Misrepresentation — Insurer denying travel insurance coverage for false answers given during policy application by telephone — Insured's estate claiming that insurer could rely only on written statements to deny coverage — Insured had been sent written application form for review and correction following telephone application — Insurer's telephone application process complied with written application requirements and met consumer protection objective of Insurance Act — Insurance Act, R.S.O. 1990, c. I.8, s. 300, Statutory Condition 2.

Insurance — Statutory conditions — Insurer denying travel insurance coverage for false answers given during policy application by telephone — Insured's estate claiming that insurer could rely only on written statements to deny coverage — Insured had been sent written application form for review and correction following telephone application — Insurer's telephone application process complied with written application requirements and met consumer protection objective of Insurance Act — Insurance Act, R.S.O. 1990, c. I.8, s. 300, Statutory Condition 2.

The 84-year-old insured telephoned the respondent to renew his travel insurance policy. During the 27-minute call the insured answered no to questions about prescribed medications and pre-existing health conditions. The insurance representative filled out an application form as the insured provided him with information, then e-mailed and mailed the application to the insured for his review. The policy was issued. While travelling in Florida, the insured was unexpectedly hospitalized and incurred significant hospital expenses. The respondent denied his claim for reimbursement on the ground that his policy was voided for incorrect answers given during the telephone interview. After the insured passed away his estate took over the claim for reimbursement. The estate's position was that, regardless of whether the telephone answers were correct, the insurer could not rely on those answers to deny coverage unless such answers were, in the wording of Statutory Condition 2 as prescribed by s. 300 of the Insurance Act, "contained in the application or any other written statements or answers furnished as evidence of insurability". On that basis the estate applied for reimbursement of the insured's expenses from the respondent.

Held, the application should be dismissed.

The respondent's telephone application process complied with the written application requirements in Statutory Condition 2. The Insurance Act was designed to protect both insurer and insured. The reason for the written application requirement was to provide an applicant with an opportunity to review the application and make any corrections before the representations took effect. The insured was given that opportunity. In each of the telephone interview, the confirmation material, and the policy itself, the insured was repeatedly warned that if any of his medical answers were incorrect the policy would be rendered null and void and no claims would be paid. The insured had two months to review his answers as set out in the written version of his application and advise the respondent of any corrections or clarifications before the policy took effect and he travelled to Florida. There was no evidence that the insured attempted to contact the respondent to make any corrections. The consumer protection objective of the Insurance Act was completely achieved.

Cases referred to

Coronation Insurance Co. v. Taku Air Transport Ltd., [1991] 3 S.C.R. 622 at 636; Smith v. Co-operators General Insurance Co., 2002 SCC 30

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8, ss. 233(3), 293(1)(b), Part VII [as am.], ss. 290 [as am.], 300, 308 [as am.]

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 14.05(3)(d), (h)

Authorities referred to

Brown, Craig, Insurance Law in Canada looseleaf (Toronto: Carswell, 2019)

APPLICATION for reimbursement of expenses under a travel insurance policy.

Thomas J. Donnelly and Joyce Tam, for applicant. Gordon Jermane and Sophia Zaidi, for respondents.

BELOBABA J. : —

[1] Before travelling to Florida, Donald Farb telephoned the respondent Manulife from his home in Toronto to renew his travel insurance policy. During the 27-minute phone call with the Manulife insurance rep, Mr. Farb answered no to questions about prescribed medications and pre-existing health conditions. The requested travel policy was issued and Mr. Farb in due course travelled to Florida.

[2] While in Florida Mr. Farb, who was 84, was unexpectedly hospitalized and incurred USD$134,479 in hospital expenses. His claim for reimbursement was denied by Manulife on grounds of misrepresentation. Manulife says the travel insurance policy was voided because, according to Mr. Farb's medical records, the answers he provided during the telephone interview -- about whether in the last four months he had been prescribed or was taking six or more medications and whether he was being treated for a kidney disorder -- were not correct.

[3] Sadly, Mr. Farb passed away before he could pursue the matter further. His estate brings this application to continue his claim for reimbursement of the USD$134,479 in hospital expenses.

The Issue

[4] The estate brings this application under rule 14.05(3)(d) (statutory and contractual interpretation) and (h) (no material facts in dispute) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. To minimize confusion in my use of the word "applicant", I will refer to the applicant in this proceeding as the "estate". The estate's notice of application properly makes clear that the focus is not on the correctness or the merits of the "no" answers that led to the denial of coverage and would likely require a trial to be fully and fairly resolved. The primary focus of this application is the interpretation of Statutory Condition 2, a provision that is prescribed by s. 300 of the Insurance Act and is also set out as an express term in the insurance contract.

