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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Occasionally in litigation, an innocent party will get caught in the crossfire between two litigants that have made competing claims to property held by the innocent party. The classic case is that of an insurance company in possession of the proceeds of an insurance policy, the benefit of which is claimed by two parties.
The insurer may not necessarily be a party to the litigation between the two claimants, but they are nonetheless implicated given that they hold the coveted payout. What is the insurer to do? Enter the interpleader motion.
The interpleader motion is a powerful yet rarely utilized tool that can be used by an innocent party to essentially extricate itself from a proceeding in which competing claims have been made against property held by that party. Rule 43.02 of the Rules of Civil Procedure provide that a party may seek an interpleader order in respect of personal property if,
(a) two or more other persons have made adverse claims in respect of the property; and
(b) the first-named person (being the “innocent” party),
(i) claims no beneficial interest in the property, other than a lien for costs, fees, or expenses; and
(ii) is willing to deposit the property with the court or dispose of it as the court directs.
In other words, the interpleader motion permits a party to seek an order from the court allowing that party to deposit, with the Accountant of the Superior Court of Justice, the property against which the adverse claims are being made. However, that party must not have any beneficial interest in the property being deposited, although they are entitled to have any legal fees in bringing the motion, and other reasonable expenses, paid out of that property.
Some cases have opined on whether the court hearing the interpleader motion has an obligation to assess the likelihood of success of one or both of the claims to the property at issue. In Porter v Scotia Life Insurance Co, for example, the court considered whether, notwithstanding that one of the competing claims was “without strong foundation and built upon hearsay and suspicion”, it nonetheless held that the claim was “not frivolous” and granted the interpleader order.
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We’re lucky in Canada – our healthcare system pays for doctor bills and hospital visits, and many employer-sponsored benefit plans provide for supplementary health insurance. Even better, universal care is actually expanding in places, such as the recent introduction of free pharmacare for those age 24 and under in Ontario.
But don’t get lulled – there are costs to healthcare. With our comprehensive public coverage, it can be easy to think that your costs will be covered if you were in an accident or experienced a serious illness. But many of us simply aren’t aware of what won’t be covered. For example, out-of-pocket costs could include loss of income (especially if you are self-employed), expensive uninsured prescription drugs and medical supplies, childcare during recovery, or even home renovations to accommodate the illness. And psychological therapy fees represent another potential cost, as mental illness is one of the leading causes of disability in Canada.
So, what can you do to ensure that you are financially prepared for a sudden, serious bad health event? Here are three options to consider:
- An emergency fund/line of credit: You may need access to cash quickly if a health emergency arises and having a “rainy day fund” for unplanned or unexpected expenses is ideal for that purpose. A line of credit also serves this purpose, although it involves taking on debt and all the costs that that entails.
- Disability insurance coverage to replace income: Disability insurance replaces a portion of your income if you are unable to work due to an illness or disability. Disability policies vary widely, so even if you have coverage at work, it’s worth checking whether additional personal coverage could be beneficial.
- Critical illness insurance to cover other costs: This insurance provides a tax-free lump sum benefit upon the diagnosis of a serious illness, such as cancer, heart attack, stroke, blindness, paralysis, kidney failure and multiple sclerosis. Unlike disability insurance, the payment is not linked to your inability to return to work, and you have complete freedom to use the money any way that you wish, including paying for treatment outside of Canada that may not be covered by provincial healthcare.
Of course, rule number one is to stay healthy. But in the event you don’t, be prepared financially. A little planning can go a long way.
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For many Canadians, one or more life insurance policies represent an important component of an estate plan. If a policy cannot be honoured as a result of the cause of the insured’s death, this may completely frustrate his or her testamentary wishes.
The terms of life insurance policies typically address the issue of whether a beneficiary will be entitled to the insurance proceeds in the event that an individual commits suicide. Policy terms typically include a restriction as to the payout of the policy if the insured dies by his or her own hands within a certain of number of years from the date on which the policy is taken out (most often two years).
With the decriminalization of physician-assisted death, there was initially some concern regarding whether medical assistance in dying would be distinguished from suicide for the purposes of life insurance. The preamble to the related federal legislation, however, distinguishes between the act of suicide and obtaining medical assistance in dying.
