In Nagy v. BCAA Insurance Corporation, 2020 BCCA 270, the British Columbia Court of Appeal clarified the distinction between an “omission” and “misrepresentation” on a home insurance claim, overturning a decision made on a summary trial application in the BC Supreme Court.
In 2016, the plaintiffs, who were common-law spouses, applied for coverage through BCAA Insurance Corporation. BCAA bound coverage the same day, but the plaintiffs failed to inform BCAA of two of their three prior losses, including a total fire loss in 2008. The plaintiffs also failed to advise that their previous insurer had refused to renew their last policy.
After a fire occurred in December 2016 at one of the plaintiffs’ properties, BCAA took the position that the policy was void due to a material change in risk, and to misrepresentations and omissions made by the plaintiffs at the time the insurance policy was issued.
In response, the plaintiffs alleged that they had sent an addendum to BCAA with a complete list of their losses as well as a copy of the letter from their previous insurer informing them why it would not renew the old policy. BCAA, however, denied having received these documents.
The key issue was whether the plaintiffs’ answering “no” to questions about the existence of prior claims and the refusal of their previous insurer to renew the old policy amounted to omissions or misrepresentations. The distinction is particularly important in British Columbia as, under the Insurance Act R.S.B.C., c. 1, an insurer can void a policy if there is a misrepresentation (s. 111). An omission, on the other hand, must be fraudulent and not unintentional to void a policy (s. 112).
At the BC Supreme Court, the judge held that not disclosing the previous claims constituted “omissions,” which did not rise to the level of fraudulent misrepresentation. In addition, the judge found that one of the plaintiffs had sent BCAA a written addendum disclosing the information initially omitted and had followed up with BCAA on a subsequent phone call.
The Court of Appeal, however, noted that the insurer’s state of knowledge was more important than the claimant’s good intentions. If BCAA had had the correct information when it bound coverage, it may have changed its decision about whether to underwrite the risk. Further, the Court of Appeal found that the trial judge erred in finding that the plaintiff had contacted BCAA; in reality, the plaintiff’s call to BCAA amounted to nothing more than a voicemail message requesting a callback.
Importantly, the Court of Appeal found that, while the absence of the two claims losses on the form may have been “omissions,” the statement that they had not had an insurance policy cancelled or renewed was in fact a misrepresentation, which would void the policy. Accordingly, the Court of Appeal overturned the trial judge’s order and remit the matter for a new trial.
This decision affirms that the duty of utmost good faith is central to insurance contracts. Insureds must disclose all material facts relating to a risk, and a false statement about a material fact will not be excused easily as the omission of material information may be. While an insurer has a right to expect that material facts are fully disclosed, the Court’s interpretation of the “misrepresentation” and “omission” is consistent with their ordinary meanings, and this Court of Appeal decision provides greater predictability to insurers when deciding whether a policy is legally voidable.