Misrepresentations, Omissions And Other Half Truths

• Published date: 23 November 2020
• Subject Matter: Insurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Trials & Appeals & Compensation
• Law Firm: Clark Wilson LLP
• Author: Mr Satinder Sidhu

It is a deemed condition of every insurance contract that if a person applying for insurance misrepresents or fraudulently omits to communicate any circumstance that is material to the insurer to judge the risk, the contract is void. What constitutes a misrepresentation and fraudulent omission was recently considered by the B.C. Court of Appeal in Nagy v. BCAA Insurance Corporation 2020 BCCA 270. The writer was counsel for BCAA at both levels of court.

The insureds in this case owned a home on Mayne Island, B.C. The insureds submitted an application for home insurance (the "Application Form") to BCAA and answered "no" to the question "Has any insurer cancelled, declined, refused or imposed any special conditions on habitational insurance for the applicant in the past 10 years". In fact, the insureds' previous insurer, Wawanesa, refused to renew their policy due to claims frequency and the frequency of change of occupancy. Further, the insureds disclosed one previous insurance claim in the past 10 years when in fact they had made a number of insurance claims during this period. Most notably, the insureds previously suffered a total fire loss at another home located in Point Roberts, Washington. The insureds provided these answers to a BCAA telephone broker and the broker recorded the answers on the Application Form and emailed a copy to the insureds. The insureds signed and emailed the Application Form back to the broker and the policy was placed in March 2016.

On December 4, 2016 the Mayne Island home suffered a total fire loss and the insureds submitted a claim for coverage to BCAA. Subsequent investigations by BCAA revealed the Wawanesa denial and previous claims. BCAA denied the insureds' claim on the basis that the policy was void due to misrepresentations and omissions by the insureds at the time coverage was placed.

The trial judge treated the answer "no" and the failure to disclose the other insurance claims as omissions. The trial judge held that BCAA failed to prove that these omissions were fraudulent. The trial judge accepted the insureds' evidence that after emailing the Application Form they mailed an addendum to BCAA disclosing the previous claims and attaching a letter from their previous broker advising of Wawanesa's denial (the "Addendum").

The Court of Appeal overturned the trial judge's finding that the answer "no" as to whether an insurer had cancelled, declined, or refused insurance was an omission. Grauer J. held as follows:

"...