Insurance company within its right to deny claim due to misrepresentation of applicant’s health, says court

By James Langton | Investment Executive - Sept 04, 2013  

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An Ontario court has ruled that an insurance company was within its rights to deny payment of life insurance benefits to the widow of man who died of brain cancer but failed to disclose unrelated health issues on his insurance application.

The Ontario Superior Court of Justice found that TD Life Insurance Company was justified in declining to payout life insurance in connection with a line of credit at TD Canada Trust. According to the decision, the plaintiff, Karen Cheetham, claimed that she was due $97,500 from insurance on the life of her late common-law husband, John Foreman. The $97,500 is owed on a line of credit in both their names.

The company denied the claim on the basis that the application contained answers to health questions that misrepresented the true state of Foreman's health. Specifically, it says that he answered no to a question about whether he'd been informed of certain health issues within the previous 24 months, despite the fact that his doctor had warned him of elevated cholesterol and asthma. Moreover, it said that the application for insurance would have been rejected had it been properly completed.

Foreman passed away from brain cancer on October 12, 2007; which, the court noted, was unrelated to any of the health questions erroneously answered in the life insurance application. Nevertheless, it found that the company was within its rights to decline to payout on the policy.

"Regrettably, as difficult and tragic as the facts of this case are, the insurance company was within its rights to deny the claim," it said in dismissing the claim.

"The plaintiff lost her partner 23 months and 12 days after completing an application for credit line life insurance. The death of Mr. Foreman was unrelated to any of the inaccurately answered questions contained in the application for life insurance. Had he passed away a month later the insurance would have been paid out," the court found. "While it was a case of misrepresentation I certainly do not find that there was a fraud." ~