Life insurance is almost a necessary product. We buy life insurance on ourselves or others to protect and prevent our beneficiaries from suffering financially – while they are suffering emotionally. There is no doubt that if we pass away unexpectedly, we would want to ensure that our loved ones are not saddled with serious financial issues such as paying debts alone; we need to give our loved ones financial recovery because we are no longer around to contribute to shared expenses; we need provide financial support to our dependents; we need to help cover funeral costs; ensure that our children’s education expenses are paid and to help pay off estate taxes.
When you are dealing with the loss of your loved one, the last thing you need is a fight with an insurance company that you trusted and dutifully paid premiums to over many years. Your loved one purchased a life policy to protect you in the event of his or her death – and now, in a time or grief and need, the insurance company is giving you a problem on the payout.
It is important to understand that life insurance companies often refuse to pay life insurance claims, hoping that you, as the beneficiary will not pursue the matter or take some reduced payment to avoid a legal conflict. Too often, grieving families must turn to hiring an Ontario denied life insurance lawyer in order to make sure that the withholding of payment is not wrongful or unlawful and to hopefully, in the end, get the life insurance payments that they deserve.
Life insurance policies are called “non-indemnity policies” in the sense that they involve payment upon occurrence of an event, as opposed to indemnity policies where there must be a loss or exposure for the insured.
“Life insurance” is statutorily defined as insurance by which an insurer undertakes to pay money upon the death or other evidence or contingency dependent on human life at either a fixed or determinable time or for a term dependent on human life. Life insurance may include accidental death insurance and disability insurance.
Life insurance essentially “risk pooling”. Today, when something insured is destroyed or lost, such as a car, house or human life, your insurance company should pay you the value of that economic benefit to help compensate you for your loss. Even though life insurance can’t replace your loved on who has died, the money that you receive can ease the economic hardship of your loss, rather directly or indirectly.
Just as only a very small amount of buildings burn down to the ground in a year, only a relatively small percentage of individuals will die during a given year – statistically speaking. Actuaries for insurance companies have developed actuarial systems over the years that predict the changes of such loss occurring. Although actuarial systems cannot foresee when a person will suffer a loss, they can predict with extra-ordinary accuracy how often a loss will occur. This enables our society to pool, or share risk of loss. Essentially, if each person contributes a fair and small amount every year – the total of those contributions are deposited into a reserve fund from which a few individuals who have lost loved ones can be reimbursed.
At the time of a payout, insurance companies mostly deny payments based on something called non-disclosure or misrepresentation. What does this mean?
It means that when negotiating the contract, the parties involved must fully and accurately disclose to each other everything relevant. The life insurance applicant is not entitled to draw the insurance company into a contract by withholding information which, if known, might cause a change of mind. This distinguishes insurance contracts from most other types of contracts which allow the parties to keep silent on any matter, however relevant to the transaction, unless asked about it
Understandably, the greater part of the burden of this obligation to disclose falls on the person applying for insurance. In buying a life insurance policy, the person is essentially transferring the risk of a particular loss to the insurance company. The insurer company will usually only accept that risk if it judges the likelihood of a loss occurring to be relatively low. Even if it agrees to underwrite the risk, the amount of the premium will vary with the likelihood of a loss occurring – i.e. more risk the higher the premium.
It is therefore important to the insurance company that it is never misled about facts on which the likelihood of loss may turn. For example – imagine that a person is applying for fire insurance. The insurance company is in essence, being asked to accept the risk that the person’s house will burn down will be interested in the materials from which it is built, activities conducted in it, the existence of smoke detectors, its proximity to a fire station, the state of the wiring and so on. But some of these facts are known only to the customer. If they are not disclosed, the insurance company may not discover the truth until after loss has happened. That is why the person applying for insurance has a duty to disclose all relevant matters as well as to respond truthfully to any questions asked – if he or she does not, then the life insurance payment can in fact be denied.
Simply put, a person applying for life insurance must disclose all matters within his or her personal knowledge that are vital to determining the nature and extent of the risk. This duty applies even in the absence of questions from the insurance company. Whether the failure to disclose is deliberate or inadvertent is irrelevant.
When information is disclosed at the time of application, it must be full and accurate. Thus, in addition to the duty to disclose, there is a duty, common to all contracts, not to misrepresent either directly or by partial omission.
The test for determining if a fact is relevant (or “material”) is really an objective one in the sense that the fact must be such that a prudent insurer would take it into account in either deciding whether to accept the risk or in adjusting the premium.
However, the test also has a subjective element. If an insurance company would not have acted any differently had it known the non-disclosed fact, even if other “prudent” insurers would, it may not rely on the customer’s non-disclosure of the fact as a reason for turning down a claim. But an insurer’s failure to ask about a matter does not necessarily mean it does not consider it to be relevant. However, some recent cases have undermined the strictness of this approach by holding that an insurer may only raise the defence of non-disclosure if it has told the insured what it considers to be material.
In all written statements, including the application for life insurance, and in any medical examination, the applicant must disclose everything they know that is relevant to the insurance they were applying for. The test of relevance is that applied by the “reasonable insurer”. Some things, such as the insured person’s medical history, age and occupation easily satisfy this test. Other things may be regarded as relevant by some, but not all, insurers. If a particular insurer shows it considers a fact to be relevant, the objective, reasonable insurer test will be satisfied unless the insured can show otherwise.
The insurer may only use non-disclosure or misrepresentation to nullify the coverage within two years from the date the contract came into effect (or was reinstated if the coverage had lapsed) unless there was fraud.
If the misrepresentation on the application is fraudulent (meaning an intentional lie) there is no time limitation within which the insurer can void the contract. However, if the misrepresentation is not fraudulent (such as the applicant forgets an important fact”) the provincial statutes contain an “incontestability” provision stating that the policy, on a basis other than fraud, cannot be voided where the policy has been in effect for two years.
If an applicant fails to comply with the duty to disclose in life or accident and sickness insurance, the insurer (if it discovers the discrepancy within the two-year period) is entitled rescind the life insurance contract. For group insurance, the coverage can be terminated only for the person guilty of the misstatement or non-disclosure.
We understand that the denial of a life insurance payment in Ontario can be terribly devastating to the surviving beneficiaries. If the deceased is a bread winner in the family, it is only life insurance payment that offers a guaranteed sum of money to the dependents of the deceased to help them re-adjust to the unexpected financial insecurities. Life insurance benefits are often denied for various reasons, including non-disclosure of pertinent health information to the insurance company, policy lapse for non-payment, suicide, arguments that the deceased was not insured at the time of his/her death, misrepresentation, fraudulent misrepresentation or negligent misrepresentation.
If your insurance company has denied your claim for life insurance benefits and/or have told you that they would have not insured the deceased after the fact, please contact our life Insurance lawyers for more information. It is not very often that and insured actions or intentions are deliberate enough to void a life insurance policy or influence an underwriter’s opinion as to the risk that the insurance company is incurring.
It is important to consult with experienced life insurance lawyers who will evaluate your life insurance claim and fight for the benefits you are due. We are based in Hamilton and clients throughout Ontario. You can reach us no matter where you are in Ontario by calling us at 1-844-LALANDE (525-2633) or local in the Hamilton / Burlington / Niagara areas at 905-333-8888. You can also speak to our live chat operator who will assist in setting up a free consultation. Alternatively you can send us a private email through out website. We would be happy to assist you and provide you the best possible legal advice and options to assist with your situation.
Our life insurance lawyers don’t charge for the initial consultation and we represent most of our insurance clients on a contingency-fee basis. This means that you won’t owe us anything unless we recover money from the insurance company through a settlement or litigation.