Failure to disclose a Medical Condition can result in a voided Insurance Claim

An insurance contract is an agreement that requires both the insured person and the insurer to approach the contract with good faith.  The concept of good faith encompasses the beginning of the relationship when an insured takes out a policy as well as later, when the insurer agrees to extend coverage for a claim.  The requirement of ‘good faith’ means that insureds must act in good faith in disclosing all relevant facts to the insurance company when they apply for insurance, which entails fully disclosing all pre-existing health conditions.

Remember that your insurance rates and fees are based on an assessment of your health, as determined by factors such as your age and medical history.  If an applicant misleads the insurance under-writer about their health, the insurer doesn't have the correct information to properly access risk and the associated costs of insuring you.   Even when an insured suppresses health or other information by mistake and without the intention to defraud, the under-writer has still been deceived and there is a risk that the policy may be voided.

For these reasons, it is extremely important not to leave anything out, particularly in terms of your medical history, when providing required information on your insurance application.  After all, the whole point of an application for life insurance, health or long-term disability insurance is to have this benefit available when you need it, so it’s important to be honest so that you don’t risk a denied claim due to a failure to disclose.

In Fernandes v. RBC Life Insurance Company, the Ontario Court of Appeal had to decide a case where a man’s long-term disability insurance claim was denied by RBC because he did not fully disclose his medical history on his application. This case involves a man who became disabled due to acute meningitis, which caused him to be unable to return to his job as a carpenter. He subsequently applied for long-term disability benefits but when RBC investigated his medical history, as insurers are want to do when someone files a claim, the insurer found that the plaintiff had not disclosed medical complaints and checkups for hip and back pain. As a result of his failure to disclose these details on the questionnaire that is part of the application, RBC voided his policy for non-disclosure and declined to pay his claim for long-term disability coverage.

The plaintiff testified that he fully disclosed all ‘serious’ medical issues and that the information regarding his back complaints was not ‘material’ or relevant to his disability claim due to meningitis.  The Court of Appeal, however, held that there is nothing to support the idea that a plaintiff must disclose only ‘major’ or ‘serious’ medical issues and treatments.  The plaintiff was obligated to reveal all information within his knowledge that may be relevant to the insurance for which he was applying.  As such, the Court ruled in favour of the insurer and dismissed the plaintiff’s appeal.

Of course, the concept of good faith works both ways and requires that when an insured has submitted an application for insurance and paid their fees in good faith, then the insurance company must honour their claim to pay owed benefits.  In a landmark case, Whiten v. Pilot Insurance Company, the insurance company denied a family’s claim for home insurance after their house burned down and they lost all their possessions.  The insurer, for years, denied their claim with accusations of arson, despite overwhelming evidence that the fire was accidental.  And when their own adjuster recommended payment of the claim, the insurer replaced the adjuster.  The loss of their house without coverage left the family in dire straits.  An Ontario Court ruled that the insurance company breached their obligation to act in good faith and ordered the insurer to pay the claim as well as punitive damages in the amount of $100,000.

In the interests of obtaining the best rate possible, some people are tempted, if not to lie, to at least exclude information that they believe places them in a higher risk category and will result in higher premiums.  However, this is never a good idea.  Insurance companies are very adept and experienced in investigating the medical history of claimants and it’s highly unlikely that your failure to disclose full and accurate information won’t be discovered and result in denial of your claim. 

Unfortunately, it is also not uncommon for insurance companies to deny legitimate and deserved claims, and when this happens, your chance of successfully resolving the case is much greater if you are represented by a skilled personal injury lawyer. The highly respected Kitchener-Waterloo Injury Lawyers of Ontario affiliates have proven success and experience in representing clients in insurance disputes.  Call us today to find out how we can help you get your owed benefits.