2022 ONSC 432
COURT FILE NO.: CV-19-0003913 DATE: 20220118
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Matteo Costanza, by Litigation Guardian, Bozana Skojo, Applicant AND: Desjardins Financial Security Life Assurance Company, Respondent
BEFORE: Chozik J.
COUNSEL: A. Leigh McFadden, Counsel for the Applicant Noah Bonder, Counsel for the Respondent
HEARD: September 28, 2021
ENDORSEMENT
[1] On January 9, 2012, Dean Costanza applied for life insurance with State Farm, now Desjardins Financial Security Life Assurance Company (“the Respondent”). One of the questions on the application form, question 21(a), asked: “In the last three years, have you: (if yes, explain) been convicted of or pleaded guilty to any criminal offence or any moving violations or driving under the influence of alcohol or drugs?”. Mr. Costanza answered “No”.
[2] Based on the answers in his application and a paramedical examination conducted shortly after, State Farm issued an insurance policy (“the policy”) on February 9, 2012, to Mr. Costanza. The policy contained a basic life insurance benefit of $500,000 and designated the Applicant, Matteo Costanza, as the primary beneficiary. The Applicant is Mr. Costanza’s son. He is now 13 years old.
[3] On December 3, 2017, Mr. Costanza was killed: he was found in his car in front of his house with bullet holes in his body. On December 4, 2017, the Applicant made a claim under the insurance policy.
[4] The Respondent refused the Applicant’s claim. The Respondent took the position that Mr. Costanza made “a material and fraudulent misrepresentation” on his application for life insurance. The Respondent argues that Mr. Costanza’s answer to question 21(a) – whether he had been convicted or pled guilty to a criminal offence in the preceding three years – was false. In fact, the Respondent argues, Mr. Costanza was “convicted” of assault causing bodily harm and sentenced to 90 days imprisonment on March 11, 2009 – 2 years, 9 months, and 29 days prior to the day he submitted the application for insurance.
[5] There is no dispute that the policy contains an incontestability clause. The incontestability clause provides that:
Except for nonpayment of premiums, We will not contest the Basic Plan after it has been in force during the Insured’s lifetime for 2 years from the Policy Date.
It is not disputed that Mr. Costanza paid the premiums for the policy. At the time of his death, the policy had been in effect for more than 5 years.
[6] On this Application, the Applicant seeks a declaration that the policy is valid, subsisting, and binding on the Respondent. The Respondent argues that the policy is void ab initio due to Mr. Costanza’s fraud.
ANALYSIS:
[7] The duty of an insured to make full disclosure of material facts is a well-established principle of insurance law: Gregory v. Jolley, 2001 4324 (ON CA), 54 OR (3d) 481 (C.A.)at para. 31; Mohammed v. The Manufacturers Life Insurance Company, 2020 ONCA 57, 149 O.R. (3d) 428.
[8] The duty to disclose is also set out in subsection 183(1) of the Insurance Act, R.S.O. 1990, c.l.8, which states:
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.
A failure to disclose or a misrepresentation of material facts renders the contract voidable: sections 183(3) and 184 of the Insurance Act.
[9] Where a contract has been in effect for two years during the lifetime of the person whose life is insured, a failure to disclose a material fact or a misrepresentation of a fact required to be disclosed by section 183 does not, in the absence of fraud, render the contract voidable: section 184(2).
[10] The issue to be determined on this motion is whether the Respondent has made out, on a balance of probabilities, a fraud. The test for civil fraud was set out in Bruno Appliance and Furnituyre, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 21. To make out fraud, the Respondent must establish the following four elements:
a. A false representation made by the defendant;
b. Some level of knowledge of the falsehood or the representation on the part of the defendant, whether through knowledge or recklessness;
c. The false representation caused the plaintiff to act; and,
d. The plaintiff’s actions resulted in a loss.
