In a recent case, the estate of a deceased man attempted to challenge an insurer’s denial of medical coverage based on the insurer’s telephone call with the deceased.

Deceased Obtains Insurance Over the Phone

Before travelling to Florida, the deceased, an 84-year old man, had telephoned his insurer from his home in Toronto to renew his travel insurance policy. During the 27-minute phone call with the insurance representative, the deceased had answered “no” to questions about prescribed medications and pre-existing health conditions. The requested travel policy was issued and the deceased then travelled to Florida.

While in Florida, the deceased was unexpectedly hospitalized and incurred $134,479 (USD) in hospital expenses. His claim for reimbursement was denied by the insurer on grounds of misrepresentation. The insurer claimed that the travel insurance policy was voided because, according to the deceased’s medical records, the answers he had provided during the telephone interview – about whether in the last four months he had been prescribed or was taking six or more medications and whether he was being treated for a kidney disorder – had not been correct.

The deceased passed away before he could pursue the matter further.

The deceased’s estate brought an application to continue his claim for reimbursement of the $134,479 (USD) in hospital expenses.

Parties’ Position on Statutory Condition

The main focus on the application was the interpretation of Statutory Condition 2, a provision that is prescribed by s. 300 of the Insurance Act, which was also set out as an express term in the insurance contract.

Statutory Condition 2 provides that:

“No statement made by the insured or person insured at the time of application for this contract shall be used in defence of a claim under or to avoid this contract unless it is contained in the application or any other written statements or answers furnished as evidence of insurability.”

The deceased’s estate argued that the insurer could not rely on any of the “no” medical answers provided by the deceased at the time of application to deny coverage unless these answers were contained “in the application or any other written statements or answers furnished as evidence of insurability.”

The insurer argued that a proper and contextual interpretation of Statutory Condition 2 does not require a written application and fully allows a telephone application. It also adduced expert evidence that the most common purchase method for travel insurance is by telephone because it is easy and convenient and has quickly become an accepted and normal insurance industry practice.

Court Denies Estate’s Claim

The court began by explaining that the Insurance Act (the “Act”) is designed to protect both the insurer and the insured. It stated that the Act protects the insurer by imposing a duty of utmost good faith and full disclosure on the part of the insurance applicant and by prescribing a significant sanction for failure to do so. Specifically, s. 308 of the Act states:

Duty to disclose

308. (1) An applicant for insurance … shall disclose to the insurer in anyapplication,on a medical examination, if any, and in any written statements or answers furnished as evidence of insurability, every fact within the person’s knowledge that is material to the insurance …

Failure to disclose, general

(2) … [a] failure to disclose, or a misrepresentation of, such a fact renders a contract voidable by the insurer.

The court stated that the real issue was not whether the deceased purchased the travel insurance via a telephone application process but whether as part of the telephone application process he was provided with a written copy of his application for review and correction before the policy took effect, stating:

“It was enough, in my view, that the insurer provided [the deceased] with a copy of his written application and gave him ample opportunity to review and advise of any corrections before the insurance policy took effect. […]

[The insurer] prevails on this application because its current telephone application process complies with the “written application” requirements in Statutory Condition 2 – as part of the application process, a written version of the application was emailed and mailed to [the deceased] for his review and correction before the policy took effect.”

As a result, the estate’s application for reimbursement of the Florida hospital expenses was dismissed.

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