The suicide problem is a moral hazard concern; i.e. person is depressed due to financial condition, knows he or she has life insurance and family will be provided for, etc.
Also, suicide is a ‘deliberate’ act
How does the law / code deal with this problem?
2441. The insurer may not refuse payment of the sums insured by reason of the suicide of the insured unless he expressly stipulated that coverage would be excluded in such a case and, even then, the stipulation is without effect if the suicide occurs after two years of uninterrupted insurance; Any change made to a contract to increase the amount of coverage is, as regards the additional amount, subject to the initially stipulated exclusion clause for a period of two years of uninterrupted insurance beginning on the effective date of the increase.
Thus, there is an added interest in knowing what is the date of effect of the insurance
The default position in the civil and common law were exactly opposite
In Common law, initially, you could not recover from suicide at all because you can’t get proceeds from the commission of a ‘crime’ whereas in the civil law was that you could get proceeds, unless explicitly excluded
Current position in CML due to statute being enacted is that you can recover if it is not in the 2 year exclusionary period (but the default position is still different from CVL in the sense that there must be a clause included saying you can recover for suicide after two years, otherwise you can’t recover at all)
Chablis Textiles v. London Life Insurance Co[1996] 1 S.C.R. 160 The 2-year rule can be shortened if the Ir and Id agree to it (but it cannot be extended). A definitive agreement can come into force on a retroactive date (so long as the 3 conditions of 2425 are met at some point in time). Exclusion period can only run once.
Facts:
Sept 8 1980: Id signs a $500,000 provisional life insurance policy.
Sept 26 1980: The Id and Ir agree that the coming into force of definitive policy is Sept 26 1980.
Nov 11 1980: The definitive policy is issued. It contains a “suicide” clause stating that the policy is valid so long as the Id does not commit suicide within the following 2 years period. Retroactive to Sept 26.
Nov 14 1980: The Ir receives the payment of the 1st premium and the insured accepts to reduce coverage in the event of accidental death.
Jan 12 1981: The indemnity is increased from $500,000 to $1,000,000, a new beneficiary is named, and the effective date of the policy is changed to Jan 26,1981.
Feb 9 1981: The new policy is issued.
Oct 20 1982: Id commits suicide.
Issue: When does the 2 year clock start ticking: on Sept 26, the date agreed to by the parties as the coming into force date, OR on Nov 14, when the 1st premium is paid and the 3 conditions of 2425 are met?
Held: On Sept 26.
Reasoning:
Normally, a definitive policy comes into force once the 3 conditions of 2425 are met (acceptance of the provision as-is, payment of the 1st premium, no change in insurability).
So the coming into force date is Nov 14 1980.
However, the parties contractually agreed that the coming into force date was Sept 26.
The net effect is that the 2 year rule is, in this case, reduced (to about 1 year and 9 months) because the Ir voluntarily accepted to provide a more favorable contractual term to the Id.
An insurance contract cannot be less favorable to the Id than the codal articles, but it can be more favorable.
Suspensive conditions once satisfied can have retroactive effect, back so far as application date, but not before.
In this case, the K is more favorable (i.e. to the benefit of the Id).
Therefore, the 2 year period runs from Sept 26 1980 to Sept 25 1982.
The Id committed suicide on Oct 20 1982, after the 2 year period, after the expiration of the “suicide” clause.
Rule: The parties can abridge the 2 year rule if it favours the Id. Said differently, the coming into force date of a definitive agreement can be established at an earlier date once the 3 conditions of 2425 are met.
Comments:
2441(2) is a change to make the 2-year limit run again in the event there is an increase to life insurance.
If the individual committed suicide between Sept. 26 – Nov. 14, there would have been no payment since the suspensive conditions had not yet been met. But once they have been met, nothing prevents the contract’s effective date from being adjusted to a retroactive date.
Class Notes We’re dealing with the problem of suicide and insurance here. There the problem was death by suicide on Oct. 20, ’82. Thus are question date is Oct. 20, ’80. Was there insurance at place at this time?
Application: Sept. 8, 1980
Original policy issued: Nov. 11, 1980 (Acceptance)
Payment of initial premium: Nov. 14, 1980 (coming into force date)
However, they agreed upon a different date of taking of effect: Sept. 26
Application to change the policy: Jan., 1981
Courts don’t find that this was a new policy; just a change to an existing policy. The exclusion period cannot run more than once in a single insurance contract. Over here, Courts ruled only one contract, thus new suicide exclusion clause does not apply.
