A decision by the Ontario Superior Court highlights the importance of correctly answering health-related questions on insurance applications.
Be careful to tell the truth when you’re filling out an insurance application, or it could hurt you in the long run.
A top Ontario court has ruled that a woman cannot claim a $97,500 life insurance policy because the application by her late partner contained inaccurate information about his health.
This decision by the Ontario Superior Court again highlights the importance of correctly answering health-related questions on insurance applications. You may think you are protected once a policy is issued, but that is not the case. This is because the insurance company might only check the details when you make a claim.
In August, 2005 Karen Cheetham and John Foreman applied to TD Canada Trust to increase their home equity line of credit from $36,500 to $97,500. They planned to pay off some debt and finance renovations. The credit line was approved that October following an appraisal.
On Nov. 1, 2005, they applied for a life insurance policy that would pay off the credit line if Foreman died. The form asked if he had seen a doctor or been treated within the previous 24 months for a specific list of conditions. He answered no. In fact, he had several health problems on the list that had been identified by his doctor within the previous two years, including elevated cholesterol and asthma.
The application also asked whether in the same period Foreman had been denied life or critical illness insurance, or had to pay a higher premium because of his health. Again, he answered no. But a later investigation by TD Canada Trust revealed that Transamerica had issued a life insurance policy at higher than normal premiums because of his health problems.
Foreman died from brain cancer on October 12, 2007, which was unrelated to any of the incorrectly answered health questions. However, TD Canada Trust refused to pay the policy proceeds because his death occurred within the 24 month “contestability period” after he completed the application.
Had Foreman died three weeks later, after the 24-month period, the proceeds would have been paid, according to the policy provisions.
Cheetham sued the bank and represented herself at the trial. She testified that when Foreman filled out the insurance application he told Ingrid Forrest, their banker, he was uncertain whether his problems had been diagnosed within the previous two years. Cheetham said they were told not to bother confirming the time frame because there had already been too much delay.
Judge Robert Maranger preferred Forrest’s evidence that had there been any uncertainty, she would have told him to answer yes to the questions on the health questionnaire. The Judge also accepted evidence from the bank’s underwriters that the application would have been rejected if the true state of Foreman’s health had been revealed. He characterized this as a case of misrepresentation, but not a fraudulent act.
In an August 2013 decision, Maranger refused Cheetham’s claim for the $97,500 and allowed the bank to claim its court costs from her.
Cheetham is appealing the decision.