Following a summary trial, the appellant, the BCAA Insurance Corporation ("BCAA"), was found liable under a homeowners' policy it issued to the respondents, who are joint spouses, to compensate them for the complete loss of fire from their house and its contents on Mayne Island, BC. The BCAA issued the policy on March 8, 2016. The fire occurred on December 4, 2016. In Nagy v. BCAA Insurance Corporation, Court of Appeal for British Columbia, Docket: CA462032020 BCCA 270, October 7, 2020 the insurer questioned a decision by the judge who found that it was liable under an insurance policy issued to the respondents.
The appellants rejected the claim on the ground that the insurance policy was invalid due to a significant change in the risk and incorrect information and omissions made by the respondents at the time of issuing the insurance.
The Court of Appeal concluded that the insurer's state of knowledge was more important than the applicant's good intentions and argued that they did not intend to deceive. If the BCAA had had the right information when the bound coverage, the court found, it may have changed its decision to take out the risk. as omissions rather than misrepresentations, thus applying increased scrutiny of the evidence that required evidence of fraudulent intent. The insurer did not present sufficient evidence to establish a fraudulent intent for the insured. had an insurance been canceled or not renewed was in fact a misrepresentation, which would invalidate the policy. Consequently, the Court of Appeal overturned the decision of the trial judge and sent the case back to the trial court for a new trial.
This decision confirmed that the obligation to be in good faith is central to insurance contracts referring to Carter v. Boehm decided in House of Lords 1766.
Insured must disclose all material facts relating to a risk , and a false statement of an essential fact will not be easily excused as the omission of material information may be. While an insurance company has the right to expect material facts to be fully disclosed, the court's interpretation of "misrepresentation" and "omission" is consistent with their ordinary meaning. The Court of Appeal's decision allows greater predictability for insurers when deciding whether an insurance policy is legally invalid if the insurer can prove an actual misrepresentation rather than an innocent omission because a charter requires proof of fraud for omissions but not for misrepresentations.
Appeal was allowed; the decision which was set aside and concluded that the judge erred in finding one of the respondents' answers to the application for failure to act rather than an erroneous submission, which error was manifest and compelling.
Our neighbors in the north apply the cancellation of an insurance in a unique way, due to a charter that limited the marine rule first established by Lord Mansfield in Carter v. Boehm (1766), 3 Burr 1905 97 ER 1162 which established the rule of utmost good faith in insurance transactions. Misrepresentation was obvious while the concealment of the two previous losses was visible, but could not be proved to be fraudulent. In California and other states that apply the old naval rule is misrepresentation or concealment that effectively deceives the insurer, even if done innocently or in good faith, to repeal the policy. Canada requires that negligence be proven fraudulent while it does not require the same for misrepresentations.
© 2021 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice to working as an insurance consultant specializing in insurance coverage. , handling of insurance claims, unfaithful insurance and insurance fraud almost equally for insurers and policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
For the past 53 years, Barry Zalma has devoted his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following libraries with books and other materials to enable insurers and their claims staff to become insured.
Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Zalma on Twitter at https://twitter.com/bzalma ; Go to Barry Zalma videos on Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/ posts; and Read the last two issues of ZIFL here.