Court Finds Omissions on Medical Questionnaires Sufficient for Finding of Fraud
The following decision is important since it establishes that the onus is on a prospective insured to make full disclosure of any prior illnesses or injuries that would have an impact on an insurer’s decision to grant coverage. Any omission by the prospective insured in this respect could very well lead to a finding of fraud and a reversal of coverage.
In the March 10, 2008 Quebec case of Falduto v Federated Life Insurance Company of Canada, Falduto had made an application in 1992 to double his life insurance coverage. As part of this application Falduto also applied for disability insurance. Formerly, Falduto had instituted an application for disability coverage in 1991 where he revealed treatment for a back injury that caused him to miss time at work within the last ten years. This information was also disclosed on his 1988 application for life insurance. However, before the 1991 disability coverage could be considered Falduto withdrew his application.
When Falduto reapplied for disability coverage in 1992 he did not fill out the medical information section on the new application. A nurse came to Falduto’s house to do some tests and required Falduto to also answer a health questionnaire. When asked if he had ever missed days of work or been disabled from an accident or illness in the previous ten years Falduto answered, no. The disability Policy was subsequently issued to Falduto and in Falduto’s name. In July 1995 and April 1996, Falduto had accidents for which he received disability benefits in the amount of $2,000 a month for a total of 14 months.
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At trial Falduto attempted to explain the omission in informing the nurse of his 1984 injury by claiming that since it was a continuation or relapse from the 1981 accident that he did not consider it to be within a ten year period. The Court was not persuaded by Falduto’s testimony and found that his statements were a deliberate attempt to mislead in order to be approved for coverage. The Court also rejected Falduto’s argument that the 1991 application, subsequently withdrawn, which did disclose the leaves of absence, should have been recognized as making full disclosure of his illness.
The Quebec Lower Court granted judgment in favour of the insurer by denying the plaintiff continued disability benefits and also ordering the plaintiff to repay the benefits issued by the insurer. The decision was upheld by the Quebec Court of Appeal and leave to appeal was denied on September 4, 2008 by the Supreme Court of Canada.
