Life & Accident Insurance

Life & Accident Insurance

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  Refer to benefits, not indemnity
  
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  Beneficiary: person receiving payment
  
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  Insurance certificates are issued in group life insurance, this is usually a booklet, receiver of insurance is not privy to the contract of insurance
  
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  Life insured: person who’s death triggers the payout
  
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  Policy holder may or may not be life insured
  
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    For individual life insurance policies, life insured is likely to be policy holder
    
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    In group policies, typically policy holder is employer
    
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    In creditor group insurance, policy holder is the creditor
    
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      Insurance contract between insurer and the credit union
      
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      Debtor is not entitled to payment from the insurer
      
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      There should be no liability between insurer and the individual participant, liability only lies between insurer and creditor, then creditor to insured
      
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      Not part of standard life insurance policies, treated differently
      

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  In every insurance policy, premium meant to reflect risk that insurer has to pay out on policy at some point in time
  
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    Higher the risk that benefit will be payable, the higher the premium, this raises issues with accidental death policies
    

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  You are not just insured for dying, you must die through accidental means
  
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    In these circumstances, would expect death by accident to occur more rarely than ordinary death
    
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    Typically, premiums for these policies are less than those for normal death
    
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  Underlying rationale of accidental insurance is that you aren’t to indemnify everything, it provides limited coverage
  
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    Provides some coverage for critical diseases and some bodily injuries
    
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  Life Insurance Co: M killed in crash of chartered aircraft, wife was named beneficiary, the certificate and policy awarded beneficiary $25k in accidental death, and $1mill payout if M died while riding in a “common carrier” (a major airline on a set route). Insurer denied wife $1mill benefit.
  
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    BCSC held that words of policy were clear and unambiguous so P’s claim didn’t fall into scope of coverage
    
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      Don’t want to have absurd result when you pay a small premium
      
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    Insurer unsuccessfully argued that M had accidental death coverage for $14/month
    

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  When insurer offers single policy to large company who purchases insurance in bulk, and sell coverage to customers
  
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    Pro: get coverage for cheaper rate
    
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    Con: no negotiation of terms
    

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  Under statute, when policy lapses, you have a 31 day grace period, if premium paid within this time, policy is reinstated
  
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    During grace period, you are still covered
    
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    Sometimes policy will provide that if you miss payment a few times, you pay arrears and apply for reinstatement
    

Paul v CUMIS Life Insurance Co [2012] BCCA [creditor’s group insurance, policy lapse]

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  Wife has no standing to bring action against insurer since she is not privy to the contract which is one of creditor group insurance
  
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    But matter was dealt with since insurer conceded that she potentially had an insurable interest
    
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  Question 3 of the handout: “coming to the risk” ties into principle of fortuity, in insurance policy, don’t want people coming to insurance policy when they know something will happen
  

Branch v Empire Life Insurance Co [2013] BCSC [suicide exclusion]

Facts	- B took out life insurance for $600k, the policy lapsed three times and was reinstated each time, in between lapse 1 and 2, B went bankrupt - When he applied for reinstatement after lapse 2, he represented in his application that his annual income was still $1mill and as to net worth, he wrote “Look In Your Files!” - After lapse 3 in June 2003, insurer agreed to reinstate the policy upon receipt of premiums in arrears on Sept 4, 2003 and B paid the corresponding premiums in Oct 2003, in July 2005, B committed suicide - B’s beneficiaries (P) were denied claim because insurer’s alleged B committed suicide within two years of the last policy reinstatement, and no benefits payable pursuant to the suicide exclusion clause
Issues	- When was B’s policy reinstated after lapse 3? i.e. from which date did the two year time period begin to run? - Even if the policy was reinstated, would any residual entitlement be eliminated if B committed fraud or misrepresentation material to the policy?
Rules	- Date of reinstatement is the date after insurer agrees to reinstate, when insurer receives the arrears
Analysis	- Beneficiary argued that since B paid arrears, the policy should’ve been reinstated on the date of the lapse, based on reasonable expectation principle - Insurer argued that insurance was effective on the date of reinstatement, not date of the lapse - P argued that the Act and policy were unclear as to what constituted the “effective date” of reinstatement Court held that it was plain and obvious that “last reinstatement” meant the date on which the Policy entered into force again Silence on criteria of delivery or approval of re-application for policy indicated that once the requested documents and payments were submitted, the policy would be automatically reinstated - Court found that B did not reinstate policy a full two years before his suicide since his premiums were not paid in time - A material misrepresentation was committed by B B’s financial circumstances were a material fact since the application for reinstatement asked B to disclose his annual income and net worth B’s representation that his annual income was $1mill amounted to a misrepresentation since he had a broad duty to disclose under the Act, and bankruptcy would have influenced a reasonable insurer in fixing the premium or accepting risk
Conclusion	- The policy was void for misrepresentation, no coverage

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  Lapse and reinstatement is common issue with life insurance policy
  
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  Involved a keyman policy: standard insurance policy that insures company for death
  
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    Doesn’t indemnify for losses to business, provides fixed monetary sum
    

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  Why can insurer only exclude suicide for two years?
  
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    Because after a two year period, suicide would become a fortuitous event
    
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    The two year period is meant to detract from people “coming to the risk”
    

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