§ 1. — Nature of the contract of insurance and classes of insurance
2389. A contract of insurance is a contract whereby the insurer undertakes, for a premium or assessment, to make a payment to the client or a third person if a risk covered by the insurance occurs.
Insurance is divided into marine insurance and non-marine insurance.
2390. The object of marine insurance is to indemnify the insured against losses incident to marine adventure.
2391. Non-marine insurance is divided into insurance of persons and damage insurance.
2392. Insurance of persons covers the life, physical integrity or health of the insured.
Insurance of persons is divided into individual insurance and group insurance.
Group insurance of persons covers, under a master policy, the participants in a specified group and, in some cases, their families or dependants.
2393. Life insurance guarantees payment of the agreed amount upon the death of the insured; it may also guarantee payment of the agreed amount during the lifetime of the insured, on his surviving a specified period or on the occurrence of an event related to his existence.
Life or fixed-term annuities provided by insurers are assimilated to life insurance but also remain governed by the chapter on Annuities. However, the rules in this chapter that apply to unseizability take precedence.
2394. Clauses of accident and sickness insurance which are accessory to a contract of life insurance and clauses of life insurance which are accessory to a contract of accident and sickness insurance are governed by the rules governing the principal contract.
2395. Damage insurance protects the insured against the consequences of an event that may adversely affect his patrimony.
2396. Damage insurance includes property insurance, the object of which is to indemnify the insured for material loss, and liability insurance, the object of which is to protect the insured against the pecuniary consequences of the liability he may incur for damage to a third person by reason of an injurious act.
2397. The contract of reinsurance has effect only between the insurer and the reinsurer.
Grey vs Kerslake [1958] S.C.R. 3 – CML - Classification of Insurance – Annuity is not life insurance (see above)
Insurable Interest
Formation of the Contract
Robitaille v. Madill – CVL – CS - 1983
F: Robitaille, the owner of a hotel establishment, had installed an automatic extinguisher system in his kitchen at the request of his previous insurers. Some years later Madill offered to insure Robitaille, and on August 20, 1980 an inspector and a broker went to his premises. After inspecting the building the inspector classified the risk as "acceptable" and gave appellant the applicable rates. The insurance application was written on the spot and accepted. The broker then told the appellant that his coverage began that same evening. There was nothing in the application to indicate that appellant had to sign a maintenance contract for his extinguisher system – a requirement which was also not part of his old insurance contract. However, the insurance policy when issued three weeks later stated in clause 8 that the extinguisher system had to be checked at least twice a year by the manufacturer's authorized representative. When a fire occurred in 1981 the extinguisher system did not operate correctly and the hotel establishment sustained considerable damage. Madill refused to compensate appellant, alleging his failure to observe clause 8 (the exculpatory clause) of the policy. Madill refuses to pay the claim because it says the K is void ab initio or, without prejudice to the foregoing, the hotel owner forfeited the policy by not advising the insurer that the system was not functional (it did not make the insurer aware of a material change in the risk).
I: (1) Is the K void because of R’s misrepresentations / concealments? No – no misrepresentations or concealments found. (2) Did the hotel owner forfeit the policy? No.
Reasoning:
-
Robitaille’s subjective belief was that the system was functioning properly; according to his knowledge, the installation was adequate, effective and well maintained. This is the information he gave to the inspector of the insurance company who did not notice any problem with the system.
-
R thought he had nothing to disclose because he didn’t have this requirement in his old insurance policy with a different insurer.
-
Insurer says: if we had known it was not functional we would not have insured it.
-
However, R brought all the available information to the insurer.
-
The exculpatory clause was in the policy, but was not in the original insurance proposal contract (application) nor the draft.
-
Also, according to CCLC 2478, wherever there is a difference between the initial proposal and the final policy, and that difference was not expressly brought to the attention of the policy holder (evidenced in writing), it is the term of the initial proposal that applies, not the terms of the policy.
-
To bind R, it would have been necessary for the defendants to deliver to R a separate document indicating inconsistencies between the policy and the application because such inconsistencies reduced the liability of the insurance company.
-
The K is formed when the Insurer receives the application, and adding new terms to the policy is an amendment to the K.
-
There is an obligation for the insured to read the policy but this does not counter CCLC 2478
Rules:
-
Disclosure requirements: The applicable standard of requirements for disclosure is the subjective belief of the insured as evidenced by any available information (best in writing). The insured must make all the information known by him available to the insurer. The policy holder is not liable for insurer’s incorrect evaluation of risk even if he has provided incorrect or incomplete information, so long as the incorrect / incomplete information was not provided in bad faith.