[5] Statutory Condition 2 provides that

No statement made by the insured or person insured at the time of application for this contract shall be used in defence of a claim under or to avoid this contract unless it is contained in the application or any other written statements or answers furnished as evidence of insurability.

(Emphasis added)

[6] In other words, Manulife cannot rely on any of the "no" medical answers provided by Mr. Farb at the time of application to deny coverage unless these answers were contained "in the application or any other written statements or answers furnished as evidence of insurability".

Positions of the Parties

[7] The estate argues that because the word "application" is immediately followed by the phrase "or any other written statements or answers" this means that the application itself must also be in written form. Here however, says the estate, the impugned "no" statements or misstatements were provided by Mr. Farb during a telephone interview and not by way of a written application. Therefore, even if Mr. Farb's "no" answers were incorrect and untruthful, the insurance policy cannot be voided and coverage cannot be denied. Given the written application requirement in Statutory Condition 2, says the estate, the respondent insurer is obliged to pay the claim.

[8] Manulife responds with an array of submissions to the contrary. Manulife argues in essence that a proper and contextual interpretation of Statutory Condition 2 does not require a written application and fully allows a telephone application. Manulife also adduces expert evidence that the most common purchase method for travel insurance is by telephone because it is easy and convenient and has quickly become an accepted and normal insurance industry practice.

Analysis

[9] The submissions of both sides, represented by experienced insurance lawyers, are extensive and intricate. In my view, however, the dispute can be resolved in a much more direct and sensible fashion.

[10] It is important to begin with first principles. The Insurance Act is designed to protect both the insurer and the insured. Craig Brown, Insurance Law in Canada looseleaf (Toronto: Carswell, 2019) at 1.2; Coronation Insurance Co. v. Taku Air Transport Ltd., [1991] 3 S.C.R. 622 at 636; Smith v. Co-operators General Insurance Co., 2002 SCC 30 at para. 11. The Act protects the insurer by imposing a duty of utmost good faith and full disclosure on the part of the insurance applicant and by prescribing a significant sanction for failure to do so. This is made clear in s. 308:

Duty to disclose

308(1) An applicant for insurance . . . shall disclose to the insurer in any 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 . . .

Failure to disclose, general

(2) . . . [a] failure to disclose, or a misrepresentation of, such a fact renders a contract voidable by the insurer.

[11] Given the significance of the sanction for misstatement, the Act protects the consumer/applicant by requiring the insurer to provide a copy of both the policy and the application to the insured. Insurance Act, s. 293(1)(b). The Act also protects the consumer/applicant by prohibiting the cancellation of coverage for alleged misstatements unless the misstatements are contained in a "signed written application" (if auto insurance, Insurance Act, s. 233(3)), or as already noted, in "an application or any other written statements or answers" (if accident and sickness insurance, Statutory Condition 2).

[12] The reason for the written application requirement is to provide the applicant with an opportunity to review the application and make any corrections, here to the medical answers, before the representations take effect and become a basis for possible cancellation. I agree with the estate's submission in this regard as set out in its factum:

The rationale for requiring misrepresentations to be in writing is clearly consumer protection. Written applications ensure that the person applying for insurance has the chance to carefully review, consider, reflect upon, and confirm the questions asked and the answers given . . . The person applying for insurance can also take a written application to their doctor, or pharmacist, or family members for help. The person applying for insurance can take their time, rather than being pressured into giving immediate answers on the telephone by a commissioned salesman hired by [the insurer] to sell insurance.

[13] The issue, in my opinion, is not whether Mr. Farb purchased the travel insurance via a telephone application process but whether as part of the telephone application process he was provided with a written copy of his application for review and correction before the policy took effect.

[14] This important distinction was actually acknowledged by the estate in its factum when it described how Manulife would have to change its telephone application process to comply with the requirements of Statutory Condition 2. The estate said this:

It would have been easy for Manulife to comply with [the Statutory Condition] by taking the information by phone, filling out the application, and then mailing or emailing the application [to Mr. Farb] to be reviewed, signed and returned.

[15] But this is exactly what happened.

[16] The Manulife insurance rep took the information by phone, filled out the application form on his computer as the information was being provided, and then e-mailed and mailed the (now written) application to Mr. Farb for his review and correction. It is true that Mr. Farb did not personally fill out or sign the written application. But there is no requirement in either Part VII of the Insurance Act (that deals with accident and sickness insurance) or at common law that the insurance application must be filled out or signed in Mr. Farb's own hand. Indeed, one can imagine a scenario where the applicant attends the insurance office in person, and being unable to hold a pen, asks the insurance rep to fill out the medical questionnaire. The insurance rep does so, the applicant reviews his answers, confirms that his answers were correctly recorded and returns the application for further processing. No one would seriously suggest this is not a written application.

