Advisors must try to “extract” maximum information when they complete clients’ life insurance applications. A recent judgment by the Quebec Court of Appeal in favour of Empire life finds that insurers are not obliged to investigate all of the insured’s claims in depth before issuing a policy. Beneficiaries may be denied benefits upon the death of an insured who knowingly omitted details.In the judgment Empire compagnie d’assurance-vie v. Belhumeur Pronovost inc., Court of appeal judges Julie Dutil, Jacques Lévesque and Yves-Marie Morissette allowed the appeal by Empire life. The insurer refused to pay death benefits of $250,000 for policyholder Jean-Eudes Tremblay; the Superior Court had found in favour of the beneficiary. Empire Life based its decision on the fact that the policyholder had not informed the insured of his medical history, but simply indicated the name of his former attending physician.
The judges took the point. They ruled that the policyholder did not fulfil his obligation to declare the circumstances of which he was aware, which could have significantly influenced the insurer’s setting of the premium. He simply stated the name of his former physician, which equals authorization to consult his medical file, they summarize.
The Court of Appeal also found that the insurer was not obliged to conduct a complete investigation of the medical file provided by the policyholder. In addition, proof established that the holder was aware of his medical past and that the information he did not disclose was pertinent to setting the premium.
When he replied to the questionnaire attached to the insurance application in July 2007, the 67-year-old smoker omitted to mention a vascular problem, namely angioplasty performed on his right leg in 1992. “Instead he answered no to the question of whether he had already been treated for a vascular or circulatory heart condition,” the Court of Appeal judges maintain. The policy holder also did not mention that he had been referred to a cardiovascular surgeon in December 1991 because he had difficulties walking and poor blood circulation in his right leg.
The insured died of cancer on April 13, 2009. After an investigation, Empire Life refused to pay the benefits. “If Mr. Tremblay’s application had contained precise and complete answers, we would not have approved it,” the insurer argued.
The doctrine submitted to the Court, however, cites cases where the insurer could be bound to take the investigation further when the application is submitted. In Commentaires sur le droit des assurances et textes législatifs et réglementaires, Professor Patrice Deslauriers discusses this principle.
“An insurer is bound to go further in gathering information on the assumption that the policyholder is sharing ambiguous or equivocal information. Note that this exception must be analyzed in light of the words of the Supreme Court, which stated that ‘I do not see how an insurer can be expected to make inquiries based merely on clues which might be present in the facts provided by the insured.’ It is then recognized that the insurer has an obligation to get informed to correct its inexperience caused by poor knowledge of the market it serves.”
Deslauriers added that the spontaneous duty of information imposed on the insured remains well anchored in Quebec law.