More and more; people are purchasing insurance or renewing their insurance policies over the phone. This can relate to car insurance, mortgage insurance, life insurance, disability insurance, critical illness insurance, health/medical insurance. It doesn’t matter what type of insurance it is; the reality is that we are placing more emphasis on purchasing these policies over the phone.
An important decision came across my desk when it comes to the purchase or renewal of insurance over the phone. It’s an important read for anyone. The decision is Estate of Donald Farb v. Manulife et. al., 2020 ONSC 3037; the entirety of which can be read by clicking the link here.
The decision was written by the Honourable Justice E. Belobaba who is one super duper smart Judge. Ready his decision doesn’t require a law degree to understand. It’s easy to read and makes sense to lawyers and non-lawyers alike.
So, if you’re buying insurance; no matter the type over the phone; here’s what you need to know from this decision:
The Plaintiff Donald Farb called Manulife to renew his annual travel insurance. He had done so for years. He intended to travel to Florida and needed medical coverage. This is not out of the ordinary as many snow birds and travelers purchase travel insurance over the phone in the event of medical emergency while out of the country. Our point is that everyone does this sort of thing.
The telephone conversation with the Manulife Insurance representative lasted around 27 minutes. It was recorded and the Judge had the opportunity to listen to the conversation. The Honourable Justice Belobaba commented that the Manulife rep was “polite and professional. There was no evidence of any high-pressure or unfair sales practices. There is no evidence of lack of understanding on the part of Mr. Farb. He was an extremely capable and successful businessman and he had purchased this very travel policy in the very same way in the four previous years.”
Once the policy had been purchaed, Mr. Farb travelled to Florida where he was unexpectedly hospitalized and incurred $134,479 USD (approx $178,556 CDN) in hospital expenses. That’s a pretty big medical bill. And that’s why people get insurance before they travel. When the claim was submitted to Manulife, the insurer took the position that the policy was voided because according to Mr. Farb’s medical records; the answers which he provided during the phone interview were not correct. Specifically; they allege that he misrepresented about whether or not he had been prescribed or was taking six or more medications and about whether he was being treated for a kidney disorder.
Mr. Farb commenced litigation against Manulife for payment under the policy.
Manulife was successful in their its defence.
In analyzing the case, the Honourable Justice Belobaba went back to basics and examined the relevant provisions of the Insurance Act stating:
“The Insurance Act is designed to protect both the insurer and the insured. The Act protects the insurer by imposing a duty of utmost good faith and full disclosure on the part of the insurance applicant and by prescribing a significant sanction for failure to do so. This is made clear in s. 308:
Duty to disclose
- (1) An applicant for insurance … shall disclose to the insurer in anyapplication,on a medical examination, if any, and in any written statements or answers furnished as evidence of insurability, every fact within the person’s knowledge that is material to the insurance …
Failure to disclose, general
(2) … [a] failure to disclose, or a misrepresentation of, such a fact renders a contract voidable by the insurer.
Given the significance of the sanction for misstatement, the Act protects the consumer/applicant by requiring the insurer to provide a copy of both the policy and the application to the insured….. The reason for the written application requirement is to provide the applicant with an opportunity to review the application and make any corrections, here to the medical answers, before the representations take effect and become a basis for possible cancellation.
In the phone interview, the Manulife Rep was very clear to Mr. Farb, stating:
- If you’re not sure how to answer any question, please consult with your family doctor. Any incorrect answers to any of the medical questions I’ m about to ask you will render your coverage null and void and will result in the non-payment of any claim.
- So, Donald, you understand that applying for coverage under this policy, it is your responsibility to be aware of all of your medical conditions and that all your answers to all the questions in this application must be true up to and including the time of your application for this insurance. If at the time of claim it’s discovered any question is not answered truthfully and accurately, it will result in the non-payment of any claim, your policy will be null and void, and your premium will be refunded. You represent that the answers to the medical questions are accurate.
Mr. Farb acknowledged both of these statements in the affirmative, indicating his acceptance of the terms of an understanding of the statements.
After the policy was entered in to over the phone, Manulife sent a follow up letter to Mr. Farb along with a copy of the policy stating:
“Please review the accuracy of these responses as well as the other details of your trip as they relate to your insurance coverage. It is your responsibility to be aware of all your medical conditions and ensure that each answer to each question in your application is true. If you are uncertain of any answer to any medical question, please consult your doctor to be sure you answered the question correctly. Please note that any material misrepresentation of your health status will render the insurance voidable and result in non-payment of any claims arising from your trip. [Emphasis added.]”
And again in another letter stating:
[Y]our plan was issued based on your answers to the enclosed Medical Questions. Please review the Medical Questions carefully and call us immediately at 1-800-268-3763 between 8:00 a.m. and 8:00 p.m. E.S.T., Monday to Friday if there are any discrepancies. If any of the answers to the Medical Questions are untrue or incorrect, then any coverage offered will be null and void …
Please review your responses to each question. It is your responsibility to be aware of all your medical conditions, to ensure that your answer to each question is true, and to read and understand the benefits, limitations, conditions and exclusions (including those related to pre-existing medical conditions) or the Manulife Travel Insurance policy that apply to your coverage and whose terms will prevail. If, at the time of claim, it is discovered that any question was not answered truthfully and accurately and there is material misrepresentation, it will result in the non-payment of any claim; your policy will be null and void; and your premium will be returned.…
You understand that in applying for coverage under this policy it is your responsibility to be award of all your medical conditions and that all your answers to all the questions in this application must be true up to the time of your application for this insurance. If, at the time of claim, it is discovered that any question is not answered truthfully and accurately, it will result in the non-payment of any claim; your policy will be null and void and your premium will be refunded. You represent that the answers to the medical questions are accurate. [Emphasis added.]
The Honourable Justice Belobaba concluded that their telephone application process and subsequent correspondence complied with the law. They were allowed to declare that the policy was void because Mr. Farb’s answers over the phone did not correspond with what was contained in his medical records or his health condition at that time.
It’s not uncommon for insurance companies to deny claims for these reasons across many different areas of insurance. We often see it for critical illness, disability and life insurance claims. More often than not, the applicant doesn’t know what’s contained in his/her medical records. That’s why it’s important to consult a doctor once you have the policy to ensure that the answers you’ve provided are accurate so you can notify the insurer about any necessary changes. But the applicant should be knowledgeable about what medication(s) which s/he is taking at the time the policy is entered in to. It’s a standard question for the insurer to ask about medication and the applicant ought to know. The applicant also ought to make a list of the doctors which s/he has seen over the past 6-12 months so that they’re making full and open disclosure. Keeping information from an insurer will likely have a devastating impact on whether or not the claim gets approved. One of the easiest outs for an insurer to deny a claim is cross referencing the insurance application/questionnaire with medical records. If the applicant on the questionnaire states that they are not taking any prescription medication and don’t have a heart, kidney, lung etc condition; but the hospital and medical records paint a completely different story; the claim will be denied 10 out of 10 times.
Let this case be a warning as to what can happen in the event that full disclosure is not made to an insurer during the application process. Even extremely capable personal injury lawyers cannot turn back time and change the facts of a case to make it work in their client’s favour.