[11] Fraud requires more than a mere innocent material misrepresentation or non-disclosure. It means an “actual fraud”: Kruska v. the Manufacturers Life Insurance Company Fraud (1984), 1984 888 (BC SC), 54 B.C.L.R. 343, at para. 40. The onus is on the Respondent to prove an actual fraud on a balance of probabilities. In this case, the Respondent has failed to discharge its onus.
Was Mr. Costanza’s Representation on the Application False?
[12] To prove that Mr. Costanza had been convicted of a criminal offence in the three years prior to his application, the Respondent relies on an excerpt of a document with a heading “Criminal Convictions Conditional and Absolute Discharges and Related Information.” It appears to be part, but not the entirety, of a report produced by the Canadian Police Information Centre (“CPIC”), commonly referred to as a criminal background check. There is no information how this document was obtained, or what law enforcement unit issued it. There is no evidence to authenticate the document. It appears to be a partial document or excerpt.
[13] The print-out is attached to a letter dated February 5, 2019, from a lawyer at the Desjardin’s Legal Department to the Applicant’s lawyer, and appears elsewhere in the Respondent’s Application record. It is the only evidence which stands for the proposition that Mr. Costanza was “convicted” of a criminal offence on March 11, 2009.
[14] In the February 5, 2019, letter, Mr Bonder states:
Mr. Costanza indicated on the Application that he had not been convicted of or pleaded guilty to any criminal offence in the 3 years prior to his application for benefits, dated January 9, 2012. The criminal records, enclosed, indicated that on March 11, 2009, Mr. Costanza was convicted of assault causing bodily harm and was sentenced to 90 days in prison.
That is not what the record establishes. No evidence was called with respect to the interpretation of the record proffered. There is no evidence to establish that the date of the entry is the date of the conviction, sentence or some other date.
[15] For reasons known only to the Respondent, it has chosen not to produce to the court a certified copy of the Information or Indictment on which Mr Costanza was charged, or any other official court record that shows the date of the conviction or guilty plea. A CPIC is not a court record, but a police record. The date of entry is, or may typically be, the date of the disposition of the matter, rather than the date of conviction. The way to verify the date of a conviction is by reference to the official court record entry contained in an Information or Indictment or a court transcript.
[16] In this case, there is no evidence that would permit me to say that the date of the entry that appears on the CPIC is the date of the conviction, rather than the date of the disposition (or some other date for that matter). The only evidence before me as to the details of the events that led to this entry comes from the cross-examination of the Applicant’s mother, Bozana Skojo. On cross-examination, she testified that Mr. Costanza was “charged” with the offence that led to the March 11, 2009, entry in 2004. She also testified that a trial in that matter was supposed to have been held in “December” – presumably December of 2008 but even that is not clear. Ms. Skojo could not recall a number of details, but this is the only evidence in this case as to the history of the proceeding that appears to have led to the entry.
[17] It is well known that in criminal matters, there is typically a passage of some period of time between the date of offence, the charge or laying of the Information by police, a trial, a conviction, sentencing submissions, and the date the sentence is imposed. Convictions and sentencing routinely proceed on different dates particularly in cases where a custodial sentence is realistically available. In fact, such a delay is the norm in order to allow the Court to receive submissions in respect to the appropriate sentence.
[18] Similarly, a person can enter a plea of guilty and the matter can then be adjourned one or more times to permit the preparation of a pre-sentence report and in order to allow for sentencing submissions. Following sentencing submissions, the matter can again be adjourned to another date for a judge to pronounce the sentence. The date of the “conviction” or “guilty plea” and the date of the sentence, or disposition, are often different dates and it is not unusual for them to be several months apart.
[19] In light of all this, the document relied on by the Respondent as proof that Mr. Costanza was “convicted” on March 11, 2009, may show that he was convicted at some point no later than March 11, 2009, but does not offer any insight in to how long before March 11, 2009, that may have happened. It is not at all clear from the document relied on by the Respondent that the excerpt of the Criminal Convictions Conditional and Absolute Discharges and Related Information refers to the date of the conviction rather than the date of the disposition. Typically, it is the date of the disposition – that is when the sentence starts, but not when the conviction is entered.
