Abbas v Esurance Company of Canada, 2023 ABCA 36
Reading Time: 6 minutes (approx.)
By: Weston McArthur (Articled Clerk)
Mr. Abbas (“the Plaintiff”) was involved in a motor vehicle accident as a passenger where the driver was uninsured. He made claims for Section B benefits and SEF No. 44 benefits, but in his Section B application, he made false statements.
The Insurer applied for summary judgement on the basis that the Plaintiff was barred from making claims for Section B benefits and SEF No. 44 benefits due to the false statements he made in his Section B application. The Insurer brought the summary judgement pursuant to section 554(1)(b) and (c) of Alberta’s Insurance Act, RSA 2000, c I-3. This provision provides:
(b) the insured contravenes a term of the contract or commits a fraud, or
(c) the insured wilfully makes a false statement in respect of a claim under the contract.
a claim by the insured is invalid and the right of the insured of the insured to recovery indemnity is forfeited.”
The New Brunswick equivalent is section 229(1)(b) and (c) of the Insurance Act, RSNB 1973, c I-12.
The issue at hand was that section 554 of Alberta’s Act was not clear on whether a fraudulent statement made by an insured that is material to a claim under one part of an insurance contract vitiates all claims made under that contract.
To come to its decision, the Court investigated why section 554 was originally enacted. It found that section 554 represents the codification of the common law rule on fraud with respect to insurance contracts. Justice Watson explained that “[t]he idea that contracts of insurance mandate a special kind of good faith on the part of both the insured and insurer is firmly entrenched in the common law going as far back as 1776. This notion reflects the information deficit under which the insurer, as opposed to the insured, operates” [para 84]. To deal with the information gap that exists between the two parties, the common law provided an answer in the form of the fraud rule. That is, “false statements in a claim vitiate coverage” [para 87].
Justice Watson cautioned that not all false statements will deny an insured coverage. He wrote that “[n]ot only must an insurer prove on the balance of probabilities that the insured knew the information the insured provided was false or was reckless, it must also prove that it was material to one of the claims” [para 91].
Justice Watson concluded by discussing whether section 554 alters the common law’s use of the materiality concept. Stated differently, the Court asked whether the provision changed the common law’s stance that a fraudulent statement made by an insured that is material to a claim under one part of an insurance contract vitiates all claims made under that contract. He held that it did not. Justice Watson explained that the “there is a presumption that a statute changes the common law only ‘when that disposition is clear’” [para 108]. This “onerous test” was not met here [para 109]. Writing for the Alberta Court of Appeal, Justice Watson held that all claims were vitiated.