Help! My insurance claim has been denied for misrepresentation!

Many private insurance plans, including critical illness policies, require you to provide information about yourself and your medical history in the form of a questionnaire or application form.  Failing to fill these out accurately may result in your insurance coverage being voided at the time you make your claim.

At common law, the insured has a duty to properly disclose the nature of the risks that are being insured.  In addition, your insurance contract will usually contain a term enabling the insurer to treat your contract as void in the case of misrepresentations.  Finally, accident and sickness policies in British Columbia are governed by the the Insurance Act. which permits the insurance company to void your policy for misrepresentation or failure to disclose.

However – if the insurance company has decided to void your policy, you might not be completely out of luck .  First, the Insurance Act and the common law only permit the insurer to void your contract if the misrepresentation is a material one.  So what does that mean?  Essentially, a material fact is one that, if the insurance company knew about it, they would have made a different decision about your insurability – usually this means a fact that they would have caused them to charge you higher premiums, or not insure you at all.    For your own reference you may want to read the Supreme Court of Canada’s decision in  Mutual Life Ins. Co., N.Y. v. Ontario Metal Products Co. [1925] 1 D.L.R. 583which provides a definition of “material” misrepresentations.

It is important to recognize that the focus is on whether or not the insurer would have insured you at the time that you applied, and not on whether your current illness or disability is related to the misrepresentation.  For example, if you failed to disclose on your questionnaire that you had a heart condition, and then later you developed multiple sclerosis, the insurance company can still deny your claim, even though the two conditions were likely unrelated.

For accident and sickness policies in British Columbia, even an innocent misrepresentation can be grounds to void an accident or sickness policy.  However, section 112 of the Insurance Act creates a kind of “grace period”: generally, this means that after the policy has been in effect for two years, the insurer can’t deny your claim for a misrepresentation unless it can show that your misrepresentation was fraudulent.

If you do find yourself in the position where an insurance company has denied your claim based on misrepresentation, you should seek legal advice immediately.  There are strict time limits in the Insurance Act  which can prevent you from suing the insurance company if you do not do so in time.

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