This was changed, re: CCQ 2441 (2)
New policy issued (after medical exam): Feb., 1981
Real debate is when did the insurance policy take effect?
It is permitted to have the retroactivity because it is more advantageous to the insured, thus suicide is a recoverable act in this case!
If death occurred between Sept. 26 and Nov. 14, no insurance because premium hadn’t been paid!
Now, what about the Jan. 8 addition? Under 2441 CCQ, this amount would not be allowed for recovery. There is an additional amount exposed to additional risk; thus it does not make sense, from insurer point of view, to have a suicide provision be dated back to the effective date of the original policy
So the important thing here overall is the retroactivity for all purposes of the policy (no cherry picking!)
Blais c Cie d’assurance vie Union commerciale du Canada[2001] R.R.A. 22 Suicide 2-year clause runs continuously from agreed start date (either interim or definitive) Art 2441
Facts: A suicide case where the insurance company refuses to pay the premium.
Oct 31 ’88: Blais signs the insurance proposal and pays the 1st premium. The “suicide” clause (the policy is void if the Id commits suicide) terminates on 31 Oct 1990.
Blais immediately benefits from the interim policy.
Jan 13 ’89: All medical exams are passed and the definitive policy takes effect, retroactive to Oct 31 ’88 (via a contractual term).
Dec 13 ’90: Blais commits suicide.
Issue: When does the 2 year clock start ticking, on Oct 31st ’88 or Jan 13 ’89 (if it is the latter, then the insurance company does not have to payout because the 2 year period is in effect.)?
Held: Oct 31st ’88. Coverage for suicide allowed!
Reasoning (J. Rousseau-Houle):
The definitive agreement was accepted on the 12th Jan. ’89. Three conditions met on Jan. 13th.
Suicide was the 13th Dec. ’90.
The definitive agreement took effect on Oct 31 ‘88, retroactively. (cf Chablis)
As it seems here parties favoured retroactive adjustment.
So the 2 year period started running on that date and there was no interruption between the interim and definitive policy.
Art. 2441 requires a continuous uninterrupted period.
Unclear here how long the interim policy ran, but she finds in favour of the Insured to find uninterrupted insurance from date of application on 31 Oct 88.
The interim policy conditions did not mention whether it expired on the first of the events of the two events stated (i.e. accept / rejection of proposal or 60 days), nor that the 60 days is definitive. Therefore, from the reasonable expectation of the party, it would appear that the coverage ran until the decision was made…
Furthermore, the term of the definitive agreement stated that it came into force on Oct 31 ’88 (via interpretation of a contractual term) and it is the interim policy that dissolves (the 2 policies are not “back to back,” rather the interim policy dissolves in the definitive policy).
Dissent Beauregard:
Definitive Insurance came into effect 13 Jan, and no evidence that parties intended to have retroactivity. Furthermore, temporary insurance is by definition a fixed-term insurance and no notice of termination is needed.
Rule: The 2 year rule requires continuous coverage. Here, the definitive agreement started on the 1st day of the interim policy (due to a contractual term) and the interim policy dissolved once the definitive policy came into force. If the 2 policies were such that the provisional expired when the definitive came into force, the 2 year period would have started when the definitive agreement came into force. Class Notes Beauregard is the dissent. Facts: Retroactivity. Temporary coverage. Suicide.
Application: Oct. 31, ’88
Given replacement form and includes suicide clause and its effective date
First question: what’s in the application? Is the replacement form in the application or not?
Interim cover note:
Tells us the length of time temporary insurance will be in place
Doesn’t tell you how you’re going to choose between the dates
Ambiguity; problem of interpretation
Jan. 13 or could be 60 days from the cover note and we don’t know because of ambiguity
Acceptance & Policy established: Jan. 13, ‘89
Suicide: Dec. 13, ‘90
We have here a situation where we have some temporary insurance, but it may have come to an end before the definitive policy came into effect. If we look at the conditions of the end of the temporary insurance, it’s either 60 days from Oct. 31, or if it takes us to the point that the new policy was accepted (or rejected). The answer hinges on if the suicide provision was in the original application. We care about this because of the expectation of the insured. Here, the terms of the temporary conditions created a reasonable expectation in the mind of the insured that there would be coverage until a decision was rendered.
