Material Misrepresentation Exclusion Tough to Prove: 18-001028 v. Aviva Insurance Canada
May 15, 2019
In 18-001028 v Aviva Insurance Canada, Matthew M. Létourneau, an Adjudicator at the Ontario Licence Appeal Tribunal (“LAT”) addressed an Applicant’s request for income replacement benefits (“IRBs”) from the Respondent, Aviva Insurance. Aviva countered that the Applicant was not entitled to IRBs on the basis that paragraph 31(1)(b) of the Statutory Accident Benefits Schedule (“SABS”) excludes entitlement to any person who makes a material misrepresentation that induces an insurer to contract or intentionally fails to notify of a material risk to the insurance contract.
Paragraph 31(1)(b) of SABS states:
Circumstances in which certain benefits are not payable:
31. (1) The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 21, 22 or 23,
(b) in respect of any person who has made, or who knows of, a material misrepresentation that induced the insurer to enter into the contract of automobile insurance or who intentionally failed to notify the insurer of a change in a risk material to the contract;
The facts of the case were unique in many respects. The applicant was not yet the owner of the vehicle; he was in the process of purchasing the vehicle, but had become the primary driver. The applicant had submitted he was aware the vehicle was insured and even tried to call in to notify the insurer regarding the change in circumstances, but was turned away from providing any information as he was not the policy holder. No evidence was led by Aviva to contradict this evidence.
Aviva submitted that intentional misrepresentation had occurred on the part of the Applicant in an effort to delay or avoid transferring the policy to his name. According to the insurer , the goal of the Applicant was to benefit from the cheaper insurance premiums of the previous driver. Evidence was led that made the Applicant’s previous convictions related to insurance offences clear; and that he knowingly did not make the insurer aware of the fact he was the primary driver. Further evidence was led to indicate the Applicant had the insurance and ownership documents, making it clear he knew insurance in his own name did not exist for the vehicle.
In this noteworthy decision, Adjudicator Létourneau interpreted paragraph 31(1)(b) of the SABS to require clear and consistent evidence of an “intentional failure” to notify the insurer. Regarding the intentions of the Applicant, Adjudicator Létourneau stated:
“The intention shown in evidence was that the applicant, as a third party to the insurance contract, wished to purchase a vehicle, subsequent to which he would make necessary changes to ownership documents and insurance. The applicant states he called the respondent to inform them of this, but the insurer would not speak to him as he was not the contracting party. The applicant also stated his understanding to be that F.W. continued to manage his own policy for the vehicle which he still owned, meaning that any notice of change of circumstances would be his responsibility at the time, and not the applicant’s. This is the only direct evidence I was provided on intent, and I accept this evidence in absence of any other compelling scenario.”
Adjudicator Létourneau held that while the denial of IRBs was not unreasonable, the Applicant was entitled to IRBs as he could find no clear evidence of intentional failure to notify in this case. In future cases, insurance providers would be wise to include direct evidence of intentional failure to notify of a change in material risk if coverage is to be denied. In this case, the applicant’s previous insurance related convictions and driving record that would give rise to higher premiums, if brought to the attention of the insurer, was not enough to prove intentional failure to notify. Such evidence regarding intent can be viewed as ‘circumstantial and indirect’, as Adjudicator Létourneau held. The onus is on the insurer to show evidence to support the denial of IRBs on the basis of the general exclusion in SABS 31(1)(b).