Court allows insurer to reject claim without obligation to void or cancel policy

The Ontario Court of Appeal has confirmed that if an insured fails to disclose a material change in a risk to a commercial insurance policy, the insurance company may reject the claim without being obligated to void or cancel the policy instead.

In Patriquin v. Great Lakes Forest Products, the Great Lakes Forest Products

company had an automobile fleet insurance policy with the Dominion of Canada General Insurance Company. The decision notes that Great Lakes failed to disclose a material change in the risk, “namely, that they had employed and would have as one of their drivers an individual with a record for impaired driving.”

The driver was involved in a serious accident and Dominion denied coverage. Great Lakes argued if the basis for denial of coverage is a failure to disclose a material change in the risk, the insurer cannot deny coverage but is required to void or cancel the policy instead.

“We are unable to find any support for that proposition in principle, the wording of the policy, in the applicable legislation or in the jurisprudence,” the Appeal Court wrote in its decision. “We agree with the trial judge that the matter is covered by Standard OAP1 Policy.”

Section 1.4 of that policy says: “If you fail to meet your responsibilities, claims under this policy, with the exception of certain Accident Benefits, may be denied.”

The policy also states the policyholder agrees “to notify us promptly in writing of any significant change of which you are aware in your status as a driver, owner or lessee of a described automobile. You also agree to let us know of any change that might increase the risk of an incident of affect our willingness to insure you at current rates.”

The Appeal Court awarded costs against Great Lakes in the amount of $18,000.