[20] One thing we do know is that the matter that led to Mr. Costanza’s conviction for assault causing bodily harm had not proceeded quickly prior to 2009 – the matter had a very lengthy history. Given that history, there is no reason to think that it suddenly started moving faster and that the date of the conviction, sentencing submissions, and date of sentence, were one and the same. It is quite possible, if not more likely, that March 11, 2009 was not the date of the conviction, but the date that the sentence was ultimately imposed.
[21] On the evidence before me, I am not satisfied that Mr. Costanza was “convicted” or “pled guilty” to the criminal offence on March 11, 2009. I am therefore not satisfied that his answer to question 21(a) on the application was false or a misrepresentation. The Respondent has not discharged its onus in this regard. The evidence that Mr. Costanza was “convicted” on March 11, 2009, falls woefully short.
Was Any Misrepresentation Done with Knowledge or Recklessness?
[22] Even if Mr. Costanza was “convicted” or pled guilty on March 11, 2019, I am not satisfied that the Respondent has proven the intent to deceive required to make out a civil fraud. Question 21(a) is very specific in asking about “conviction” or “guilty plea” – not about sentencing. Given the passage of time from the time of the conviction and the date of the insurance application, and the fact that the date of the conviction fell at the outer edge of the time frame in question, I am not satisfied that it can reasonably be said that it is more likely than not Mr. Costanza’s answered that question knowing that it was false or being reckless as to its truth.
[23] The Respondent relies on the fact that Mr. Costanza served time in custody as support for the proposition that he must have known that the conviction was within the three years asked about. Again, this proposition is based on a misconception of the criminal process. Convictions and dispositions, especially for complicated matters, do not necessarily happen on the same day. There are often many court appearances, at which the accused person may or may not be present. It is not at all unlikely that Mr. Costanza could have been mistaken in calculating when his conviction was in relation to the date of his application.
[24] On the evidence before me, I cannot determine whether Mr. Costanza had a trial or pled guilty and if so when that happened. Ms. Skojo was not sure. The Respondent elected not to adduce any evidence in this regard. A trial is something that one could reasonably be expected to remember. The only evidence before me is that the trial was supposed to have taken place, or did take place, in December 2008 - outside the three years Mr. Costanza was asked about in the application.
[25] I find that in these circumstances, I cannot be satisfied on a balance of probabilities that any misrepresentation by Mr. Costanza was done knowingly or recklessly. It is at least as likely (if not more likely) that Mr. Costanza was mistaken or merely negligent as to the date of the conviction when he filled out the application for insurance.
Did Mr. Costanza Fail to Disclose his “Criminal History”?
[26] The Respondent argues that Mr. Costanza was obliged to disclosure the fact that he had a “criminal history” or “criminal background”. Mr. Costanza’s CPIC shows a number of convictions and dispositions between 1990 and 1994, then 2002, 2008 and finally on March 11, 2009. The Respondent does not argue that this is the criminal history that Mr. Costanza ought to have disclosed. These convictions are dated and, inferring from the dispositions, relatively minor.
[27] Rather, in support of its contention that Mr. Costanza was obliged to disclose his criminal involvement, the Respondent relies on two printouts from news stories posted on the internet in the days after Mr. Costanza was shot and killed. The articles, one of which does not indicate an author, purport to repeat what unnamed sources from various police services had stated. One of the articles reports that “Costanza’s name surfaced in 2014 as part of the massive Niagara Regional Police operation called Project Ink” which targeted another man and “mob cocaine smuggling activities in the Niagara Region.” The article also states that in June 2014, Niagara Regional Police said that their investigation found that Costanza was targeted for kidnapping and murder between Oct. 1, 2011, and July 1, 2012, by Niagara Regional mobsters in a dispute over money and drugs.”
