*Since the writing of this blog, reconsideration was heard on May 25, 2018 – the decision was dismissed and not overturned.
In 16-004349 v. Aviva Insurance Canada, Adjudicator Jeffrey Shapiro clarifies that the test for repayment of benefits pursuant to section 52 of the Statutory Accidents Benefits Schedule for an existing policy is not whether there was a material representation, but rather, whether the claimant intentionally failed to notify the insurer of a change in a risk material to the contract under section 52(1)(b).
Wilful misrepresentation is the test when the insurer is induced into the contract, or the wilful misrepresentation caused the insured to receive a benefit.
This is not the case here.
The claimant was injured in a motor vehicle accident on December 8, 2014. Following the accident, the claimant applied for and received Income Replacement Benefits (“IRBs”) from Aviva. Aviva subsequently voided the policy after discovering that the claimant failed to disclose that his partner, who had a poor driving record, had moved in with him a year before the accident.
The claimant had an existing auto insurance policy with Aviva and had failed to notify Aviva of the material change in risk, namely, the co-purchase of a house with his partner. The claimant had obtained the policy in September 2013 and despite numerous policy changes a year before the accident, such as changing his address to the new home and later amending the policy to incorporate a new vehicle, the claimant failed to mention the fact that he was now living with his partner.
Was there a change in a risk material to the contract?
Adjudicator Shapiro held that the non-disclosure of the existence of a new member of the household, with that partner having a poor driving record, specifically, the three convictions and an at-fault accident, constituted a change of material risk to the contract. Aviva would have increased the premium had this information been disclosed. Citing the Ontario Court of Appeal decision Sagl v Chubb Insurance Company of Canada, Adjudicator Shapiro explained that a fact is material if it would influence a prudent insurer when determining the amount of the premium.
Was the non-disclosure intentional?
Adjudicator Shapiro found that the claimant intentionally failed to notify Aviva of the change in risk. Again, referring to Sagl, Adjudicator Shapiro stated that a claimant’s duty to disclose all material facts applies even in the absence of questions from the insurer. Relying on the decision in Michalowski v. St. Paul Fire & Marine Insurance Co., he further stated that if accompanied by pertinent evidence, a failure to disclose material information, in other words the claimant’s silence, could demonstrate an intention to mislead.
Adjudicator Shapiro cautions however, that a misrepresentation that should have been known to the insurer binds the insurer. In support, he notes the decisions in Venner Woodworking Ltd. v. Wawanesa Mutual Ins. Co. and Coronation Insurance Co. v. Taku Air Transport Ltd. In Venner, the insurer was held to have knowledge of information provided to the broker despite the broker failing to provide this information to the insurer. In Coronation, the Supreme Court of Canada held that if a “basic check” of an insurer’s own files would have revealed the misrepresented information, this information would be binding on the insurer and thus have no consequence for the insured.
Conversely, a fact only within the insured’s knowledge is a different matter. Adjudicator Shapiro differentiates this case from Venner and Coronation. Here, neither Aviva nor the broker knew that the claimant and his partner co-purchased a home the year before the accident. The claimant testified that his lawyer was to notify the broker, but there was no evidence of this. Additionally, the claimant admitted that he knew the property insurance documents did not list his partner as an insured. Unlike Venner and Coronation, the undisclosed information was not obtainable Aviva’s own records and the information was not directly and obviously relevant. The claimant had a duty to actively disclose the information.
Adjudicator Shapiro did not find the claimant had a good faith intention to ensure that the material information was properly disclosed or received by Aviva. He found that the claimant’s intention was in fact not to disclose the information. In this case, the claimant was a reasonably sophisticated party. He was an accident benefits paralegal and thus had knowledge of the insurance industry. Adjudicator Shapiro asserted that the claimant would have known that cohabitation with his partner, who had a poor driving record, would be important information to disclose to Aviva. Further, he should have realized that Aviva was unaware of this fact when his insurance premium remained unchanged following their cohabitation.
Adjudicator Shapiro further opines that the partner’s poor driving record was at the forefront of the claimant’s mind. The claimant only obtained the policy because his partner was not able to obtain her own insurance and he did not allow her to drive. Adjudicator Shapiro found that it was not credible that the claimant never verified the correctness of the insurance policy nor confirmed his partner’s presence was properly addressed given her poor record. The claimant’s failure to secure a quote for his premium at the time of the cohabitation confirms that he purposely intended to not list her on the policy.
Considering the evidence before him, Adjudicator Shapiro held that the claimant intentionally failed to disclose a change in a material risk and Aviva could not have reasonably known of the information through other means. As a result, Aviva was entitled to repayment of the IRBs with section 52 interest.
Note: Aviva was not entitled to repayment of the insurer examination expenses as they are not subject to repayment under section 52. Section 52(1)(a) specifies that only benefits can be repaid and an insurer examination is not a benefit nor is it paid to the insured. Similarly, section 52(1)(b) specifies that only IRB and non-earner benefits may be paid.