Clause deemed to be in effect on Oct. 31, ’88.
Unfair to hold the insured at a disadvantage due to error of the insurer
Comment: Lamed feels like it is a bit of a weird decision.
Insured has the knowledge the insurer needs to cover the risk
Thus concept of disclosure of risk is very important
CCQ 2408. The client, and the insured if the insurer requires it, is bound to represent all the facts known to him which are likely to materially influence an insurer in the setting of the premium, the appraisal of the risk or the decision to cover it, but he is not bound to represent facts that the insurer knows or is presumed to know because of their notoriety, except in answer to inquiries.
Obligation is on the insured. Note the word materially.
Presupposes enlightened consent and utmost good faith.
Nearly all of modern insurance law was developed when Lord Mansfield was on the bench
Carter v. Boehm – CML – 17th Century – Declaration of Risk – Duty to Disclose
Facts:: Policy taken for one year to protect Fort Marlborough against Risk the fort might be captured by a European army. Fort is captured, and underwriter refuses to pay indemnity b/c insured failed to disclose circumstances which ought to have been disclosed. Claims K was void ab initio.
Issue: Did insured fail to disclose circumstances to the underwriter which ought to have been disclosed? In other words, do some circumstances not disclosed by the governor to the underwriter amount to concealment which ought to void the policy (either as fraud or as varying the contract)?
Held: NO, insured wins
Reasoning: Lord Mansfield C.J. – Parties obligated to disclose to prevent fraud and encourage good faith
The suppression of information can void the Insurance Policy. The special facts on which the risk is to be calculated are most commonly the knowledge of the insured and should be disclosed. The insured should not keep back any circumstance in his knowledge to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risk as if it did not exist. This amounts to fraud and the policy would thereby be void (Insurer makes calculations of premiums based on disclosed risk assessment, and withholding information is fraud)
Fraud equally occurs if insurer underwrites a policy which is risk-free (like a ship already arrived)
Good Faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact and his believing the contrary.
The question always becomes: whether there was, under all circumstances at the time the policy was underwritten, a fair representation or a concealment, fraudulent if designed, or, though not designed, varying materially the object of the policy, and changing the risk understood to be run.
Scope of disclosure:
Must disclose: special facts on which the risk is to be calculated
Insured not obliged to disclose things the underwriter already knows or ought to know, or speculations not based in fact.
The insured ought to know: natural perils (ie. sea, weather), political perils. Factual things, but speculative things.
In this case, the information not disclosed were either conditions well known by simple inquiry and or speculation. Therefore, it does not amount to concealment.
Moral Hazard: underwriter signed the policy without asking any questions. If the underwriter signed the K, knowing it to be void, he did so only to make a gain thinking the K was void and knowing there was no risk of paying out. He could have been informed about the risk of attack by asking questions.
Ratio: Parties obligated to disclose special facts on which risk is calculated, but not obligated to disclose things the underwriter knows, ought to know, or speculation. Class Notes Facts: protection of risk against fort being captured by European army. It was connected with the East India company carrying the Pepper Trade. The insured was the governor of the Fort. 7 year was going on. Thus, they were concerned that a British fort would be taken over. The fort was captured and governor sought indemnity. Refusal to pay on the basis that not all relevant facts were disclosed there was concealment: the nature of the Fort (wasn’t really a fort but a factory or a warehouse, never intended to be a military output), the fear of an attack by the French being known (points to a letter). Mansfield in this case tries to point out what the insurer should have the right to know and what the insured should have divulged.
