The Ontario Court of Appeal has upheld a life insurance award of $280,000 against Industrial Alliance Insurance and Financial Services Inc.
Last week’s decision upholds a trial decision of Dec., 2012, in which a jury found in favour of Barbara Pagliaroli, whose husband, Frank Pagliaroli died in May, 2009.
The case turned on the interpretation of s.180(1)(c) of Ontario’s Insurance Act, which deals with a change in the insured’s health between the date when the policy is applied for and the date that it is delivered. If there has been a change in the applicant’s health in that period, the policy does not take effect.
The facts in this case could easily arise among clients who apply for a policy without full knowledge of their own medical condition. The husband completed an application for life insurance on Jan. 16, 2009. It was delivered on Feb. 17, 2009. Both sides agreed that he had answered the policy’s questions about his health honestly. That included a diagnosis of gallstones and referral to a surgeon. During the consultation with the surgeon, on Feb. 2, 2009, a heart murmur was found. The insured died in May, from complications that followed surgery to alleviate the heart condition.
The insurance company argued that the word “insurability” in s. 180 of the insurance act, was not linked to the insured’s health and that the crucial issue was whether his insurability was altered by “emerging medical information” between the date the policy was signed and the date it was delivered.
The Court of Appeal disagreed with this position. It reviewed the wording of the “Receipt for Delivery of Contract” form, which the insured signed on February 17, 2009. That document contained the following clause, addressed to the insurance agent: “Change of Insurability. Notice to agent: Has the state of health of occupation of any of the insureds changed since the application was signed?” The “no” box had been ticked.
Evidence from a senior official from Industrial Alliance undermined the company’s position. The official agreed that “there was no change in Frank’s health between the time of the application and the time of the delivery, that Frank’s health was the same in that period of time….”
In holding for the insured, the Court of Appeal stated: “The factual reality in this case is a simple one; in its contractual document, the appellant [Industrial Alliance] does not define ‘change of insurability’; in the document it requires an insured to sign, it directly links ‘change of insurability’ to a potential insured’s ‘state of health’ and ‘occupation’; and, in this case, the appellant concedes that the insured’s state of health did not change in the relevant time period.”