As mentioned by Suzana Popovic-Montag in a recent blog entry, the Canadian Life and Health Insurance Association suggested in 2016 that, if a Canadian follows the legislated process for obtaining medial assistance in dying, life insurance providers will pay out on policies that are less than two years old. Since then, the Medical Assistance in Dying Statute Law Amendment Act, 2017 has come into force to provide protection and clarity for Ontario patients and their families. This legislation has resulted in amendments to various provincial legislation, including the Excellent Care for All Act, 2010, a new section of which now reads as follows:
…the fact that a person received medical assistance in dying may not be invoked as a reason to deny a right or refuse a benefit or any other sum which would otherwise be provided under a contract or statute…unless an express contrary intention appears in the statute.
The amendments provided for within the legislation introduced by the Ontario government represent an important step in the recognition of physician-assisted death as a right that is distinguishable from the act of suicide. They also confirm the right of individuals who access medical assistance in dying to benefit their survivors with life insurance policies or other benefits.
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Other blog posts that may be of interest:
Today on Hull on Estates, Natalia Angelini and Rebecca Rauws discuss the decision in Sun Life v Nelson Estate, 2017 ONCA 4987, and beneficiary designations for insurance policies.
Should you have any questions, please email us at email@example.com or leave a comment on our blog.
This week on Hull on Estates, Natalia Angelini and Stuart Clark discuss options that may be available to help protect a trustee when drafting a Will or Trust.
The common law slayer rule makes the law in Canada clear that committing murder will prevent a person from inheriting the estate of the victim. For clarity, the accused must be found guilty and exhaust all of their rights to appeal before the courts will void a testamentary gift or beneficiary designation.
In the cases of Helmuth Buxbaum and Peter Demeter, who were found guilty of murdering their wives, the court refused to allow the men to benefit from their crimes by collecting the proceeds of their wives’ insurance policies. Pursuant to the case of Demeter v British Pacific Life Insurance Co.,  OJ No 3363, a criminal conviction will be accepted as proof of criminal activity in civil cases. Therefore, a person who has been convicted of murder cannot argue in civil court proceedings that he or she is innocent and capable of accepting a testamentary gift.
Recently, in Minneapolis, an individual named Michael Gallagher killed his mother, and around a year later, is attempting to obtain her life insurance proceeds. According to an article in the Toronto Star, bedbugs were infesting the apartment of Mr. Gallagher’s mother, and he believed that she would be evicted from her home, and decided to “send her to heaven.” The law in Minnesota is similar to the law in Canada, and their legislation states that an individual who “feloniously and intentionally kills the decedent is not entitled to any benefits under the will.”
This case turns, however, on the fact that Mr. Gallagher was not convicted for murdering his mother. In July, a Judge found that he was not guilty due to reasons of mental illness, stating that he “was unable to understand that his actions were wrong.” This finding allows Mr. Gallagher to potentially have a claim to his mother’s life insurance policy.
In Canada, a similar finding is known as NCRMD (Not Criminally Responsible on Account of Mental Disorder). If this case took place in Canada, it is likely that Mr. Gallagher would have been found NCRMD. This raises the important question of whether an individual, who is not convicted of murder, but has killed somebody, is still able to claim the proceeds as a beneficiary a testator’s estate or life insurance.
In the case of Nordstrom v. Baumann,  SCR 147, Justice Ritchie stated, “The real issue before the trial judge was whether or not … the appellant was insane to such an extent as to relieve her of the taint of criminality which both counsel agreed would otherwise have precluded her from sharing in her husband’s estate under the rule of public policy.“ The court held that the public policy slayer rule does not apply if the individual was found NCRMD at the time of the killing. Furthermore, in the case of Dreger (Re),  O.J. No. 2125 (H.C.J.), the court held that “[the] rule of public policy [that a person found not guilty for murder] cannot receive property under the will…the only exception to this rule is that a person of unsound mind is not so disqualified from receiving a benefit under the will of a person he has killed while in law insane.“ Lastly, the recent case of Dhingra v. Dhingra Estate, 2012 ONCA 261, upheld a similar finding and allowed the NCRMD individual to apply for the deceased`s life insurance policy.
The law in Ontario seems to uphold the principle that a mentally ill individual who was unable to understand the consequences of their actions should not be automatically disentitled to life insurance proceeds.
