Clark Wilson LLP Insurance Bulletin
Case Law Review Archive
Living in a Material World
It is, as the song suggests, a material world and none more so
than in the context of issuing insurance policies. The British
Columbia Supreme Court has again emphasized the importance
of the obligation placed on an insured to notify the insurer of a
material change in risk.
In Lucow v. Canadian Direct Insurance 2004 BCSC 1525 the
insured had obtained an optional excess automobile policy
with Canadian Direct Insurance (“CDI”). Mr. Lucow suffered
from epilepsy which, at the time of the original application, had
been successfully medicated and under control for a number of
years. However, during the application process no questions
were asked about Mr. Lucow’s medical condition. After the initial
application Mr. Lucow experienced a recurrence of seizures and
was advised on two separate occasions by three different
neurologists that he ought not to drive. Mr. Lucow did not
advise CDI of the recurring seizures or doctors' advice.
On March 24, 2002 contrary to his doctor’s instructions, Mr.
Lucow drove his automobile and was involved in a multi-motor
vehicle accident. Upon the claim being reported to CDI Mr.
Lucow’s epilepsy and intervening seizures were discovered and
CDI voided the Policy returning all premiums paid.
The Policy contained both the standard statutory material change
in risk wording as well as a plain language version that provided:
1.4 Your Responsibilities
If you fail to meet your responsibilities, claims under
this
policy may be denied.
By accepting this contract you agree to the following conditions:
1.4.1 You will notify us promptly in writing of any significant
change of which you are aware in your status as a driver, owner,
or lessee of a Described Automobile. You will also promptly inform
us of any change that might increase the risk of an accident or
affect our willingness to insure you at current rates. You will
promptly inform us of any change in information supplied in your
original application for insurance, such as additional drivers, or a
change in the way a Described Automobile is used.
CDI maintained that the medical advice not to drive constituted a
material change in the risk Mr. Lucow posed as a driver and had they
been aware of such prohibition they would have cancelled the Policy.
Mr. Justice Groberman adopted the test for materiality from Panajim
Developments v. Laurentian Pacific (1992) 12 CCLI (2d) 29 (BCSC):
Whether a change is material to the risk is a question of
fact in each case. The question is: if the change had been
disclosed would it have influenced a reasonable insurer to
either decline to continue the insurance or to have stipulated
for a higher premium
It was noted that a number of factors assist the Court in
determining materiality and this includes the questions asked by
an insurer at the time of placing insurance. However, the insurers
failure to ask questions is only one of the factors to be considered
and was found not to be determinative of the materiality of a
subsequent change.
Mr. Justice Groberman ultimately held that the “materiality of the
change in Mr. Lucow’s medical condition is patent” and was a material
change in risk and consequently the action against CDI was dismissed.
Neo Tuytel and Krista Prockiw of Clark Wilson LLP represented
CDI in this matter.
A copy of the Lucow case can soon be accessed on the BC Courts
website at:
http://www.courts.gov.bc.ca
Readers with any questions about the Lucow case or coverage issues
generally, are invited to contact Krista Prockiw at
kxp@cwilson.com (e-mail) or
604-643-3105 (direct dial), or Neo Tuytel
njt@cwilson.com
or 604-643-3180 (direct dial).