-
Where a policy differs from a proposal, the terms of the proposal apply unless the changes were communicated in writing to the policyholder by the insurer and the policyholder ratified the changes.
-
The burden is not on the insured to assess if there is a discrepancy.
-
The discrepancy must be disclosed in a separate document.
-
Discrepancy means significant and oppositional.
|
Robitaille v. Madill – 1990 – SCC
F: Same as above, except the Quebec Court of Appeal had overturned the decision.
I: Same as above.
R: Respondents had a duty to compensate appellant. Under art. 2476 C.C., an insurance contract is formed upon the insurer's acceptance of the policyholder's application. Since here this application, which was accepted on August 20, 1980, contained no mention of the requirement contained in clause 8 of the policy, namely inspection and maintenance of the sprinkler system, in principle this condition forms no part of the insurance contract. However, assuming that the condition is part of the contract and there is a resulting inconsistency, art. 2478 C.C. must be applied. As respondent insurers did not inform appellant in writing of the inconsistency between the policy and the application, the latter is evidence of the insurance contract and its content.
Rules:
-
Application of CCLC 2476 and CCLC 2478
|
Insurance Law – May 6
Kaperonis v. Standard Life – CVL – SC – Proceedings
|
-
Plaintiff’s grounds are that the defendants are liable under the temporary insurance certificate and under actual policy and are liable for negligence
-
There is an argument over who’s agent Simeonidis, the insurance broker, is
-
Exhibits:
-
P-1: Plan details
-
P-2: Application by K
-
P-6: Standard life insurance policy for K’s daughter (Critical Illness)
Class Notes
-
As you can see, a case turns on the details!
-
The facts drive the attack you are going to take
-
Facts:
-
Mr. K took out critical illness insurance for his daughter. His daughter was diagnosed with Cancer within the 90 days moratorium period.
-
Fulfills all the requirements
-
Receives the policy sometime in the following year
-
In March, daughter is diagnosed with Stage 4 type of cancer
-
Issue:
-
By march 20th the question is if Mr. K is within the 90 days or is there any other reason why the insurance co. is required to pay
-
Arguments by the Insured
-
Arguments by the Insurer
-
90 day period: Mr. K has previous policies with similar clauses.
-
This argument was rejected
-
What was the ultimate strongest framing of the case?
-
There was a discrepancy between the application and the policy. Furthermore, there was no writing that indicated the discrepancy. Thus, the insurer is out of luck at having not produced the writing.
-
This moratorium period was not mentioned in the application
-
The argument then becomes, was there a discrepancy / divergence?
-
You have to consider the reasonable expectation of the insured when taking out the policy objective standard (reasonable by definition is an objective standard unless qualified!)
-
Divergence isn’t simply a difference in wording or a divergence in the extent of the information between the application and policy (i.e. detailed expanding information in the policy where the application was less dense)
-
For there to be a divergence, there must be something: Oppositional, contradictory, or anything that would negate the ultimate expectation and intention of the insured in taking out the insurance
-
Ref. para. 12 of Faubert: if it is a substantial alternation or a profound modification to the substance of what is being contracted
-
Element of surprise
-
Introduces a subjective element
-
Lamed feels that this case may open up the door to defenses based on the individuals reasonable expectations founded on a subjective element
CCQ 2400. In non-marine insurance, the insurer is bound to deliver the policy to the client, as well as a copy of any application in writing made by or on behalf of the client; In case of inconsistency between the policy and the application, the latter prevails unless the insurer has indicated in writing to the client, in a separate document, the particulars of the inconsistency.
|
-
Now we’re moving on to another topic: insurable interest
-
2418. In individual insurance, a contract is null if at the time the contract is made the client has no insurable interest in the life or health of the insured, unless the insured consents in writing; Subject to the same reservation, the assignment of such a contract is null if the assignee does not have the required interest at the time of the assignment.
-
You have to have greater interest in the person being alive than dead
-
There should be some economic interest (see 2419 CCQ)
-
2419. A person has an insurable interest in his own life and health and in the life and health of his spouse, of his descendants and the descendants of his spouse, or of persons who contribute to his support or education; He also has an interest in the life and health of his employees and staff or of persons in whose life and health he has a pecuniary or moral interest.
-
So has economic grounding and a moral one
-
If no insurable interest, the contract is null!
-
2481. A person has an insurable interest in property where the loss or deterioration of the property may cause him direct and immediate injury; It is necessary that the insurable interest exist at the time of the loss but not necessary that the same interest have existed throughout the duration of the contract.
