Moss v Sun Life Assurance Company of Canada, 2018 ABQB 953

Court of Queen’s Bench of Alberta Citation: Moss v Sun Life Assurance Company of Canada, 2018 ABQB 953 Date: 20181122 Docket: 1003 17723 Registry: Edmonton Between: Daniella Moss Plaintiff/Applicant - and - Sun Life Assurance Company of Canada and Sun Life Financial Defendants/Respondents _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice G.S. Dunlop _______________________________________________________ Table of Contents 1. Overview .. 2 2. Application for

Summary Trial 3 2.1

Summary Trial Procedure . 3 2.2

Summary Trial Application . 4

3. The Factual Dispute: Characterization of the 2009 Transaction . 5 4. The Legal Issue: Voiding an Insurance Contract 8 4.1 Rescission in General Contract Law .. 8 4.2 Rescission Pursuant to the Insurance Act 9 5. Conclusion . 10 1. Overview [ 1 ] On October 18, 1994, Dr. Jeffery Moss obtained a $600,000 life insurance policy (the “1994 Policy”) from a predecessor insurance company of Sun Life Assurance Company of Canada. On April 15, 2009, Dr. Moss applied to Sun Life for a replacement policy (the “2009 Policy”) with the same $600,000 benefit. The application included medical questions.

Sun Life reviewed the application and on May 23, 2009 issued the 2009 Policy, backdated to April 15, 2009. [ 2 ] Dr. Moss died on October 17, 2009. On November 9, 2009, his two adult children and his adult interdependent partner, who were the beneficiaries under both the 1994 Policy and the 2009 Policy, applied for the $600,000 benefit. After investigating, Sun Life rejected the claim and purported to void the 2009 Policy based on alleged misrepresentations in the answers to the medical questions in the April 15, 2009 application. [ 3 ] Two actions were commenced against Sun Life, one by Dr.

Moss’s daughter and the other by his adult interdependent partner. In one action, Dr. Moss’s daughter, Daniella Moss, sued on her own behalf and on behalf her brother and Dr. Moss’s adult interdependent partner for the $600,000 benefit under the insurance on which they were all beneficiaries. There was also another insurance policy, a joint life policy held by Dr. Moss and his adult interdependent partner. Dr. Moss’s children are not beneficiaries under the joint life policy. In the other action, Dr.

Moss’s adult interdependent partner sued for benefits under both the joint life policy and the 2009 Policy. [ 4 ] Ms. Moss applied for

summary judgment in her action. The

summary judgment application was dismissed on November 16, 2016. Ms. Moss now applies for a

summary trial of an issue, which she argues is suitable for

summary trial and will dispose of the litigation on the 1994 Policy and the 2009 Policy entirely. The issue Ms. Moss proposes for

summary trial is whether, if the 2009 Policy were voided, the 1994 Policy would be restored and the beneficiaries would be entitled to the $600,000 benefit. [ 5 ] I find that the issue proposed by Ms. Moss is suitable for

summary trial, because the factual dispute relevant to that issue can be determined based on the evidence before me, because determination of that issue will either dispose of the litigation entirely, or narrow the issues for trial, and because it would not be unjust to decide that issue in a

summary trial. [ 6 ] On the

summary trial itself, I find that if the 2009 Policy were voided, the 1994 Policy would be revived, because the contract entered into between Dr. Moss and Sun Life in May 2009 was for both issuance of the 2009 Policy and cancellation of the 1994 Policy. If Sun Life is entitled to void the 2009 Policy, it must rescind the entire May 2009 contract, including the cancellation of the 1994 Policy. Any misrepresentations made by Dr. Moss in the 2009 application have no effect on his beneficiaries’ entitlement under the 1994 Policy, so Dr.

