This summary does not constitute a legal opinion. The information it contains may not reflect the current state of the law.
By Me Jean Rivard, LL.L., PAA, inspecteur, Chambre de l’assurance de dommages
Under the Civil Code of Quebec (s.2408 and 2409), insureds are tasked with an important duty: the obligation to disclose. However, insureds are not necessarily aware of everything insurers take into consideration when underwriting a risk.
In two recent decisions, the courts dealt with an insured’s obligation to declare his criminal record, analysing both the concept of a “normally provident insured” and the absence or presence of any issues that are deemed complex and are related to having a criminal record.
If you want to find something out, it’s important to ask questions.
In November 20121, the Superior Court analysed the decision of an insurer that refused to compensate an insured for damages caused by a fire on the grounds that the insured had not disclosed his criminal record for growing marijuana. The insured had pled guilty to the charge in February 2005; the building fire occurred in May 2008.
In this case, no one challenged the insurer’s allegations: an offence such as the one the plaintiff admitted to having committed less than two years before the insurance policy was issued could indeed have influenced the decision of an insurer “offering regular products” to accept the risk or not. However, the Court felt that the case was actually one of determining whether a “normally provident insured” had to disclose his criminal record “on his own initiative”. Furthermore, according to the Court, the reasons given by the insurer to explain the “absence of questions regarding the criminal record”—essentially to avoid “indisposing” clients—seemed “very weak, given the prejudice the citizen would suffer as a result of being refused compensation”.
The Court accepted the part of the insured’s testimony where he explained that he had not seen any link between his conviction for growing marijuana, which he had ceased doing and would never do again, and his application for insurance coverage. The insurer’s arguments based on moral risk (revenge, settling of scores, etc.) and physical risk (modification of the electrical system), were dismissed due to time elapsed and the absence of any conclusive evidence.
The Court ordered the insurer to pay $338,000—the value of the burnt building and its contents.
When the Insured Hides His Record
In December 20122, the Quebec Court analysed the decision of an insurer that had refused to compensate an insured for damages to his vehicle in July 2011. The insurer’s refusal was based on the insured’s failure to disclose his lengthy criminal record. The analysis dealt with the notion of the normally provident insured, but this time in light of a question including both “both criminal and civil” record. Despite the grammatical complexity of the question, the court concluded that the individual’s record was so serious, recent and of such frequency that “a provident insured” would have understood that he should have at least mentioned his guilty pleas for the most egregious issues, namely the events that occurred between May and October of 2007” (theft of an Interac machine, possession of a device intended for use in committing forgery, possession of a fake or forged credit card, non-compliance with the terms of probation and possession of cannabis).
The Court therefore decided to declare the policy null and void and the insurer was only required to reimburse the premiums collected.
The Presumption of Innocence
Though most decisions dealing with criminal records concern criminal convictions, what happens when the charges have yet to be ruled upon (pending cases) at the time the insurance application is made or during the term of the insurance policy?
In December 20123, the Quebec Court handed down a decision based on section 2466 C.C.Q. (aggravation of the risk during the term of the policy), ruling that the insured was justified in not disclosing the administrative suspension of his driver’s licence and the charge of impaired driving. When the application for insurance was made in March 2007, the insurer asked about a criminal record and “pending cases”. The policy was subsequently automatically renewed without this being asking again. In January 2008, the insured was arrested for drunk driving and was handed a 30-day administrative suspension of his driver’s licence. His vehicle was stolen on November 20, 2008.
The Court applied the “presumption of innocence”, especially since the plaintiff “sincerely believed he was innocent to the point of challenging this charge three times” and the fact that he was only convicted after making the insurance claim. The court referred to a previous decision in which it was ruled that a pending charge is not the same as a criminal record and that “in the absence of any issues”, an accused is “presumed innocent as long as he has not been found guilty”.
The Court took into consideration the plaintiff’s age (at 16, he was a minor at the time of the acts: s. 153 and following, C.C.Q.) as well as his lack of experience in order to justify his not having understood the importance of the questions the insurer asked and the importance of disclosure “during the term of his insurance contract”.
Finally, the Court ordered the insurer to pay the sum of $10,000—the value of the vehicle on the day of the loss.
In order to avoid policy cancellation when a loss occurs, we recommend that the damage insurance representative act as a conscientious advisor and make his clients aware of the importance of disclosing one’s criminal record and the possible consequences of non-disclosure. At the time of publication of this article, another decision had just been published.
In Bergeron c. Compagnie mutuelle d'assurance Wawanesa, 2013 QCCQ 2777, the judge ruled that the insured was not required to investigate whether or not her new spouse had a criminal record and notify the insurer; consequently, she did not fail to declare any factors that increased the risks stipulated in the home insurance policy (s. 2466 C.C.Q.).
1. Loranger v. Lloyd’s Canada Compagnie d’assurances et al., 2012 QCCS 6266.
(Notice of appeal, 200-09-007929-125)
2. Barakat v. La Compagnie Mutuelle d’Assurance Wawanesa, 2012 QCCQ 15979.
3. Guignard v. Compagnie Mutuelle d’Assurance Wawanesa, 2012 QCCQ 16297.
Translator's note: Words, phrases and sentences in quotation marks are unofficial translations.