Famous paragraph: “Insurance is a contract upon speculation. The special facts upon which the contingent chance to be computed lie most commonly in the knowledge of the insured only. The underwriter trusts to his representation and proceeds upon confidence that he does not keep back any circumstance in his knowledge to mislead the underwriter to believe that the circumstance does not exist.“
However, there are limitations to this. Insured does not have to reveal what the underwriter already knows or ought to know, i.e. tendency towards natural perils, political perils, and probability towards political perils. Thus, in this case, Mansfield imputes on the underwriter the knowledge of the nature of the fort and knowledge of the political situation. As for the insured’s knowledge of some design by the French, it was not specific enough to be knowledge that the insured should have divulged.
underwriter = insurer
not all the questions in the form asked by the insurer will be considered material by the courts
when does one have to divulge info? At the time of application
materiality can also be subjective things, depending on the type of insurance, etc.
from who’s point of view is materiality assessed? AN insurer! CCQ 2408
beyond subjective; what a reasonable insurer would find to be material under the circumstances
2409 CCQ is a pro-insured provision. This idea of the normally provident insured is a new arrival. Note it does not say reasonable. So if the insurer can show in 2408 that a material fact was not represented, 2409 CCQ can act as a defence
the judge would normally decide who would be the normally provident insured
La cie mutuelle d’assurances Wawanesa c. GMAC Location Ltee [2005] R.R.A. 25 – CVL – existence of questions can limit obligation to disclose – CCQ 2408, 2409, 2410
Facts: insured fills out the application and answers the questions to obtain car insurance (questions included driving infractions and other items covering a period of 6 years going back). No questions about a criminal record. He was a previous client of the insurer. 18 months later car is destroyed, and insurer refuses to pay on basis the insured failed to disclose his criminal record.
Issue: Can indemnity be refused for failure to disclose criminal record not asked in detailed questionnaire? In other words, Is the information that R withheld material?
Held: No. No.
Reasoning (Dalphond J.):
CCQ 2408, 2409, 2410
These articles have placed on a burden on the insurer to show that the information omitted were of a nature that would influence their decision and has placed an obligation on the insured to behave as a normally provident insured.
In the current case, the criminal record of the resp. was not related to driving and was 8 years ago.
The resp. fulfilled his duty in 2409 CCQ: a reasonable person would assume that it wasn’t relevant to disclose criminal activities not related to driving and ones that happened so long ago. The questionnaire further reinforces this reasonableness as a reasonable insured party could assume that the questions not asked weren’t relevant and since the date of the questions in the questionnaire only went as far back as 6 years, details going further back than that would also not be relevant.
General Test - Burden of Proof for failure to disclose:
Insurer invoking nullity must show materiality of what was not disclosed (CCQ 2408), if yes,
then insured has a burden of showing he disclosed what a normally provident insured would have, and his failure to disclose was consistent with this category (CCQ 2409).
CoA: Not unreasonable that the insurer found the criminality material, BUT Wawa answered the questions honestly and the Criminal Record was 8 years ago, and beyond the 6 year cut-off of the other questions.
Insurer could have asked about criminal record if they did not want to insure people with a criminal record.
[Rule: An Insured cannot take advantage and benefit from collecting premiums and later invoke nullity on the basis of concealment of information. The type of information that the Id has to reveal is determined according to an objective standard. It is not limited to answering questions. But it is limited by 2409 which is an objective standard (according to the normally prominent insurer) but there is an element of subjectivity. It is also further limited by the nature of the questions and what the Id can infer as being important to the reasonable insurer in the industry. The questionnaire is supposed to hint at what the reasonable insurer considers as being important. In the end, the “material disclosure” requirement is subjectively assessed.
Test: Is the disclosure objectively sufficient, given the Id subjective knowledge?] Ratio: The obligation to disclose can be limited by the existence of a detailed questionnaire. An insurer cannot take advantage of premiums, and then later invoke nullity.
Class Notes Facts: R leases vehicle from car dealership. Dealer assigns contract to GMAC (they become the owner of the vehicle). R asks Wawanesa for insurance on the car. W asks questions in their form. No questions asked about criminal record or other kinds of convictions. R was W’s prior client and was indemnified twice before. Car was soon after totaled. W finds out about R’s criminal record. All convictions were 8 years prior to the seeking of insurance. W is concerned that had they known about this they might not have insured due to moral hazard.
Despite even though the insurer asks questions on a form, the insured still has a residual obligation (even outside the questions) to disclose under 2408 CCQ. Part of the utmost good faith thing. Two reasons the Court gave relying on 2409: not insured to driving infractions and was 8 years ago. A normally provident reasonable person without experience would not have disclosed this information.
So this case essentially states that the questionnaire can guide the scope and the nature of the residual obligation to disclose.
This case thus complicates even further the relationship between the questionnaire and the residual obligation to disclose.
