Invalid Claim

Insurance Act, R.S.O. 1990, c. I.8

Misrepresentation or violation of conditions renders claim invalid

233 (1) Where,

(a) an applicant for a contract,

(i) gives false particulars of the described automobile to be insured to the prejudice of the insurer, or

(ii) knowingly misrepresents or fails to disclose in the application any fact required to be stated therein;

(b) the insured contravenes a term of the contract or commits a fraud; or

(c) the insured wilfully makes a false statement in respect of a claim under the contract,

a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited. R.S.O. 1990, c. I.8, s. 233 (1).

Statutory accident benefits protected

(2) Subsection (1) does not invalidate such statutory accident benefits as are set out in the Statutory Accident Benefits Schedule. R.S.O. 1990, c. I.8, s. 233 (2); 1993, c. 10, s. 1.

Use of application as defence

(3) No statement of the applicant shall be used in defence of a claim under the contract unless it is contained in the signed written application therefor or, where no signed written application is made, in the purported application, or part thereof, that is embodied in, endorsed upon or attached to the policy.

Idem

(4) No statement contained in a purported copy of the application, or part thereof, other than a statement describing the risk and the extent of the insurance, shall be used in defence of a claim under the contract unless the insurer proves that the applicant made the statement attributed to the applicant in the purported application, or part thereof.

Ghaffari v. Co-operators General Insurance Co., 1996 CanLII 8031 (ON SC)

The onus is upon an insurer to establish on a balance of probabilities that an insured is wilfully or recklessly exaggerating his or her loss as submitted in a proof of loss: Chlebak v. Royal Insurance Co. of Canada, 1975 CanLII 427 (ON SC), [1975] I.L.R. 1-683 (Ont. C.A.). In order to find someone guilty of fraud, the evidence should be clear and satisfactory: Glen Falls Insurance Co. v. Adams (1916), 1916 CanLII 636 (SCC), 54 S.C.R. 88, 32 D.L.R. 399.

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Section 129 of the Insurance Act allows for relief against forfeiture where there is "imperfect compliance with a statutory condition as to the proof of loss". This provision has no application in a situation of fraudulent conduct: West v. Royal Insurance Co. of Canada (1986), 21 C.C.L.I. 53 at p. 59 (Ont. Dist. Ct.); Wigmore v. Canadian Surety Co. (1994), 1995 CanLII 66 (SCC), 27 C.C.L.I. (2d) 96, [1995] I.L.R. 1-3139 (Sask. Q.B.). However, where the insured's proof of loss contains an honest mistake, the court can resort to s. 129 in order to grant relief on the basis that the insured's proof of loss amounted to "imperfect compliance".

Armstrong v State Farm Mutual Automobile Insurance Company, 2016 CanLII 30098 (ON SCSM)

1. The plaintiff sues the defendant for breach of contract for refusal to indemnify under the insurance policy, loss of use of the insured’s property following the loss, and damages for bad faith for the manner in which the plaintiff’s claim was handled.

2. The plaintiff owned a motorcycle insured under a motor vehicle policy by the defendant. The plaintiff alleges the bike was stolen and later recovered with damage totaling the sum of $5,639.45. As of the date of trial, the bike had not been repaired. However, there is no dispute over the quantification of the damages claimed for the cost of repair. The plaintiff also claims damages for loss of use. This claim is by and large without evidentiary foundation in that the plaintiff as of the date of loss had other bikes owned by her and available to her under a normal period while the bike was being repaired. I would postulate that a normal period for the repair and therefore for calculating loss of use would be about 2 weeks. Beyond my speculation, counsel did not proffer any substantive evidence upon which damages could be awarded under this heading.

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7. The defendant has not given the court any assistance on the meaning of the word “willfully”, the lynchpin for a finding that the claim is forfeited, nor has any case law been cited to assist the court in knowing how the courts to date have treated this section. In my view therefore the plain meaning of the word “willfully” is to be given and to me it connotes an intention to deceive on material fact with a view to obtaining what is not lawfully due to the insured under the contract of insurance. What must be proven by the insurer is that the insured set out on a course of conduct to obtain indemnification by making a false claim knowing it to be false. In this case, it cannot be meant to be any statement unrelated to the claim but must be a false statement relating directly to the claim itself. In this case, the insurer must establish on its burden of proof that the claim that there was a theft is false and that the insured participated in a fraud or something nefarious relating to making a false claim. It is not sufficient to assert that the claim is false because the defendant suspects the defendant because the defendant appears to have made inconsistent statements on facts that are not material to the claim and the loss.

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14. Accordingly, there will be judgment to the Plaintiffs against the Defendant in the sum of $5,639.45 for breach of contract and indemnity under the contract of insurance plus prejudgment interest at the rate of 5% calculated from September 6, 2013 plus the further sum of $1000.00 for breach of the duty to act in good faith.