Moss’s children and his adult interdependent partner are entitled to the $600,000 benefit. [ 7 ] Ms. Moss also argued that Sun Life is not entitled to void the 2009 Policy, because Sun Life did not take on any additional risk when it issued the 2009 Policy and cancelled the 1994 Policy. It is not necessary for me to determine whether Sun Life took on additional risk and, if not, whether that would have any effect on Sun Life’s rights, because the

interpretation of the contract and the application of the law of rescission resolve the

summary trial issue in Ms. Moss’s favour. 2. Application for

Summary Trial 2.1

Summary Trial Procedure [ 8 ] On December 12, 2017, Ms. Moss filed an Application for a

Summary Trial, relying on: • her affidavit filed January 29, 2016; • transcript excerpts from a cross-examination in 2016; • transcript excerpts from an examination in 2014; and • a February 24, 2009 email from Sun Life’s agent to Dr. Moss, with some handwritten notes. [ 9 ] Nothing else was filed until one month before the hearing. Specifically: • On August 20, 2018, Sun Life filed an unsworn report of Josee Malboeuf, who purports to be an expert in life insurance underwriting. • On August 29, 2018, Sun Life filed an affidavit which attached a copy of the 1994 Policy.

• On September 7, 2018, Sun Life filed a

Summary Trial Brief and a Book of Authorities. • On September 21, 2018, at the commencement of the hearing before me: o Sun Life entered as an exhibit Extracts of Key Evidence and Relevant Documents, and o Ms. Moss provided a

Summary Trial Bench Brief. [ 10 ] Sun Life’s Extracts of Key Evidence and Relevant Documents were not filed on time. Rule 7.6 requires the respondent to an application for a

summary trial to file the evidence upon which it intends to rely at least 10 days before the hearing. Rule 7.8(2) requires a respondent who objects to the

summary trial procedure to file its evidence at least 5 days before the hearing. Whichever of those deadlines applies, the evidence Sun Life filed on September 21, 2018 was late because it was not filed until the commencement of the hearing. Ms. Moss took no issue with this and the point was not argued before me. I am not granting any relief on this point. [ 11 ] Sun Life’s Brief includes, at paras 54 to 57, an objection to Ms. Moss relying on excerpts from a transcript of evidence given by Sun Life’s agent in the action commenced by Dr. Moss’s adult interdependent partner. Ms.

Moss’s counsel complained in oral argument before me that he had no notice of this evidentiary objection until he received Sun Life’s Brief on September 7, 2018. Ms. Moss’s counsel argued that I could admit the agent’s testimony into evidence, determine I do not require that evidence to decide the application, or determine that I do require that evidence and reconvene the

summary trial to hear that evidence from the agent in person. I do not find it necessary to determine the admissibility of Sun Life’s agent’s testimony, or to hear his evidence in person, because I have been able to find the necessary facts without reference to the agent’s transcript. [ 12 ] Ms. Moss’s counsel invited me to provide some guidance in my reasons regarding the appropriate procedure for parties to follow on a

summary trial application. On that point, I make the following observations. The

summary trial rules (R. 7.5 – 7.11) permit, but do not require, a single step

summary trial process. In this case, had the parties followed a bifurcated process such was suggested in Moncrieff v. Hayne , [1] the issues and evidence could have been clarified well in advance of the hearing which would have provided for a more efficient and focused

summary trial. In particular, the challenges of late evidence and objections to evidence, referred to above, could have been avoided. The process suggested in Moncrieff would have the applicant instigate a bifurcated process, but in my view the respondent could also do so by objecting to the

summary trial and scheduling a hearing of that objection before the hearing of the

summary trial itself, as permitted by R. 7.8. Furthermore, either party could have sought a procedural order setting deadlines for objections, evidence and written briefs, at any time. 2.2

Summary Trial Application [ 13 ] A

summary trial should be ordered if disputed questions of fact can be determined on affidavits or other evidence available in the

summary trial process and if it would not be unjust to decide the issues in a

summary trial. [2] [ 14 ] In the

summary trial proposed by Ms. Moss, one factual dispute would be whether Sun Life took on any additional risk in issuing the 2009 Policy. I have determined that I do not need to decide the additional risk issue to determine the beneficiaries’ entitlement to the $600,000 benefit. [ 15 ] The only other factual dispute is whether Dr. Moss and Sun Life entered into a single contract in 2009 encompassing both the issuance of the 2009 Policy and the cancellation of the 1994 Policy, or whether the issuance of the 2009 Policy and the cancellation of the 1994 Policy were separate transactions.

