Driver’s Deception Ends in Denied Coverage
The decision in Wong v. Aviva Insurance Company of Canada, 2024 ONSC 1111, addresses an unusual scenario involving a denial of insurance coverage after the insureds lied about who was driving the defendant vehicle.
Wong was the driver of a vehicle involved in an accident in 2019 with another driver, Robertson. Believing that her license was expired and worried that there would be criminal consequences, Wong convinced her mother Tieu to pose as the driver of the vehicle. Tieu complied and even went so far as to sign the Collision Reporting Centre report stating that Tieu was driving. Wong also posed as Tieu when calling the insurer in relation to the accident.
Tieu and Wong convinced Robertson to go along with the story to ensure she would have coverage for her damages. Robertson commenced an action as against Tieu.
At Tieu’s examination for discovery, Tieu stated under oath that she was driver. Wong stood by off screen to assist with answers. The deception was uncovered at Robertson’s examination for discovery when she made some disclosure that the defendant driver was a young woman.
At the time of the accident, both Tieu and Wong had insurance coverage on the same policy, in good standing, with Aviva. After discoveries, Aviva denied coverage to both Wong and Tieu. Aviva took an off-coverage position with respect to Tieu and was added as a Statutory Third Party to the Robertson action.
Wong brought this Application seeking a defence and indemnity from Aviva, or in the alternative relief from forfeiture. Aviva opposed the Application and brought a Cross Application seeking to be added as a Statutory Third Party to the Robertson action in relation to Wong.
The court considered the following issues:
- Was Wong in breach of her policy with Aviva?
- Did Wong’s conduct amount to civil fraud?
- Should Wong be granted relief from forfeiture?
- Is Aviva entitled to be added as a Statutory Third Party in relation to Wong?
The court found that Wong had breached the Insurance Act and the insurance policy. The relevant sections are sections 233(1) of the Insurance Act and Schedule 5(3) of the Insurance Act, which provide:
Section 233(1) of the Insurance Act provides that:
Where,
(a) an applicant for a contract,
(i) gives false particulars of the described automobile to be insured to the prejudice of the insurer, or
(ii) knowingly misrepresents or fails to disclose in the application any fact required to be stated therein;
(b) the insured contravenes a term of the contract or commits a fraud; or
(c) the insured wilfully makes a false statement in respect of a claim under the contract,
a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited.
Schedule 5(3) of the Insurance Act and Statutory Conditions – Automobile Insurance provides:
The insured shall, whenever requested by the insurer, aid in securing information and evidence and the attendance of any witness and shall co-operate with the insurer, except in a pecuniary way, in the defence of any action or proceeding or in the prosecution of any appeal.
The court was not persuaded by Wong’s argument that there was no specific “request by the insurer” to aid in securing information or to cooperate in the defence of the action. Given the facts as admitted, the court did not spend much time on this aspect of the analysis.
The court set out the test for civil fraud, as stated by the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, at paras. 86-87; Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 21. The elements are:
i) a false representation made by the defendant;
ii) some level of knowledge of the falsehood of the representation on part of the defendant;
iii) the false representation caused the plaintiff to act; and
iv) the plaintiff’s actions resulted in a loss.
The first two elements of the test for civil fraud were admitted. Upon analysis, the court found the other elements of the test were also met. The court was not persuaded by Wong’s argument that the only issue in the Robertson action was damages, and therefore that the credibility of Wong and Tieu would not impact the outcome, nor that if Wong and Tieu compensated Aviva for the costs thrown away to date, no loss will have occurred.
Reasons given by the court included that evidence with respect to the plaintiff’s appearance and conduct at the scene of the accident as well as evidence with respect to the defendant driver’s speed, sobriety, vision and more is all now of no use. Additionally, this deception expended both time and money as Aviva had retained counsel to defend the wrong defendants for over two years.
The court next set out the relevant statutory provisions and case law in relation to the equitable remedy of relief from forfeiture:
Section 98 of the Courts of Justice Act provides:
A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.
Section 129 of the Insurance Act provides:
Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
In denying relief from forfeiture, the court considered whether Wong’s actions were akin to “imperfect” compliance. Unsurprisingly, the court found that Wong’s actions went beyond mere imperfection. There is a body of case law which says that relief from forfeiture will not be available in cases involving false statements or fraudulent conduct.
Moreover, the court held that Aviva could not be returned to its original position in defending the main action because the credibility of Tieu and Wong was significantly compromised.
Wong’s Application was dismissed, and Aviva’s Cross Application was granted.
Although this decision does not seem to return an unexpected result given the facts, it does provide a clear and convenient road map for the analysis of several issues which may arise in a case of coverage denial, such as application of the Insurance Act provisions relating to false statements, the test for civil fraud, and the equitable remedy of relief from forfeiture.