On July 11, in Bourdages v. Ivari, 2023 QCCS 1688 (CanLII), the Superior Court considered the impact of an undisclosed change in the state of health of an insured taking out a life insurance policy, which occurred between the submission of the application and the effective date of the policy.
Background to the dispute
On June 22, 2016, the plaintiff Rose-Anne Bourdages and the late André Jolicoeur completed a life insurance application with Ivari to cover the balance of their mortgage.
On October 12, 2016, Ivari delivered to them a 10-year term life insurance policy in the amount of $200,000. The policy stipulates, among other things, that the policy will take effect only if their insurability has not changed between the date of application and the date the policy is delivered.
It wasn’t until December 14, 2016, that the financial security advisor delivered the policy. At that time, they signed a delivery receipt confirming that all information provided in the application was still true and complete, and that there had been no change in their state of health or insurability. They also declare that they have not consulted a physician or received any examination or treatment since the application.
The evidence shows that on December 5, 2016, prior to the police delivery, the late André Jolicoeur consulted his family doctor and complained of a persistent cough. The latter prescribed a blood test and X-rays, which revealed, “pulmonary hyperinflation suggestive of chronic obstructive pulmonary disease”. She then ordered a spirometry test to check his lung function. This examination, which took place on December 28, 2016, proved to be normal. The cause of the cough was never identified.
At the same time, another, more serious medical condition was discovered. Indeed, on December 15, 2016, the late André Jolicoeur again consults Dr. Bourget in connection with a pain in the epigastric hollow that persisted for several months, which gave rise to a series of medical tests. Sadly, on February 1, 2017, a biopsy revealed advanced cancer attacking the lymph nodes around the esophagus.
On August 31, 2017, the late André Jolicoeur died of cancer. The plaintiff, a beneficiary under the policy, filed a claim with Ivari.
Following an analysis, Ivari refused to pay the indemnity, declared the life insurance policy null and void and refunded the insurance premiums paid since its inception.
The testimonies of Ivari’s representatives and its underwriting expert confirm that, before accepting the policy, it would have waited for the results of the examinations prescribed by Dr. Bourget, with a view to making a final diagnosis. Although no definitive diagnosis was made in connection with the respiratory difficulties, the digestive system difficulties appeared quickly, and the diagnosis of cancer would have led to the refusal of insurance.
Disclosure of Material Circumstances
The Court recalled that insurance contracts are based on the insurer’s highest degree of confidence in the insured, considering that the insurer depends on the accuracy of the information provided. In accordance with articles 2408 and 2410 C.C.Q., insureds are therefore obliged to disclose all material circumstances likely to influence their insurability, failing which they expose themselves to the nullity of the policy. This is an objective test, assessed according to the fictitious standard of the “reasonable insurer”.
Moreover, when the death occurs less than two years after the date of delivery of the policy, as in this case, the insurer does not have to prove fraudulent intent in order to declare the insurance null and void.
In this case, the Court found that the late André Jolicoeur made a false declaration when the policy was delivered on December 14, 2016. He stated that he had not seen a doctor since the application. He also declared that statements made in the application are still true. However, the initial application included questions on medical follow-ups, difficulties with the respiratory or gastrointestinal system and examinations undergone, all of which he answered in the negative. By the time the policy was delivered, these answers had become inaccurate.
The Impact of Non-Disclosure of Changes in Insurability
Recalling what the Court of Appeal said in Assurance-Vie Desjardins Laurentienne v. Poirier-Wilson, 2003 CanLII 32938 (QC CA), Judge Dufresne explains that, since no diagnosis is made, the false declaration does not deprive the insurer of any material information, at least at the time it is made. However, it does deprive it of the alarm signal that would trigger an investigation, which could eventually lead to the discovery of a medical condition of this materiality.
In this case, the Court concluded that had Ivari (or the “reasonable insurer”) been made aware of the ongoing medical follow-up for the late André Jolicoeur’s pulmonary and gastro-intestinal condition, it would have been justified in delaying its decision until the diagnoses were confirmed. The late André Jolicoeur was clearly uninsurable until a diagnosis was made. However, the late-stage esophageal cancer with metastases that was ultimately discovered constitutes a material fact justifying Ivari’s decision to deny the risk. Judge Dufresne therefore rejected the plaintiff’s claim and declared the insurance policy void ab initio.