On February 3, 2023, in Bolduc v. SSQ Assurance, 2023 QCCS 266, the Superior Court once again reminded the insurance industry that strict compliance with the rules governing the drafting of exclusion clauses, particularly in the case of suicide, is essential to avoid unfortunate consequences for insurers.
The facts in dispute
On November 23, 2006, François Roch (“Roch“) purchased a $1.5 million “T-10” life insurance policy (“T-10 Policy“) from SSQ Insurance (“SSQ“), expiring on November 22, 2016. As the expiration date approached, he met with his insurance broker and agreed to purchase a new “T-20” term life insurance policy (“T-20 Policy“), effective October 23, 2016.
The T-20 Policy, like the T-10 Policy, contains a clause in the “General Provisions” section that excludes insurance coverage in the event of suicide within two years of the policy’s inception:
SUICIDE
“If, during the two (2) years following the effective date of any coverage, the insured dies by his or her own hand or act, whether of sound mind or not, the obligation of the Company shall be limited to the payment of a death benefit equal to the refund of premiums paid for such coverage, without interest.” [translation]
On February 19, 2018, less than 16 months after the new effective date, Roch took his own life under sad circumstances.
The Superior Court was called upon to determine whether the exclusion clause was valid and enforceable against the beneficiaries of the insurance policy.
Exclusions must be grouped under an appropriate heading
The Court first recalls the requirements of article 2404 C.C.Q. :
In insurance of persons, the insurer may invoke only the exclusions or clauses reducing coverage that are clearly indicated under an appropriate heading.
In analyzing the history surrounding its adoption, Justice Lalonde concludes that the legislative objective of this provision is to facilitate the identification of exclusion and reduction of coverage clauses for the policyholder.
This provision must be read in conjunction with article 2441 C.C.Q., which provides as follows:
The insurer may not refuse payment of the sums insured by reason of the suicide of the insured unless he expressly stipulated that coverage would be excluded in such a case and, even then, the stipulation is without effect if the suicide occurs after two years of uninterrupted insurance.
Any change made to a contract to increase the amount of coverage is, as regards the additional amount, subject to the initially stipulated exclusion clause for a period of two years of uninterrupted insurance beginning on the effective date of the increase.
According to the judge, this provision recognizes the legitimate interest of insurers in protecting themselves against a policyholder who would purchase insurance with the sole intention of carrying out a suicide plan.
Nevertheless, the fact remains that this “express exclusion of coverage” must be listed under an appropriate heading that clearly indicates all exclusions and reductions of coverage. The reader of the insurance policy must be able to read the policy and be confident that all exclusionary clauses are grouped under one heading, without having to look elsewhere in the policy.
In this case, the suicide clause is found in the “General Provisions” section of the T-20 Policy. Its wording does not refer to an exclusion, but to a limitation of the indemnity payable and it is not included in the separate section that groups the other exclusion clauses.
The essence of the warning required by the legislator in article 2404 C.C.Q. is therefore not respected and the clause is null and void, even if it is clear, unambiguous and not abusive.
The continuity of the insurance contract is a matter of context
In order to determine whether the suicide occurred within the first two years of the insurance (art. 2441 C.C.Q.), the court must determine whether the T-10 Contract was continuous or replaced. In order to do so, Justice Lalonde recalls that he must conduct a contextual analysis to determine the intention of the parties.
Among other things, the court noted the following:
- The two contracts are identified by different policy numbers;
- Roch did not take advantage of the option provided for in the T-10 Contract to convert it to a life insurance policy;
- The replacement notice signed by Roch clearly indicates that he wishes to replace his T-10 policy in order to subscribe to the new T-20 policy;
- The replacement notice explains that this decision sets the clock back to 0 with respect to the two-year period provided for in the suicide and incontestability clauses;
- Roch signed a new insurance application with the title “cancellation and full internal replacement” of the T-10 Contract;
- In order to be insured for 20 years under a renewal of the T-10 Policy, Roch would have had to pay premiums corresponding to more than twice what he had to pay for his T-20 Policy.
In light of these circumstances, the Court concludes that SSQ and Roch had the unequivocal intention, at the time of the subscription, to proceed with the complete cancellation of the T-10 Contract in favour of the T-20 Contract.
Since there is a break in the temporal continuity between the two contracts, Roch’s death by suicide did not occur after more than two years of uninterrupted insurance with SSQ. This is of no consequence, however, since the exclusion clause is null and void.
Interest begins to accrue within 30 days of receipt of the justification
Finally, the Court recalled that in matters of personal insurance, the insurer must pay the insurance indemnity upon receipt of the supporting documents, as provided for in article 2436 C.C.Q. :
The insurer is bound to pay the sums insured and the other benefits provided in the policy, in accordance with the conditions of the policy, within 30 days after receipt of the required proof of loss.
However, in accident and sickness insurance, the period is 60 days, unless the policy covers losses of income arising from disability.
In this case, the documentation, was transmitted on June 18, 2018. Although a coroner’s report was missing, the court held that SSQ could obtain any missing information or documentation through the authorization signed by the estate administrator.
As a result, on July 19, 2018, SSQ was in default by operation of law to pay the $1,500,000 insurance indemnity, which marked the starting point for the computation of interest and additional indemnity on that amount.