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Other Articles You Might be Interested In
When envisioning how your life will unfold within the next few years, there is one thing you likely will not plan for – faking your own death or “pseudocide”. While faking your own death may seem like an extreme measure to try to hide from problems, it is a mechanism that some use in order to gain a large windfall (e.g. insurance fraud) or to avoid having to pay off debts.
Successfully faking a death is an unlikely and extreme example of insurance fraud. The most common cases of pseudocide involve people trying to hide from debt, hide from committed crimes, or couples. Couples commit life insurance fraud when one partner will fake their own death while the other partner is alive and able to claim their life insurance policy.
In Canada, pseudocide is not illegal per se. There is no crime in the Criminal Code for faking your own death, although actions associated with the process, such as obtaining a false death certificate or fraud, are illegal.
One Canadian example of pseudocide took place in 2004 by Jeremy Daniel Oakley. He faked his own death in order to escape criminal charges of sexual assault and sexual interference. He did this by publishing an obituary in a Halifax newspaper stating he died in Toronto, resulting in his criminal charges being stayed. He eventually was arrested for his sexual offences in Nova Scotia.
This month, a book is set to be released entitled Playing Dead: A Journey Through the World of Death Fraud. This book is written by Elizabeth Greenwood and documents her personal journey investigating the fake death “industry” and how easy it would be fake her own death and escape a $100,000.00 student loan. One highlight from this book involved the author purchasing a death certificate on the black market in the Philippines, stating she died in a car accident in Manila.
The book outlines just how far individuals may go in order to claim on life insurance policies, and interviews individuals who have tried. In one case, a couple used and cremated the body of a “local drunk” from the Philippines in order to get a death certificate immediately rather than wait for the payout from the insurance company years down the road. As per Elizabeth Greenwood, “you can go into any city morgue in almost any developing country, ask to see the unclaimed bodies, and cry…they’ll be happy to get a body off their hands.”
Another case in the United States involved a man faking a drowning in order to attempt to collect a policy worth $410,000.00. The perpetrator’s ex-wife eventually tracked him down through his e-mails. In another case, a man was caught for faking his own death when he repeatedly checked a website that was based on his disappearance.
While pseudocide is not common and is usually unsuccessful, it is a small and interesting branch of fraud.
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This week on Hull on Estates, Natalia Angelini and Umair Abdul Qadir discuss life insurance in the context of two articles, namely, “That’s Life Insurance” by Michael Grob, published in the June 2016 edition of Step Journal (http://bit.ly/29Yoc3Z) and “Charitable Donations: A Summary of Tax Considerations” by James M. Parks, published in the Canadian Donors Guide 2016/17 (http://bit.ly/29SAkAF).
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
As the population continues to age and individuals are living longer, healthier lives, various demographic changes are developing.
One trend among seniors in good health is to spend several months of the year travelling abroad. Such activity was historically limited to wealthier members of the population, who could afford to retire early and/or take long periods of time away from work. However, according to a recent article in the Daily Mail, more and more British seniors are spending their retirements travelling and are funding the expeditions by what is referred to as “S.K.I. – Spending the Kids’ Inheritance”.
A new BBC series called the Millionaire’s Holiday Club follows older travellers as they explore the world with ITC Luxury Travel Group. While there is clear desirability behind spending money that would otherwise form assets of one’s estate on travel, some of the individuals credit other reasons as motivation for spending more money than they otherwise might on vacations. Some participants of the television series wish to leave their children an inheritance sufficient to allow for financial security, but not so large that it discourages them from working to earn a living and funding their own luxurious travel. Others report that they choose to travel as a way of remaining independent as they age.
For some seniors, travelling without a travel insurance plan risks incurring significant healthcare costs in a foreign jurisdiction. Due to costs that typically increase with age, travel insurance may be less accessible for older individuals who choose to travel, and especially those who have experienced serious or chronic health conditions. Depending on age and medical history, travel insurance simply may not be an option, and should be a serious consideration of a senior in deciding whether or not to travel. While there is nothing wrong with enjoying oneself by frequent travel, older individuals should be careful to ensure that they retain enough money to fund their ongoing costs of living, which can significantly exceed projected costs with time and the deterioration of physical and/or mental health.
Have a great weekend.