Published in: Insurance Law Newsletter - 13.Oct.20 October 13, 2020

Case Summary: Insureds who made willfully false statements in Proof of Loss unsuccessful on appeal

Ontario Court of Appeal upholds ruling that insureds made willfully false statements in Proof of Loss and are not entitled to relief from forfeiture

Insurance law – Homeowner’s insurance – Proof of loss – Material change in risk – Misrepresentation in obtaining insurance – Statutory provisions – Practice – Leave to appeal – Relief against forfeiture – Evidence – Jury trials – Instructions to jury

Pinder Estate v. Farmers Mutual Insurance Co. (Lindsay), [2020] O.J. No. 2819, 2020 ONCA 413, Ontario Court of Appeal, June 25, 2020, K.M. van Rensburg, M.L. Benotto and A.L. Harvison Young JJ.A.

The insureds brought an action against the insurer seeking a declaration of coverage under their home insurance policy for losses in relation to a fire at their house. The fire destroyed the insureds’ house and most of its contents. The insureds alleged the insurer acted in bad faith in handling and denying their claim. The insurer counterclaimed, seeking to recover the amount it paid to the mortgagee.

The insureds’ evidence was that the primary source of heat at the house was a wood stove which was supplemented by space heaters. An insured testified that prior to the fire a log was left in the wood stove and space heaters in three rooms were turned half on. The insurer’s evidence was that the space heaters turned half on constituted a primary heat source which was not reported to the insurer.

The insureds completed a Proof of Loss with the assistance of an independent adjuster. The insurer requested additional information for items listed in the Schedule of Loss valued at over $500. The insureds did not provide proof of purchase for a number of items claiming that these items were purchased by cash or inherited from family members. The insurer’s evidence was that the insureds failed to attend at the house to review the items on the list and provide evidence of the existence or value of certain items the insurer expected to receive. The insurer paid an advance to the insureds for the contents, certain alternate living expenses and a lump sum to be paid to the mortgagee.

The insurer later denied coverage for two reasons. First, the insureds failed to notify the insurer of the change in the heating system of the house which, the insurer argued, was a material change in the risk contrary to statutory condition 4. Second, the insureds made willfully false statements with respect to the contents claim and claim for alternate living expenses contrary to statutory condition 7.

At trial, the jury answered all applicable questions in favour of the insurer. Based on the jury’s answers, the trial judge concluded the insureds failed to notify the insurer of a material change in risk contrary to statutory condition 4, voiding the policy. The trial judge also concluded the insureds made willfully false statements in their Proof of Loss contrary to statutory condition 7, vitiating their claim.

The Court of Appeal did not accept the trial judge’s conclusion that the insureds breached statutory condition 4. The Court found the trial judge misdirected the jury by answering that there is no definition of primary heat source. This answer provided inadequate assistance to the jury to determine an important issue at trial constituting misdirection. The Court of Appeal further overturned the trial judge’s finding that there was evidence to support the jury’s finding that the change in heat source constituted a material change in risk. The Court found there was no evidence by an underwriter or other qualified witness as to what would constitute a material change in risk for an insurer.

The Court of Appeal concluded the trial judge did not make a reversible error in finding the insureds breached statutory condition 7. The Court found no error in the trial judge’s instructions about the evidence of certain witnesses, instructions on the intention required for a willfully false statement or her formulation of Question 5 by not requiring the jury to consider the insureds separately. The Court further upheld the trial judge’s decision to decline to grant relief from forfeiture as this was not a case of imperfect compliance.

The Court further reversed the trial judge’s award of substantial indemnity costs against the insureds and applied a discount to the costs award. The Court concluded the insureds’ conduct did not deserve sanction. The conduct that the trial judge viewed as reprehensible did not extend beyond vigorously challenging the insurer’s conduct in the context of their punitive damages and bad faith claims.

This case was digested by Dominic Wan, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Dominic Wan at