On May 14, 2004, the Superior Court rendered judgment in Landry vs. L’Union Vie, Compagnie mutuelle d’assurance1 and allowed the action of the Plaintiff, Ms. Lucie Landry, in which she claimed $50,000 in insurance proceeds following the death of her brother on October 26, 2000, pursuant to a life insurance policy issued by Union Life on July 28, 2000. The case is currently under appeal.
The Facts
On July 28, 2000, Union Life Mutual Assurance Co. issued a life insurance policy on the basis of an insurance application which had been completed by the insured, the late Émile Landry, on July 24, 2000 through Gilles Cossette Croissance Capital Inc., described as the representative of the insurer, despite the fact that the insurer maintained that he acted as Mr. Landry’s “adviser”.
The insurance application contained a section entitled “Declarations of Insurability”, which included the following question:
“DECLARATIONS OF INSURABILITY
DOES ANY PERSON CONCERNED BY THIS APPLICATION:
(…)
13. Have a criminal record or has he/she declared bankruptcy?”
The insured, having answered in the affirmative, had to provide appropriate details in relation to the question asked. Cossette recorded the following information:
“declared personal bankruptcy in 1989 following his divorce”
The investigation conducted following the death revealed that Landry had been involved in several criminal proceedings between 1988 and 1999, which were not mentioned in the insurance application.
Had the insurer known that Landry had a criminal record, it would have refused to issue his life insurance policy. The insurer therefore invoked nullity of the insurance policy and offered to refund to the succession the amount of insurance premiums collected.
It should be noted that the intermediary Gilles Cossette was not called as a witness and that the evidence given by the Defendant’s underwriters to establish that it had been justified in seeking nullity of the policy was not contradicted.
Issue in Dispute
Because the life insurance policy had not been in force for more than 2 years, the insurer did not have to establish fraud. It only had to prove that it was well founded in seeking nullity of the policy on the grounds of the applicant’s misrepresentations regarding his criminal record because these circumstances were of such a nature as to significantly influence an insurer in determining the premium, appreciating the risk or deciding whether or not to accept it2.
The Decision
The Superior Court first analyzed the role of the insurance representative by underlying the fact that it is up to the insurer to assess the answers provided by the insured, and that it is also solely up to the insurer to evaluate the importance of the information provided in the insurance application.
On the basis of the insurer’s obligation to verify, the Court was of the view that this obligation is all the greater when the information given by the applicant is ambiguous.
In this context, the Court adopted the words of Professeur Deslauriers, which read as follows:
[our translation] “(…) in any event, we believe that if the insured had provided equivocal information, the insurer must, to satisfy the obligation of utmost good faith, do complementary research or ask further questions.”
Having established this obligation, the Court added that the equivocal information provided by the applicant resulted from the very wording of the question pertaining to a criminal record which [our translation] “was ambiguous and overlapped with the applicant’s bankruptcy”.
The Court therefore allowed the Plaintiff’s action for the following reason:
[our translation] “(…) we must therefore find that the insured never answered the question regarding his criminal record in the negative, that the ambiguity arises form the insurer’s formulation of the question and that the latter only had to further investigate, as it was obliged to do.”
Thus, in the event that the Court had agreed that a criminal record could result in nullity of the policy and although the insurer supplied convincing evidence that the risk would not have been accepted, its formulation of the question alone was sufficient to defeat the nullity sought.
Conclusion
Although it is being appealed, this decision nevertheless highlights how important it is for the insurer to ask clear and unequivocal questions. In the circumstances under consideration, two separate questions – one covering criminal records and another covering bankruptcy - would perhaps have allowed the parties to avoid the dispute altogether. The judge in fact noted that some insurers proceed in this manner.
In any event, the Court of Appeal will have an opportunity to consider the issue regarding the extent of the obligation incumbent on the insured to declare. This issue has been raised regularly before the courts and has been the subject of several decisions since the past few years. In the present case, even if the answer provided by the applicant had not been strictly false, the Court of Appeal will have to decide if the judge of first instance erred in not sanctioning the insured’s failure to provide the appropriate details regarding his criminal record, which was specifically raised by the question asked, notwithstanding that there was limited space in which to answer.
§ 9102. Allocation of premiums. (a) In determining the amount of
direct premiums taxable in this state, all such premiums written,
procured, or received in this state shall be deemed written on property
or risks located or resident in this state except such premiums properly
allocated and reported as taxable premiums of any other state or states.
