High bar for denial of death benefits based on misrepresentations

The most common grounds used by insurers to avoid payment of death benefit claims are misrepresentation and civil fraud. The Ontario Court of Appeal has again had to reconfirm the very high bar for insurers to deny a death benefit claim. In my opinion, this insurer should have been sued for breach of the duty of utmost good faith, loss of peace of mind and reported to FSRA for a UDAP violation.

"[29] Thus, where a policy has been in effect for two years or more during the lifetime of the insured, if the insurer seeks to have the policy voided on the basis of material misrepresentation or material non-disclosure, the insurer must prove on a balance of probabilities that the misrepresentation or non-disclosure was made with the intent required for civil fraud...

[68] The application judge expressly referred to the correct level of intent for civil fraud – knowledge of or recklessness as to the falsehood of the representation – repeatedly in her reasons...

[69]...After considering the evidence before her, the application judge concluded her analysis of the issue of whether the intent for civil fraud had been proven as follows:

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.

[70] In addition to the multiple references in the application judge’s reasons to the correct standard of intent for civil fraud – knowledge or recklessness as to whether the representation was false – the substance of her analysis shows that she applied the correct legal standard. Her assessment of the evidence shows that she was not assessing whether intentional deceit had been proven. Rather, she considered whether the evidence was sufficient to prove on a balance of probabilities either knowledge or recklessness as to the falsehood of the answer, or was at best sufficient to prove negligence or mistake, which would not amount to civil fraud. She found the latter...

Reach your own conclusions: https://www.canlii.org/en/on/onca/doc/2023/2023onca54/2023onca54.html?searchUrlHash=AAAAAQAUY29zdGFuemEgIGRlc2phcmRpbnMAAAAAAQ&resultIndex=2

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