The late Donald Farb called his insurance company to renew his travel insurance policy before his trip to Florida. Mr. Farb spent about half an hour with a telephone representative from Manulife to complete the insurance application. He said “no” to a variety of questions regarding his medications and pre-existing conditions. Thereafter, the travel policy was issued on the basis of the information provided by Mr. Farb, and Mr. Farb went on his trip. While he was in Florida, Mr. Farb was unexpectedly hospitalized and he incurred over $130,000 (USD) in hospital expenses. Manulife later denied Mr. Farb’s claim for reimbursement and took the position that his policy was voided on the grounds of misrepresentation. Mr. Farb died before his insurance claim was resolved and his Estate commenced a court application to continue Mr. Farb’s dispute with Manulife.
In considering the Estate’s application, Justice Belobaba of the Ontario Superior Court of Justice reviewed the first principles of the Insurance Act and how the Act is designed to protect both the insurer and the insured. While insurance companies are protected by the insured’s duty to disclose, and the right to void coverage if there was a failure to disclose or misrepresentation, the consumer is protected by the requirement that the application process be done in writing so that the consumer will have the opportunity to review the information provided and to make any necessary corrections before the policy takes effect.
Justice Belobaba found that Manulife’s application process satisfied the requirements under the Insurance Act. He found that there was no issue with the telephone service provided by Manulife and the way that information is collected verbally from the applicant because the completed application form is emailed, in writing, back to the applicant for verification. The emailed and mailed copy of the insurance policy also contained a multitude of warnings asking the insured to review their policy carefully before traveling and that “the policy is void in the case of fraud, attempted fraud, or if you conceal or misrepresent any material fact in your application”.
As evidence before the Court, Justice Belobaba was provided with an audio recording of Mr. Farb’s telephone call with the insurance representative, and a copy of the materials that were emailed and mailed to Mr. Farb. Justice Belobaba found that Mr. Farb had two months to review his answers to the medical questions that were asked of him, and there was no evidence that Mr. Farb ever contacted Manulife to correct his answers, which was sufficient to conclude that Manulife was within its rights to void the policy.
The Estate’s application was dismissed, and you can read the full reasons for decision in Estate of Donald Farb v. Manulife, 2020 ONSC 3037, by clicking here.
Travel insurance should always be top of mind before travelling. It is a good idea to reach out to your insurance company and review your existing policy and the information contained in the underlying application before you go, especially under the present circumstances with COVID-19. The issue of whether testing and medical care for COVID-19 will be covered while abroad is important to consider before any travel plans are finalized.
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A recent decision from the Royal Court of Jersey was recently discussed here with respect to a beneficiary’s right to disclosure from a trust. This blog by lawyers from Ogier is an insightful read on this particular area of trust law.
According to the authors at Ogier, M v W Limited and Others was a case that considered a beneficiary’s broad request for documents, such as copies of all trust instruments, latest accounts, financial statements for the corporations owned by the trust, and details about all past distributions from the trust. While Court’s decision was grounded in an interpretation of the relevant Jersey legislation, some of its commentary remains instructive for those of us who practice outside of Jersey.
In M v W Limited and Others, the nature and immediacy of the beneficiary’s interest is salient to the inquiry. For example, a contingent beneficiary may not be entitled to as much disclosure as a beneficiary who is entitled to the assets of the trust at that point in time. By extension, it is also relevant to consider whether the disclosure at issue would negatively affect another class of beneficiaries as well as the proportionality of the request.
As for the law in Canada, I have blogged on a recent Supreme Court of Canada decision about a trustee’s duty to disclose the existence of a trust to the beneficiaries. Justice Brown for the majority in Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, has stated the following at paragraph 19,
“In general, wherever “it could be said to be to the unreasonable disadvantage of the beneficiary not to be informed” of the trust’s existence,  the trustee’s fiduciary duty includes an obligation to disclose the existence of the trust.”
This notion of whether a beneficiary would be unreasonably disadvantaged by the non-disclosure is important to keep in mind because the right to disclosure is grounded in a beneficiary right to hold trustees accountable and to enforce the terms of the trust.
Practically speaking, issues of disclosure often leads to a request for the trustee to commence an application to pass accounts. While the trustee will have the benefit of a court order approving his/her administration for that period (if and when Judgment is obtained), an application to pass accounts must be served on all beneficiaries with a contingent or vested interest pursuant to Rule 74.18 of the Ontario Rules of Civil Procedure. In turn, these beneficiaries will have the right to object to the trustee’s accounts and seek relevant disclosure from the trustee in the course of this process.
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We all know that lawyers have a duty to hold client information confidential – it’s one of the foundations of our legal system. But estates are a special matter. If we follow the letter of the law regarding confidentiality, a drafting lawyer would be unable to release the testator’s will following their death.
To overcome this potential problem, the common-law has developed what is known as the “wills exception” to the rules regarding confidentiality between a lawyer and their client. The “wills exception” lets the drafting lawyer divulge the existence and contents of a will to those with an interest in the estate. Easy – problem solved.
Of course, not all estates are straightforward, and matters can get complicated if a will is contested. During an estate dispute, many third parties may request that a drafting lawyer divulge certain information about the deceased’s estate planning. The purpose is to find information that can help shed light on the deceased’s true intentions in relation to their estate.
Since deceased individuals can’t speak for themselves and explain intentions or waive their rights, caselaw has made it clear that the estate trustee may step into the shoes of the deceased and waive confidentiality or privilege. However, the group of individuals who may have the drafting lawyer waive privilege or confidentiality could be quite diverse, including beneficiaries, next of kin, and potentially even creditors of the deceased.
Since it’s unlikely that this group of individuals will speak with one mind in an estate dispute and collectively decide to waive privilege or confidentiality, a lawyer who is faced with the issue of releasing confidential information or documents should seek the consent of all parties with a financial interest in the estate before releasing such documents. And in some cases, the drafting lawyer may wish to seek the guidance of the court on the issue of what, if any, documents they should release.
For a detailed discussion of the issue of solicitor client privilege in an estate context, this paper reviews many of the key cases.
Disclosure rules for trusts
The cases related to trusts are many, but a few rules have emerged in relation to disclosure duties related to trust arrangements.
- Disclosure to a beneficiary: As a general rule, the beneficiaries of a trust may, on reasonable notice, require the trustees to produce for their inspection any trust document that the beneficiaries wish to see.
- Disclosure to a discretionary beneficiary: While a discretionary beneficiary is entitled to view trust documents, they are not entitled to see any documents or information pertaining to why the trustee did (or did not) exercise their discretion in the trust.
- Trustee obligation to inform: Generally, there is no positive obligation on the part of a trustee to give unsolicited information to beneficiaries. There are some exceptions however – most notably with minor beneficiaries. A trustee of a trust in which there are minor beneficiaries has a positive obligation to inform the minor beneficiary of the existence of the trust once they come of age, and to show the trust deed and any other relevant documentation that explains or sets out the basis of the trust.
For a more detailed examination of disclosure rules relating to trusts, this paper discusses many of the leading cases in this area. Thanks for reading.