(b) (1) In determining the amount of gross premiums taxable in this
state pursuant to paragraph one of subsection (d) of section two
thousand one hundred eighteen of this chapter, where a placement of
excess line insurance covers property or risks located or resident both
in and out of this state, the sum paid to the superintendent shall be
computed on that portion of the policy premium that is attributable to
property or risks located or resident in this state, as determined by
reference to an allocation schedule prescribed by the superintendent in
a regulation.
(2) If the allocation schedule does not identify a classification
appropriate to the property or risk being insured, an alternative method
of equitable allocation shall be used for such coverage. In that
circumstance, documented evidence of the underwriting bases and other
criteria used by the insurer shall be given significant weight by the
superintendent.
(3) The licensee shall report the method of allocation utilized in a
form and in a manner prescribed by the superintendent in a regulation.
Where the licensee bases the allocation on an alternative method of
equitable allocation, such licensee shall provide additional information
in support of the allocation as the superintendent may require.
(4) If the superintendent reasonably determines that the information
provided is insufficient to substantiate the method of allocation or
that the method used is incorrect, the superintendent shall determine
the sum to be paid in accordance with the method prescribed by the
superintendent in the regulation. The superintendent's determination of
the sum to be paid shall finally and irrevocably fix the tax unless,
within thirty days of notification of the superintendent's
determination, the licensee requests a hearing to dispute such
determination.
(c) (1) Any licensee who allocated the premium tax for any of the six
years prior to the effective date of this subsection shall not be liable
for the payment of any additional premium tax that would have been due
had the licensee not allocated, unless the superintendent determines
that the method of allocation was inequitable.
(
2) The superintendent's determination under this subsection shall be
in accordance with the procedures in paragraph four of subsection (b) of
this section. Documented evidence of the underwriting bases and other
criteria used by the insurer shall be given significant weight by the
superintendent.
(3) Nothing in this subsection shall entitle a licensee to a refund of
taxes previously paid.
See blogs Freiberg and Peck right here at studiohome
See blogs Freiberg and Peck right here at livejournal
See blogs Freiberg and Peck right here at grab.com
See blogs Freiberg and Peck right here at greenpeace
See blogs Freiberg and Peck right here at blogspot
See blogs Freiberg and Peck right here at bloglines
See blogs Freiberg and Peck right here at tripod
See blogs Freiberg and Peck right here at ign
See blogs Freiberg and Peck right here at isanetjournal
See blogs Freiberg and Peck right here at iziblog
See blogs Freiberg and Peck right here at naymz
See blogs Freiberg and Peck right here at multiply
See blogs Freiberg and Peck right here at 20six
See blogs Freiberg and Peck right here at blogsome
See blogs Freiberg and Peck right here at blog360
See blogs Freiberg and Peck right here at geocities
See blogs Freiberg and Peck right here at blog.uk.co
See blogs Freiberg and Peck right here at soulcast
See blogs Freiberg and Peck right here at clearblogs
See blogs Freiberg and Peck right here at ebloggy
See blogs Freiberg and Peck right here at blogs.ie
See blogs Freiberg and Peck right here at egoweblog
See blogs Freiberg and Peck right here at bahraichblogs
See blogs Freiberg and Peck right here at blog.com
See blogs Freiberg and Peck right here at xanga
See blogs Freiberg and Peck right here at blogbeee
See blogs Freiberg and Peck right here at claimid
See blogs Freiberg and Peck right here at ning
See blogs Freiberg and Peck right here at xing
See blogs Freiberg and Peck right here at vox.com
See blogs Freiberg and Peck right here at easyjournal
See blogs Freiberg and Peck right here at squarespace
See blogs Freiberg and Peck right here at squidoo
See blogs Freiberg and Peck right here at myspace
See blogs Freiberg and Peck right here at opera
See blogs Freiberg and Peck right here at aboutus
See blogs Freiberg and Peck right here at mybloglog
See blogs Freiberg and Peck right here at tblog
See blogs Freiberg and Peck right here at today
See blogs Freiberg and Peck right here at last.fm
See blogs Freiberg and Peck right here at nireblog
See blogs Freiberg and Peck right here at blog-city
See blogs Freiberg and Peck right here at blogyx