By Kendall Andjelkovic, Lawyer, and Christina Kim, Student-At-Law, Beard Winter LLP
In 2019 and 2020, the Ontario Courts released four key decisions related to life and health insurance applications, including addressing issues of misrepresentation and beneficiary designations.
The following cases were part of a legal update presentation by Michael Canning, partner and head of Beard Winter LLP’s Life and Health team, at the 2020 virtual Canadian Life and Health Insurance Association (CLHIA) Legal Section Annual Meeting.
Kulp v. Cumis Life Insurance, 2019 313 A.C.W.S. (3d) 828 (O.S.C.J.)
The plaintiff brought a summary judgment motion to dismiss the defendant’s claims on the basis that there was no genuine issue requiring a trial. The defendant took the position that it was entitled to rescind the life insurance coverage on the basis that the plaintiff failed to disclose or materially misrepresented facts related to his blood sugar levels.
The defendant conducted a supplemental health questionnaire where it asked the insured what his A1C reading, a key indicator of diabetes control, was. The plaintiff advised that he thought it was 7.5 or 7.7, which indicated good control. Following the plaintiff’s death, the defendant concluded that the plaintiff’s most recent AIC reading was actually 10.5, which indicated poor control.
The summary judgment motion was dismissed. The court concluded that there was no evidence that the plaintiff was not telling the truth as he saw it. The court further stated that the questions asked by the defendant were ambiguous, and that the defendant should have made further inquiries to resolve the ambiguity.
Key takeaway: An insurer may be required to take adequate steps in investigating the accuracy of information provided in an application for insurance before relying on it to deny benefits or to rescind the contract.
Mohammad v. Manulife, 2020 ONCA 57
The deceased was a member of a terrorist group outside of Canada, and had been convicted of various offences including manslaughter in Greece. He came to Canada using a fraudulent alias, but was deported upon this discovery. He died from lung cancer two years following his deportation. The defendant denied that the deceased’s spouse was entitled to payment of the death benefit on the basis that the deceased had failed to advise the defendant of his involvement in the terrorist organization and criminal convictions.
The plaintiff brought a summary judgment motion seeking a determination that she was entitled to payment of the death benefit. The motions judge held in favour of the plaintiff and determined that she was entitled to payment of the death benefit for her husband. The motions judge held that as the policy did not contain any questions concerning the deceased’s immigration status or criminal history, the motions judge concluded that these issues were not material.
The defendant appealed and the Court of Appeal overturned the motions judge’s decision and held that the past actions of the deceased were material to the risk that he posed for the purposes of having his life insured.
Key takeaway: The Court of Appeal maintained the focus on the foundation of what is at the root of an insurance contract, the nature of the risk that is being underwritten, and the fact that the insurer is entitled to knowledge of facts that are material to the risk that the insurer is undertaking.
Belec v. Sun Life Assurance Company of Canada, 2020 ONSC 4961
The defendant brought a motion requesting an order that its motion for summary judgment be heard before the plaintiff’s motion for certification. The plaintiff brought a motion to certify a class proceeding against the defendant on the basis that the defendant miscalculated her long-term disability benefits.
The court held that the summary judgment motion and the motion for certification should be heard together. Rather than deciding on the merits of each motion, the court held that the plaintiff’s case was “not so lacking in merit that proceeding with a summary judgment motion first would be fairer or more efficient”.
Key takeaway: The pending summary judgment motion and certification motion is something that the industry should keep a watch for.
Calmusky v. Calmusky, 2020 ONSC 1506
In this novel decision, Randy Calmusky brought an application to determine entitlement relating to certain assets following the death of his father, Henry. The assets in dispute consisted principally of funds held in (i) bank accounts that were in the joint names of the deceased and Gary Calmusky (Randy’s twin brother) and (ii) a Registered Income Fund (RIF) in Henry’s name, under which Gary was a designated beneficiary.
The issue before the court was whether or not the funds were held in trust for Henry’s estate, or whether Gary was entitled to the jointly-held funds by survivorship.
The court applied a line of cases regarding joint accounts to its analysis of both the joint account and the RIF. Where there is a gratuitous transfer of assets from a parent to an adult child, there is a presumption that the transferee holds the assets as trustee for the transferor.
Since the presumption is a resulting trust, a transferee claiming beneficial ownership of the property (in this case Gary) has the onus of showing, on a balance of probabilities, that the transferor (Henry) intended the transfer to be a gift.
Gary did not satisfy the onus, and as such the proceeds of the jointly-owned bank account and the RIF were held to belong to Henry’s estate.
This is of interest as the RIF was deemed to be part of the estate, despite there being a clear beneficiary designation, which arguably reflects an intention for the beneficiary to have the benefit of the funds upon the owner’s death.
Key takeaways: Until the decision is addressed by a higher court, this case raises several concerning questions. Are banks, investment advisors and financial planners now obliged to recommend that their clients seek legal advice to ensure that their intention is documented? Can banks no longer rest assured that they are free to pay out designated funds after the account-holder’s death? Hopefully, the answers to these questions and more will become clear to us in due time, and with additional judicial considerations of these issues.
Our experienced life/disability/health lawyers are ready to assist you. Please contact Michael Canning, Life and Health team head, at firstname.lastname@example.org with questions or inquiries.
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