Claimant makes incorrect proof of loss statement: Error? or “Wilfully false”?

A claimant does not have to intend to deceive an insurance company in order to make a “willfully false statement” on a proof of loss, thus voiding the insurance policy, an Ontario court has ruled.

In Pinder v. Farmers’ Mutual Insurance, the Ontario Superior Court distinguished between “fraud,” involving an intentional act to deceive an insurer, and a “willfully false statement,” which is a test used to determine whether there was imperfect compliance in notifying an insurer about a proof of loss.

Where there is “imperfect compliance” in a proof of loss statement – a person makes an error out of inadvertence or carelessness, for example – a jury or a court may step in and prevent an insurer from denying coverage to a claimant should they deem the denial of coverage to be unjust.

But the court has no ability to step in if the claimant makes a “willfully false statement” to the insurer in the statement of loss.

In Pinder, the jury was instructed that a willfully false statement is one that a person makes:

• Knowing it to be false,
• Without belief in its truth, or
• Recklessly without caring whether it is true or not.

The case concerned a fire that destroyed a home that Joyce Pinder owned, and in which her daughter, Cindy Pinder, resided. Farmers’ Mutual denied coverage.

The Pinders asked the court to overturn the jury result, which found that the Pinders used portable electric heaters as a main heat source, which may have caused the fire. Another central element of the case deals with the difference between honest errors and willfully false statements to insurers in proof of loss statements.

Farmers’ Mutual pleaded in court that Cindy Pinder made wilfully false statements in her statement of loss regarding the personal property in the house. This constituted a breach of statutory condition 7 of the policy, which states: “FRAUD – Any fraud or wilfully false statement in a statutory declaration in relation to any of the above particulars vitiates [voids] the claim of the person making the declaration.”

Pinder argued that fraud requires intention to deceive, and she did not intend to deceive the insurer. But the insurer did not plead fraud, and was “adamant about this at trial,” the court noted. Instead, the insurer pleaded only that Cindy Pinder made wilfully false statements.

If fraud is not pleaded, a claimant’s intent to deceive an insurer is not required to establish whether or not the person makes a willfully false statement, the court ruling noted.

The evidence in the case turned on several items claimed in the home fire, including a fur coat that Cindy Pinder stated was in the front closet. The insurer disputed the claim and said there was no evidence of a fur coat in the remnants of the closet. When asked for proof, Pinder was unable to provide receipts of purchase or anything showing proof of ownership.

At trial before a jury, the insurer expressed skepticism that she could have bought the coat. The insurer had access to Pinder’s tax return and noted that she was on social assistance at the time.

In the end, the court did not accept Pinder’s argument that her statements were simply errors, representing imperfect compliance. The court declined to overturn the jury result, which Pinder claimed was perverse.

“It was open to the jury to believe some, none or all of Cindy Pinder’s evidence,” the court ruled. “It was open to the jury to find that Cindy Pinder shut her eyes to the facts or purposefully refrained from inquiring into them. It was open to the jury to find that she made statements recklessly without caring whether they were true or not. The jury did not have to find that Cindy Pinder intended to deceive the insurer in order to come to its conclusion.”