February 1, 2019

Beard Winter LLP successfully defends client in insurance coverage application

Beard Winter LLP successfully defends client in insurance coverage application

Written by: Aaron S. Murray

On January 25, 2019, the Ontario Superior Court of Justice released its decision in Seetaram v. Allstate Insurance Company of Canada, 2019 ONSC 683.

Beard Winter LLP insurance litigators Aaron S. Murray and David Edwards successfully defended Allstate Insurance Company of Canada (“Allstate”) in a coverage application brought against their client on the basis that the applicants failed to disclose a fact that was material to the insurer’s decision to insure the applicants.

The case emphasizes the importance for insureds to read their policies and renewal documentation and notify their insurers of any changes. Honest mistakes, forgetfulness or failure to read and understand a question on an insurance application is not enough to absolve an applicant of the consequences of failing to disclose a fact that an insurer would consider material. Further, whether or not the insured knew that the insurer would consider a fact material is irrelevant.

The application dealt with the issue of whether or not the failure to disclose the existence of a 17-year-old, G2-licensed driver living in an insured’s household constituted a failure to disclose a change in risk such that an insurer could declare the policy void. The Court concluded that such a failure to disclose was a breach of both s. 233(1)(a)(ii) of the Insurance Act and Statutory Condition 1(1).

The Court found that:

  • an insurer does not have a duty to explain to the insured what constitutes a material change in risk;
  • the test under Statutory Condition 1(1) does not take into account the subjective view of an insured. The application test is analogous to the test under s. 233(1)(a)(ii): a fact will be material where, if properly disclosed, it could influence a reasonable insurer either to decline the risk or accept a different risk;
  • an insured’s failure to read or understand a question or requirement in an application for insurance (or renewal document) cannot be visited upon the insurer; and
  • relief from forfeiture is not available to an insured who fails to advise of a material change in the insured risk.

In light of these findings, the Court held that the applicants’ policy of automobile insurance was void due to their failure to disclose the existence of a G2-licensed driver living in their household. The Application was dismissed against Allstate with costs payable of $15,000.

Do you have questions about this topic? Email Aaron at amurray@beardwinter.com or David at dedwards@beardwinter.com. Subscribe for updates from this team and follow us on LinkedIn.

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