[17] It was enough, in my view, that the respondent insurer provided Mr. Farb with a copy of his written application and gave him ample opportunity to review and advise of any corrections before the insurance policy took effect.

[18] This is abundantly clear from the evidence in the record.

Manulife's telephone application/confirmation process

[19] On the morning of October 11, 2016 Mr. Farb telephoned Manulife to renew his annual travel insurance, as he had in previous years. The 27-minute telephone interview was recorded and the oral answers that Mr. Farb provided to the insurance rep were entered on a two-page medical questionnaire form. The confirmation of insurance (including the medical questionnaire) and the insurance policy were e-mailed and mailed to Mr. Farb later the same morning. There is no suggestion that these were not received.

[20] In each of the telephone interview, the confirmation material and the policy itself, Mr. Farb was repeatedly advised (warned) that if any of his medical answers were incorrect, the policy would be rendered null and void and no claims would be paid. Here are the excerpts from the recorded telephone interview:

INSURANCE REP: Okay. So, I'm going to ask -- just like every year, I'm going to ask you a series of medical questions for the purpose of determining your eligibility and premium. Please be advised that if you have or have had a medical condition or were prescribed any medication that may affect your answers to the medical questions, by answering the medical questions, you indicate that you understand your medical condition and/or the use of the medication you were prescribed and have considered them when answering the questions. All the questions just require yes or no answers. If you're not sure how to answer any question, please consult with your family doctor. Any incorrect answers to any of the medical questions I'm about to ask you will render your coverage null and void and will result in the non-payment of any claim.

MR. FARB: Right.

. . . [and later in the telephone call]

INSURANCE REP: Okay. So, Donald, you understand that applying for coverage under this policy, it is your responsibility to be aware of all of your medical conditions and that all your answers to all the questions in this application must be true up to and including the time of your application for this insurance. If at the time of claim it's discovered any question is not answered truthfully and accurately, it will result in the non-payment of any claim, your policy will be null and void, and your premium will be refunded. You represent that the answers to the medical questions are accurate.

MR. FARB: Right.

[21] In the confirmation document emailed shortly after the telephone interview (a cover letter, an information page and a copy of the medical questionnaire and the answers provided) Mr. Farb was reminded a further six times to review the medical answers provided and advise Manulife before his scheduled trip if any of the answers were untrue or incorrect -- otherwise, there would be no coverage. The cover letter said this:

If you were asked a series of medical questions when you applied for travel insurance, these questions and your responses are listed in your confirmation. Please review the accuracy of these responses as well as the other details of your trip as they relate to your insurance coverage. It is your responsibility to be aware of all your medical conditions and ensure that each answer to each question in your application is true. If you are uncertain of any answer to any medical question, please consult your doctor to be sure you answered the question correctly. Please note that any material misrepresentation of your health status will render the insurance voidable and result in non-payment of any claims arising from your trip.

If you wish to correct any information in the attachment or if you have any questions call 1-800- COVER ME (1-800-268-3763).

(Emphasis added)

[22] The information page of the confirmation added three more warnings and noted again that all of this was part of the application process:

[Y]our plan was issued based on your answers to the enclosed Medical Questions. Please review the Medical Questions carefully and call us immediately at 1-800-268-3763 between 8:00 a.m. and 8:00 p.m. E.S.T., Monday to Friday if there are any discrepancies. If any of the answers to the Medical Questions are untrue or incorrect, then any coverage offered will be null and void . . .

Please review your responses to each question. It is your responsibility to be aware of all your medical conditions, to ensure that your answer to each question is true, and to read and understand the benefits, limitations, conditions and exclusions (including those related to pre-existing medical conditions) or the Manulife Travel Insurance policy that apply to your coverage and whose terms will prevail. If, at the time of claim, it is discovered that any question was not answered truthfully and accurately and there is material misrepresentation, it will result in the non-payment of any claim; your policy will be null and void; and your premium will be returned. . .

You understand that in applying for coverage under this policy it is your responsibility to be aware of all your medical conditions and that all your answers to all the questions in this application must be true up to the time of your application for this insurance. If, at the time of claim, it is discovered that any question is not answered truthfully and accurately, it will result in the non-payment of any claim; your policy will be null and void and your premium will be refunded. You represent that the answers to the medical questions are accurate.

(Emphasis added)

[23] The two-page medical questionnaire with the inputted "no" answers provided by Mr. Farb contained two further reminders about the need to review the answers, advise Manulife of any corrections or risk being denied coverage.

[24] The e-mailed and mailed insurance policy repeated these points yet again:

PLEASE READ YOUR POLICY CAREFULLY BEFORE YOU TRAVEL

Exclusions and Limitations -- What does Emergency Medical Insurance not cover?

We will not pay any expenses or benefits relating to

. . . Any emergency when, prior to the purchase date, you had not . . . truthfully and accurately answered all the questions in the medical questionnaire.