-
When you insure, you have to have interest in the property. If there is a loss, you also have to have an interest in the property. But it does not have to be the same interest.
-
In what cases would the interest change?
-
An owner of a building who sells the building with a balance of sale. The collateral for rest of the money is the building. Thus, you still have an interest in the building.
-
If the insurable interest is over in the life of the contract, than the insurance contract is also over
-
Insurable interest is not the same thing as value it means if one has some pecuniary connection, or legal or equitable rights over the thing such that I might suffer pecuniary loss if the thing goes
-
What about if you know your aunt will bequeath you a home when she passes. Will you have an insurable interest in this home?
-
Do we need insurable interest in liability insurance?
-
We don’t have a requirement. For third party liability, the interest is intrinsic. The insurable interest is in protecting our own patrimony. Thus, there is no need for insurable interest in liability insurance because its intrinsic in us wanting to protect our own patrimony.
Kosmopoulos v Constitution Insurance (1987) 1 S.C.R. 2 – Insurable Interest Test ; Pecuniary Interest (Factual expectancy test)
Facts: man operates business as sole proprietorship, and then transfers all assets to a corporation, which he operates as sole shareholder. Fire destroys property and assets, insurance company refuses to pay policy on basis the insured has no insurable interest in the goods. The property after incorporation essentially went from being ‘owned’ by the sole proprietor, K, to being owned by the company.
Issue: Can a sole shareholder have an “insurable interest” in the assets of that corporation? Whether there is an insurable interest here.
Held: YES.
Reasoning:
-
Does Macaura Test apply? REJECTED - too rigid to deal with contemporary economic reality.
-
Test for “insurable interest” is a debate b/w legal/equitable interest or pecuniary interest.
-
Concern is that if insurance payments go to the shareholders, then creditors may get screwed, as the assets of the corp. are the collateral to the unsecured creditors.
-
Court could choose to lift corporate veil, and treat shareholders and corp. as the same entity, but accepting the benefits of incorporation means you have to accept the disadvantages. Furthermore, would create distinction between single shareholder corps and other types of corps. REFUSED
-
Three policies have been cited as underlying the requirement of an insurable interest: (1) the policy against wagering under the guise of insurance; (2) the policy favoring the limitation of indemnity; and (3) the policy to prevent temptation to destroy the insured property.
-
Pecuniary interest test satisfies the policy reasons. Thus, “FACTUAL EXPECTANCY TEST” Accepted
-
“Legal and Equitable Interest Test” from Macaura rejected and should be dropped.
Factual Expectancy Test:
-
“Insurable Interest” exists if an insured can demonstrate, "some relation to, or concern in the subject of the insurance, which relation or concern by the happening of the perils insured against may be so affected as to produce a damage, detriment, or prejudice to the person insuring", that insured should be held to have a sufficient interest.
-
To "have a moral certainty of advantage or benefit, but for those risks or dangers", or "to be so circumstanced with respect to [the subject matter of the insurance] as to have benefit from its existence, prejudice from its destruction" is to have an insurable interest in it.
Ratio: Factual Expectancy Test replaces legal and equitable interest test to determine insurable interest. Shareholders can have an insurable interest in the assets of a corporation. Mr. K had an insurable interest in the assets and he was “so placed with respect to the assets of the business as to have benefit from their existence and prejudice from their destruction”. He is entitled to recover under the insurance policy.
Class Notes:
Facts: Owner of a spring leather shop. Sole proprietor. Incorporates and now sole shareholder. Then, however, carried on business as if he was a sole proprietor. After a fire destroyed his goods, the insurer refused to pay him saying that the destroyed property was owned by the company and thus he had no insurable interest in the property.
Issue: what is insurable interest? What do you have to have?
-
precedents to the case stated that you had to have legal ownership in the property to have an insurable interest
-
Courts refer to Crawford in which the judges debate the nature of insurable interest
-
One judge says: Moral certainty of advantage or loss
-
Other says: legally ascertainable rights
-
What’s the problem of lifting the corporate veil in this situation?
-
It’s cherry picking: you want to lift when its in your favour but not when it is against you
-
Talks about Macaura v Northern Assurance Co Ltd – CML
-
Three public policies on insurable interest not interfered with insurable interest being based on factual expectancy of benefit or loss: gambling / wagering, limitation of the indemnity such that the person wouldn’t have gain, and the policy that there is no incentive for you to destroy the goods in question to attain a gain
|
Share with your friends: |
