Legal Alert: NS Court of Appeal Agrees - Insured’s Misrepresentations in Application Were Fraudulent
November 12, 2013
By Michelle Awad, QC, at McInnes Cooper
On November 8, 2013 the NS Court of Appeal upheld a decision that a disability insurance policy is void from the get-go because of the insured’s fraudulent misrepresentations in his application form. Furthermore, the insured was not totally disabled because of Bipolar II disorder during the time the insurer paid him benefits under the policy – and he had to repay them. The decision is of significance to insurers:
- Full Disclosure. It emphasizes that insureds must disclose fully in insurance application forms.
- Fraud Inference. It shows that a court can infer fraud where an insured fails to make full disclosure in his application and his excuses for that failure are not credible.
- Weight of IME Opinions. It reinforces the importance of an IME doctor’s opinion – even when it differs from the treating doctor’s views.
McInnes Cooper’s Michelle Awad, Q.C., Jeff Aucoin, and Sara Mahaney represented the successful insurer at the trial and the appeal.
Mr. Walsh sued Unum for additional LTD benefits under an individual disability policy after Unum discontinued benefit payments based on an IME doctor’s opinion that Walsh could work. Unum asked the Court to declare the policy void ab initio because Mr. Walsh did not disclose material information about his medical history on the policy application he completed in 1993 – including a history of headaches and migraines, epilepsy and seizures, anxiety and stress – which Unum learned about during discovery. Unum also counterclaimed for return of the $125,000 worth of benefits it paid over 20 months on the basis Mr. Walsh was not totally disabled when it paid them.
The NS Supreme Court dismissed Mr. Walsh’s claim and granted Unum’s counterclaim. Mr. Walsh appealed to the NS Court of Appeal – which confirmed the Supreme Court’s decision:
- Actual Fraud. The incontestability provisions of the NS Insurance Act, which form part of the policy, applied so Unum had to prove that Mr. Walsh’s misrepresentations were “actual fraud” – not just “an innocent or negligent material misrepresentation”. This was no easy feat since the trial was 18 years after Mr. Walsh filled-out the policy application. The Court decided it was not believable that Mr. Walsh forgot the undisclosed medical history, he was not credible, and he made the false representations knowingly, without belief in their truth, or recklessly. The Court confirmed that the policy was void ab initio.
- Bipolar II Disorder Not Disabling. Mr. Walsh had the burden of showing he was unable to carry out the important duties of his regular occupation because of Bipolar II disorder. The Court decided Mr. Walsh engaged in the same activities during the period of alleged disability as he would have in the course of his occupation. It preferred the opinion of Unum’s IME doctor over that of Mr. Walsh’s treating psychiatrist, and gave little weight to the evidence of several other treating medical practitioners who said Mr. Walsh could not carry out the important duties of his regular occupation because those practitioners were unaware that he was engaged in business activities while he claimed to be disabled. The Court ordered Mr. Walsh to repay the benefits Unum paid him.
Mr. Walsh subsequently asked the Supreme Court of Canada to hear his appeal of the NS Court of Appeal’s decision. On July 24, 2014 the Supreme Court of Canada denied his request, dismissing his application for leave to appeal with costs.
Click here to read the NS Supreme Court’s decision in Walsh v. Unum.
Click here to read the NS Court of Appeal’s decision in Walsh v. Unum.
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.
McInnes Cooper has prepared this document for information only; it is not intended to be legal advice. You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.
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