[28] Based on these generically sourced media reports - and only this evidence - the Respondent argues that Mr. Costanza was known to the police, his murder was believed to be targeted and related to a dispute over money or drugs connected to “a massive cocaine bust involving drug kingpin Nick Nero.” The two news articles are the only evidence that the Respondent adduced to establish that Mr. Costanza had a “criminal history”, which the Respondent argues he was obliged to disclose. With respect, this evidence is inadmissible and woefully unreliable.
[29] Ms. Skojo testified that Mr. Costanza became aware of a police investigation into a kidnapping plot in 2015, well after he had applied for the insurance. As far as Ms. Skojo knew, Mr. Costanza was not made aware of any other plot. Ms. Skojo deposed that as far as she was aware, Mr. Costanza did not know he was being targeted and was not aware of any police investigation.
[30] While it is well established in law that an applicant for insurance is required to disclose material facts, the Respondent has not established in this case that there were material facts which Mr. Costanza had failed to disclose. The unsubstantiated media-reports posted on the internet are not evidence – they are the most dangerous sort of hearsay, namely rumour and unsubstantiated inuendo. They are inadmissible, and if they were somehow admissible, would be entitled to no real weight. The fact that the newspaper says that “the police” say Mr. Costanza was involved in some organized criminal activity is not evidence that Mr. Costanza was, in fact, involved in any organized criminal activity. It would be fundamentally improper for a court of law to rely on such evidence to conclude on a balance of probabilities (the onus that is on the Respondent) that Mr. Costanza had any criminal history to disclose on this application.
[31] As a result, I am not satisfied that Mr. Costanza had a criminal history or background or that the insurance policy is voidable because of his failure to disclose it.
Did Mr. Costanza disclose that he was a “Big Drug Dealer”?
[32] In the alternative, the Applicant argued that Mr. Costanza had disclosed to the Respondent that he was a “big drug dealer” before the insurance policy was issued. I would not give effect to this argument.
[33] In support of this alternate argument, the Applicant relies on documentation from the paramedical examination. This documentation indicates that Mr. Costanza was asked a series of questions about his health and medical history. The last question was, appears as follows:
- Special Attention
MAY HAVE USED ILLEGAL DRUGS IN PAST 5 YEARS IF NOT SURE, STATE NO TO THE QUESITON, STATES DOES NOT LIKE MARIJUANA; DR. LUMMACK IS FAMILY DOCTOR HOWEVER PHYSICIAN WILL FIND SOMETHING WRONG AND PRESCRIBE MEDICATION, STATED IS BIG DRUG DEALER [sic]
[34] The Applicant argued that this means that Mr. Costanza disclosed that he may have used illegal drugs in the preceding five years and that he disclosed that he is a “big drug dealer” prior to the policy being issued.
[35] I do not accept this interpretation. I find that this passage refers to the family physician being a “big drug dealer”, or as the Respondent’s witnesses testified – a physician who easily prescribes medications.
CONCLUSION AND ORDER:
[36] For these Reasons, I am not satisfied that the Respondent has proven on a balance of probabilities that Mr. Costanza obtained the insurance through material misrepresentation or fraud. The insurance policy is valid, subsisting, and binding on the Respondent; it is payable to the Applicant.
COSTS:
[37] The parties are encouraged to agree upon appropriate costs for this Application. If the parties are not able to agree on costs, each may make brief written submissions to me (maximum two pages double-spaced, plus a bill of costs) by 4:30 pm on January 31, 2022.
[38] If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
[39] If I have not received submissions by 4:30 pm on January 31, 2022 from either of parties, I will infer that the party does not wish to make submissions and I will decide on the basis of the material that I have.
[40] Rule 59.01 of the Rules of Civil Procedure provide that this Order is effective from the date it is made, that date being the date such order is made by the judge, whether such Order is contained in a signed endorsement, order, or judgment.
E. Chozik
Electronic signature of Chozik J.
Date: January 18, 2022