Jackson v Canadian Northern Shield Insurance Co [2010] BCSC [material change in risk]

Jackson v Canadian Northern Shield Insurance Co [2010] BCSC [material change in risk]

Material change in risk (***will be on exam)

4. (1) The insured must promptly give notice in writing to the insurer or its agent of a change that is

(a) material to the risk, and

(b) within the control and knowledge of the insured.

(2) If an insurer or its agent is not promptly notified of a change under subparagraph (1) of this condition, the contract is void as to the part affected by the change.

(3) If an insurer or its agent is notified of a change under subparagraph (1) of this condition, the insurer may

(a) terminate the contract in accordance with Statutory Condition 5, or

(b) notify the insured in writing that, if the insured desires the contract to continue in force, the insured must, within 15 days after receipt of the notice, pay to the insurer an additional premium specified in the notice.

(4) If the insured fails to pay an additional premium when required to do so under subparagraph (3) (b) of this condition, the contract is terminated at that time and Statutory Condition 5 (2) (a) applies in respect of the unearned portion of the premium.

• 
  Harmon: this is a tough and rigorous condition, nothing consumer friendly about it, he questions that there must be a fraudulent omission via Craig Brown
  
  • 
    A material change in risk not reported to insurer can be completely innocent since people don’t know what to do, insured shouldn’t be penalized for this
    

• 
  Aviva v. Thomas, 2011 NBCA 96
  
  • 
    The question: will this law be imported into BC?
    
  • 
    Multi-peril policy
    
  • 
    Insured honestly disclosed at time of application that primary heating source was electrical; it was sole source of heating at the time. Over time, insured installed woodstove on back porch, led to fire
    
  • 
    Aviva denied coverage for material change in risk
    
  • 
    Aviva lost at trial and on appeal
    
  • 
    Insured entitled to $23,662.
    
  • 
    CA determined this wasn’t material since Aviva did not act like it was material, Aviva failed to make appropriate enquiries.
    
  • 
    CA held that the insured did not “subjectively” appreciate the materiality for risk purposes
    
    • 
      ONCA agrees with NBCA on this point, Harmon says this is the type of case that SCC needs to deal with to unify the law
      
• 
  This is a battleground in modern world w.r.t. what is a material change in risk
  

• 
  Insured was single woman of 57, had two children, insured premises in small town BC. Insured had multi-risk policy, there was a fire, investigation revealed there was significant number of marijuana plants and transformers. Also opinion of fire reconstruction expert that the marijuana grow-op wasn’t the source of the fire in any way.
  
• 
  First deal with policy exclusion, then determine whether policy void by misrep, material change… etc
  
• 
  Here, wording excluded coverage for buildings engaged in business or farming purposes
  
• 
  Factual issue turned on whether dealing with failure to disclose material change in risk, or failure to disclose material circumstance at time of risk
  
  • 
    Statutory condition 1 doesn’t render policy void unless fraudulent, this requires subjective intent on part of insurer
    
  • 
    If there’s a material change in risk, will only affect that part of property involved (can see that in wording of statutory condition 4), material change in risk has to be material and within controlled knowledge of insurer
    
  • 
    How would court consider evidence of marijuana not causing fire? – would this be unfair or unjust w.r.t. forfeiture of coverage?
    
    • 
      Harmon said that different judges will disagree on whether it is unjust and unfair. But must also question how much sympathy extended to someone engaged in marijuana grow-op. Must take factors from case and weigh them as a reasonable person. Harmon would be reluctant to deny coverage
      
    • 
      In Harmon’s opinion, nothing unjust or unreasonable from discouraging members of society from violating law in cultivating illegal drugs
      
• 
  Coverage was denied to the woman, she lost everything