Failure To Disclose Material Facts To Insurer Voids Coverage For Delivering Pizza

• Published date: 28 April 2021
• Subject Matter: Insurance, Insurance Laws and Products
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

Failing to advise an insurance company of material facts relating to the policy may result in a loss of coverage at a time when it is needed most.

In Euler v. Economical Insurance, 2021 ONSC 3018 (CanLII), the applicant had an automobile insurance policy with the respondent insurer which was issued in 2014, and renewed annually thereafter. The application form required the applicant to indicate any business use of the insured vehicle. The applicant left that area of the form blank, indicating no business use. The annual premium for the policy ($733) was rated on the basis that the vehicle was used primarily for "pleasure" with a stated two-kilometre commute to work. This information was endorsed on the Certificate for Automobile Insurance for each successive term.

Pursuant to the standard policy terms and conditions, the applicant agreed to promptly notify the insurer of any changes in the "risk material to the contract" or to "a change in the way the automobile is used."

At some point, the applicant started to deliver pizza for Domino's Pizza. On October 28, 2017, he was involved in an accident with another vehicle. The applicant reported the accident to his insurer and subsequently confirmed with a claims adjuster that he was employed by Domino's Pizza on the date of the accident and was returning from a delivery when the accident occurred.

It does not appear from the decision that Domino's Pizza provided any insurance coverage for delivery people using their own vehicles.

On November 28, 2017, five days after reporting the accident, the applicant cancelled the policy, signing a Cancellation Agreement, effective October 29, 2017. His vehicle had been scrapped following the accident. The insurer refunded $92.56 in unearned premium.

In 2019, the applicant was notified of a claim against him arising out of the accident. He reported this claim to his insurer. However, the insured denied the claim for indemnity and payment of defence costs arising out of the accident, stating that the applicant had breached the policy by failing to disclose on his application for insurance and at any point in the duration of the policy that he used his vehicle for business - delivering pizza - which was a change in risk material to the policy.

The applicant argued that the intended use of the vehicle, to deliver pizzas, was not a term or requirement of the contract of insurance. Alternatively, he argued that the insurer waived its right to deny coverage by treating the...