Is Refusing to Renew Coverage a Breach of Human Rights?

The insurance industry will be astounded to learn that refusing to renew coverage on grounds of “moral hazard” can constitute discrimination under the Human Rights Code and result in compensation awards against the insurer for injury to the insureds’ "dignity, feelings and self-respect". This is exactly what happened to ING Insurance in a October 21, 2004, decision of the B.C. Human Rights Tribunal.

The complainant was a foster parent. The foster child in her care intentionally caused damage to her home.

At the time the damage occurred, the complainant was insured under a standard homeowners policy issued by ING. Like all such policies, it excluded loss or damage resulting from the intentional acts of any insured. Hence the loss in this particular case was excluded and was properly denied.

The B.C. Ministry of Children and Family Development had arranged a form of secondary insurance coverage for foster parents which actually provided a form of coverage for intentional damage caused by foster children. The insurer under that program eventually responded to the loss.

ING did not know that the complainant was a foster parent nor did they know that the complainant also had secondary insurance for intentional property damage. When they learned of the situation they decided they would not renew coverage and therefore wrote to the complainant’s insurance broker stating "Please be advised we will not be able to offer renewal on the above client’s homeowners insurance. This risk is a moral hazard and we ask that you re-market it for the April 26, 2003 renewal."

The complainant ultimately learned of the "moral hazard" characterization, felt she was being wrongly discriminated against on account of her status as a foster parent, and therefore laid a complaint under Section 8 of B.C.’s Human Rights Code which provides:

The matter proceeded to a hearing before the B.C. Human Rights Tribunal. The complainant represented herself and ING was represented by a senior executive with many years experience in the industry.

At the hearing, ING explained there were three factors taken into account in deciding not to renew the insurance:

1. the fact the complainant was only 8 months into the first term of coverage and was not a long term, loyal customer of proven reliability;
2. intentional damage had been caused to her property; and
3. the fact that the insured had a secondary insurance policy which was very rare and raised something of a “red flag”.

• the Act is contravened even if the discrimination is only one of several otherwise perfectly rational factors that influence the decision;
• ING did not intend to discriminate against the complainant on the basis of her family status but no such intention is actually required for the Code to be contravened so long as the decision had a "discriminatory effect";
• the first two factors relied upon by ING in its decision not to renew had nothing whatsoever to do with her "family status" and hence raised no concerns under the Code;
• but the secondary insurance policy “red flag” arose solely due to the fact that the complainant was a foster parent and that factor had a “discriminatory effect” upon the complainant;
• the “blanket application” of its standard risk assessment practices (treating secondary insurance as a red flag) “without any attempt to inquire into the individual circumstances of the particular complainant is the antithesis of the duty to accommodate” for which there was no bona fide reasonable justification; and
• accordingly, ING was guilty of discriminating against the complainant in the circumstances.

The complainant sought an apology and an order requiring ING to pay the higher insurance costs that she was now incurring as a result of being classified "high risk". The Tribunal refused to grant either order. However, the Tribunal did issue an order that ING refrain from committing the same or a similar contravention of the Human Rights Code in the future.

Lastly, even though the complainant herself did not even ask for compensation, the Tribunal on its own initiative awarded the complainant $1,000.00 for "injury to the complainant’s dignity, feelings and self-respect".

According to this ruling, the application of an insurer’s "standard risk assessment practices" accompanied by an “ unreasonable refusal to provide individual assessment” can amount to a refusal to accommodate and therefore a breach of the Human Rights Code. It does not matter a whit that, as a matter of law, an insurance company is not obliged to renew coverage. Nor, apparently, does it matter that ING had two other perfectly reasonable bases for making its decision. Frankly, the decision seems bizarre but it assuredly highlights the unexpected pitfalls that the unwary broker or insurer might encounter in today’s politically correct environment.

Readers who would like to read the ruling can access the decision on the B.C. Human Rights Tribunal Website.

Readers with any questions regarding renewal coverage are invited to contact Nigel Kent at (604) 643-3135 or npk@cwilson.com.