In the event of a motor vehicle accident that causes injury, it is natural to want all the compensation we can possibly get to help us move forward in life. However, it is incredibly important, to be honest when dealing with insurance companies and defendants. Knowingly making a false statement or committing fraud can lead to personal injury victims obtaining less or no compensation when it is most needed. 

This article looks at the importance of telling the truth when making claims with insurance companies under automobile insurance policies. We also look at a recent decision of the Alberta Court of Appeal, in which a claimant injured in an accident involving an uninsured driver had his entire claim rejected after lying about his employment status.

Insurance Act sets out the consequences of misrepresentation and fraud

Section 554 of Alberta’s Insurance Act states that a claim by a policyholder is invalid in any of the following three circumstances:

  • the policy applicant gave false particulars of the automobile to the prejudice of the insurance company or knowingly misrepresented or did not disclose any fact required by the application;
  • the insured person contravened a term of the contract or committed a fraud; or
  • the insured person wilfully made a false statement in respect of a claim.

The impact of fraud and false statements

While the Insurance Act does not define “fraud” or “false statements,” courts have interpreted these concepts consistently for a long time. Fraud is a situation where someone knowingly misrepresents or conceals a fact to induce another to act to their detriment. Similarly, a false statement is a statement that is not true, made knowingly with an intent to mislead. 

Alberta courts have not looked kindly upon those that make false claims in an insurance context. They have even been prepared to deny entire claims where policyholders have made false statements that do not impact part of the claim. 

An example is the 1977 case of Swan Hills Emporium & Lumber Co. v Royal General Insurance Co. of Canada. In this case, the Supreme Court of Alberta decided that the owner of a hardware store that burned down was entitled to nothing under his insurance policy because he falsely said three televisions were destroyed. This was the case even though the store contents were insured up to $30,000, and the loss due to the fire, excluding the televisions, exceeded this amount. 

Injured plaintiff claimed disability benefits and under his family protection endorsement

We turn now to the recent decision of the Court of Appeal in Abbas v Esurance Insurance Company of Canada

Unfortunately, the plaintiff was a passenger in a motor vehicle driven by an uninsured driver in an accident. He was thrown from the vehicle and sustained injuries. The plaintiff sued the uninsured driver and this action was defended by the administrator of the Motor Vehicle Accident Claims program

The plaintiff also had an Alberta standard automobile insurance policy and the family protection endorsement (SEF 44). As a result, he also filed a claim for disability benefits under this insurance policy, along with a claim under the SEF 44 endorsement, to top up the shortfall in the claim resulting from the fact that the driver was uninsured. 

Plaintiff’s insurance company denied all claims after he lied about his employment status

As part of the plaintiff’s claim for disability benefits, he claimed an employment income replacement benefit by stating that he worked for his uncle’s business. He lied about this on the application form and produced a false employment certificate and hiring letter. 

His insurance company denied his claim for disability benefits because he did not qualify for them and also denied his claim under the SEF 44 endorsement because he had made a false statement. 

The plaintiff conceded that he had lied to obtain disability benefits but sued the insurance company for the SEF 44 benefits. He argued that he was entitled to receive these because his lie related only to his claim for disability benefits. 

The Insurance Act codifies the existing court cases that denied fraudulent claims

The Court of Appeal said that the Insurance Act and its predecessors had codified the law made by courts which prevented those that made fraudulent claims from recovering payments. It explained the effect of these court cases as:

“First, the insured and insurer must exhibit good faith in dealing with each other. This is true both in the pre- and post-contract stages of the insurer-insured relationship. Second, an insured who makes a wilful falsehood or engages in fraud in the course of making a claim under an insurance contract “forfeits all claim whatever upon the policy.”

Court denied the plaintiff’s claim under the family protection endorsement

The Court of Appeal decided that the reference to “a claim” being invalidated due to fraud in section 554 of the Insurance Act was a reference to all claims arising from the same event and under the same insurance contract that the insured who has made a false statement in support of a claim asks the insurance company to cover. 

As a result, the plaintiff’s lie about his employment status also relieved the insurance company of the obligation to pay him SEF 44 benefits that would have otherwise been payable. This was because the accident prompted both claims to be covered by the same insurance contract. 

Contact the Personal Injury Lawyers at Cuming & Gillespie LLP for Advice on Underinsured, Uninsured and Unidentified Claims 

Obtaining compensation following an accident with an uninsured driver or after a hit-and-run can be more difficult than following a normal car accident. The personal injury lawyers at Cuming & Gillespie LLP in Calgary are here to help you. We know how to handle your claim to position you for maximum compensation so that you avoid common pitfalls. Call us at 403-571-0555 or contact us online to book an appointment for a free consultation.