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Family who failed to inform insurer about son’s licence loses coverage

|Written By Tim Wilbur
Family who failed to inform insurer about son’s licence loses coverage
Aaron Murray of Beard Winter, who represented Allstate, says this decision highlights the importance providing updates to insurance companies.

A couple who neglected to inform their insurer that their son had a G2 driver's licence has had their policy declared void after their son was involved in an accident and they were sued by an injured party.

Zalimoon Seetaram and Lakeram Sitaram held an insurance policy with Allstate Insurance Company of Canada since 2012. At that time, their son Avinash had obtained his G1 licence and was not a named insured on the policy.

Avinash, who lived with his parents throughout the period in question, then acquired his G2 licence. Allstate sent a renewal offer to Zalimoon and Lakeram in 2013, which they signed. Avinash was then involved in a car accident with Luigi Scelsi the next month. Both Avinash and Lakeram were advised by Scelsi of his intention to sue for damages because of the injuries Scelsi allegedly suffered in the accident. Scelsi’s counsel asked Avinash and Lakeram to provide the name of the insurer, and they then advised Allstate of the accident.

Allstate then returned the premiums paid under the policy and renewal and advised Zalimoon and Lakeram that the policy was void because they had failed to disclose that their son was an operator of the vehicle.

“That change in risk was material to Allstate, who would have increased the premium almost two-fold based on a high-risk 17 year old male driver with a G2 licence living in the household,” said Justice Glustein of the Superior Court Of Justice in a decision dated Jan. 25, 2019. “Consequently, I find that the Policy, as renewed by Zalimoon and Lakeram prior to the accident, was void.”

The decision, says Aaron Murray, who represented Allstate, shows “the importance for all insured of being honest with the insurance companies and providing updates is warranted particularly with respect to licensed drivers in the household and the importance of disclosing that to the insurance company.”

While the parents held that not informing their insurer was an honest mistake, Glustein found that the insurer does not have a duty to explain what a “material change in risk” is to the insured.

“The Court of Appeal in Sagl imposes a duty on the insured to disclose all material facts even in the absence of questions from the insurer,” wrote Glustein. “A failure to disclose a material fact will void an insurance policy (Gregory and Pereira). The Court of Appeal in Salata affirmed that the agent of the insurer is only a ‘scribe’ and the application for insurance remains that of the insured.”

Glustein ordered $15,000 costs payable by the family to Allstate.

Bill Denstedt, who argued the application with his colleague Laurencia Fasoyiro, says they “were dealing with law in Ontario that’s very hard to overcome,” but they were “shocked by the cost award.”

Muhammad Alam, who practises with Denstedt and Fasoyiro at Alam Law Office, says his firm represented the family pro bono and that his clients were exposed to a huge financial risk.

“On the matter of costs, this decision will discourage all the applicant/insured to raise their voice against big insurance companies,” Alam wrote in an email.

Murray, however, who argued this application with co-counsel David Edwards, says, “It was a relatively complex coverage application that requires substantial materials. So, the cost award reflects a pretty reasonable amount in light of what had to go into this.”

Both Murray and Edwards practise with Beard Winter LLP in Toronto.

  • Kelly

    Correction, the application was argued in its entirety by Ms Laurencia Fasoyiro on behalf of the applicant, not by Mr. Bill Denstedt. More importantly, this ruling is tragic in that it will have far reaching negative consequences beyond the parties involved in this case. It basically says to insureds "dont bother defending yourselves against the "big boys" (insurance companies) cos you will be slammed with punitive attorneys fees should you lose." What a shame!




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