WHAT ELSE DO YOU NEED TO KNOW?

This policy is issued on the basis of information provided in your application (including the medical questionnaire if required) . . . This insurance is void in the case of fraud or attempted fraud or if you conceal or misrepresent any material fact in your application for this policy, extension or Top-Up of coverage for benefits under this Policy.

[25] I have listened to the recorded 27-minute telephone interview. The Manulife insurance rep was polite and professional. There is no evidence of any high-pressure or unfair sales practices. There is no evidence of any lack of understanding on the part of Mr. Farb. He was an "extremely capable" and successful businessman and he had purchased this very travel policy in the very same way in the four previous years.

[26] Mr. Farb had two months to review his answers as set out in the written version of his application and advise Manulife of any corrections or clarifications before the policy took effect and he travelled to Florida. There is no evidence that Mr. Farb ever contacted Manulife to make any corrections to his answers.

[27] It is therefore easy to conclude on this record that the consumer protection objective of the Insurance Act was completely achieved. Mr. Farb was warned repeatedly at every step of the application process (during the telephone call, in the confirmation and medical questionnaire forms and again in the insurance policy) to review the answers provided and advise of any corrections -- or the policy could be rendered null and void and no coverage would be available. The telephone interview was recorded, the medical answers were entered onto a written application/confirmation form that was e-mailed and mailed to the insured for his review and correction. Mr. Farb had ample time to review the answers provided and advise Manulife of any corrections.

[28] In my view, Manulife went too far in its submissions by focusing unduly on the 2012 amendment of the definition of "application". In the definitional section for Part VII, "written application" was amended to read simply "application". However, the language in Statutory Condition 2, set out again below, remained unchanged:

No statement made by the insured or person insured at the time of application for this contract shall be used in defence of a claim under or to avoid this contract unless it is contained in the application or any other written statements or answers furnished as evidence of insurability.

(Emphasis added)

[29] Manulife tried to argue that Statutory Condition 2 does not require the "application" to be in writing or even to have a written component and that the telephone interview alone was "application" enough. I do not accept this submission. This would mean that Manulife could cancel coverage based simply on incorrect answers provided in the telephone interview without giving the consumer/applicant any opportunity to review the written version of his answers and make any necessary corrections.

[30] In my view, Manulife's unnecessarily narrow interpretation of "application" would undermine the consumer protection objectives of the Insurance Act. Better to interpret the word "application" in the context of the protection proved by Statutory Condition 2 by giving full effect to the neighbouring words "or any other written statements or answers" and finding that the word "application" in Statutory Condition 2 requires at the very least, that at some point in the application process, the insured must be provided with a written version of the application for careful review and correction.

[31] Manulife prevails on this application because its current telephone application process complies with the "written application" requirements in Statutory Condition 2 -- as part of the application process, a written version of the application was emailed and mailed to Mr. Farb for his review and correction before the policy took effect.

Disposition

[32] The estate's application for reimbursement of the Florida hospital expenses is dismissed.

[33] I leave open the possibility that the estate may wish to pursue this matter further by way of an action to argue that the impugned "no" answers were correct -- that Mr. Farb in fact had not been prescribed six or more medications and was not being treated for kidney disease. These merit-based issues were not before me on this application.

[34] If the parties cannot agree on costs, I will be pleased to receive brief written submissions from Manulife within 14 days and from the estate within 14 days thereafter.

Application dismissed.

Notes

1. Insurance Act, R.S.O. 1990, c. I.8, s. 300.
2. Craig Brown, Insurance Law in Canada looseleaf (Toronto: Carswell, 2019) at 1.2; Coronation Insurance Co. v. Taku Air Transport Ltd., [1991] 3 S.C.R. 622 at 636; Smith v. Co-operators General Insurance Co., 2002 SCC 30 at para. 11.
3. Insurance Act, supra, note 1, s. 293(1)(b).
4. Ibid., s. 233(3).
5. Statutory Condition 2, as discussed above.
6. Indeed, one can imagine a scenario where the applicant attends the insurance office in person, and being unable to hold a pen, asks the insurance rep to fill out the medical questionnaire. The insurance rep does so, the applicant reviews his answers, confirms that his answers were correctly recorded and returns the application for further processing. No one would seriously suggest this is not a written application.
7. Affidavit evidence of Mr. Farb's daughter and estate executor, Robin Farb-Eckler.
8. Section 290 in 2012: "Definitions, Part VII, s. 290: In this Part, 'application' means a written application for insurance or for the reinstatement of insurance. Note: On a day to be named by proclamation of the Lieutenant Governor, the definition of 'application' is amended by striking out 'a written application' and substituting 'an application'. See: 2012, c. 8, Sched. 23, ss. 33 (1), 77."

End of Document