As set out below, that issue can be determined by considering the wording of the documents exchanged between the parties in 1994 and 2009, and the affidavit and examination evidence of a Sun Life employee. Justice favours the

summary trial process in this case because, on the issue proposed for

summary trial, there is no reason to expect any better or different evidence would be adduced at trial, and with only a single witness, credibility is not in issue. [ 16 ] The issue which Ms. Moss proposes for

summary trial is narrower than the complete set of issues raised in the pleadings. In particular, the issues of whether Dr. Moss made misrepresentations in the 2009 application, whether any such misrepresentations were material and whether Sun Life relied on them in issuing the 2009 Policy, need not be decided in the

summary trial Ms. Moss proposes. The determination of those issues would require more evidence than was adduced before me, including, possibly, expert evidence. Ms. Moss argues that those issues do not matter, because, she submits, if such misrepresentations were made and Sun Life voided the 2009 Policy then the 1994 Policy would be revived, and the beneficiaries would be entitled to the $600,000 benefit under the 1994 Policy. The beneficiaries would be entitled to the $600,000 benefit under either the 2009 Policy or the 1994 Policy. Consequently, the issues of misrepresentation, materiality and reliance are academic. That is Ms. Moss’s submission, and that is the issue she proposes for

summary trial. [ 17 ] Sun Life argued that

summary trial is inappropriate because the application for

summary trial has been brought in Ms. Moss’s action, but not in Dr. Moss’s adult interdependent partner’s action, where entitlement to the $600,000 benefit is also in issue. This raises the prospect of relitigation and inconsistent findings, argues Sun Life. I disagree. Ms. Moss sued on behalf of herself, her brother and Dr. Moss’s adult interdependent partner. Ms. Moss’s brother and Dr. Moss’s adult interdependent partner have not objected. All three beneficiaries will be bound by this decision. [ 18 ] Sun Life argued that

summary trial is inappropriate because it will not necessarily end the litigation. I disagree. Leaving aside the additional risk issue, determination of the rescission issue submitted by Ms. Moss will either resolve all issues with respect to the $600,000 benefit, or it will narrow those issues to the question of whether Dr. Moss made material misrepresentations in the 2009 application, upon which Sun Life relied. After the

summary trial, a full trial with respect to the $600,000 benefit will be either avoided or shortened. This is not litigation in slices, as Sun Life argued. It is a practical, economical and efficient approach to managing this litigation. [ 19 ] For those reasons, I grant Ms. Moss’s application for a

summary trial.

3. The Factual Dispute: Characterization of the 2009 Transaction [ 20 ] Ms. Moss argues that there was a single contract between Dr. Moss and Sun Life in 2009, the terms of which included Dr. Moss’s representations regarding his health, the issuance of the 2009 Policy and the cancellation of the 1994 Policy. Sun Life argues that the 2009 Policy, including Dr. Moss’s representations, is a stand-alone contract, and that the cancellation of the 1994 Policy is a separate matter.

This issue can be resolved with reference to the written documents between the parties and the evidence of Genevieve Gascon, an employee of Sun Life. In my reasons that follow, I have underlined selected words quoted from the documents, for emphasis. The bold type and italics in the quotations below appear in the original documents. [ 21 ] The 1994 Policy states that it will terminate upon non-payment of a premium within 30 days of the due date, and that it may be amended in writing. It does not state that Dr.

Moss could unilaterally cancel it at any time. [ 22 ] The Life Insurance Application, dated April 15, 2009, begins with the following statement: This transaction will result in changes to and/or termination of the old policy(ies) identified and the issue of a new policy . This may result in the loss of one or more benefits, insurance coverage on other lives or beneficial tax treatment. [ 23 ] The 2009 application also includes the following questions and answers: A Comparison Disclosure Statement is required by regulation.

Is this application intended to replace or reduce the benefits of any existing insurance policy or pending insurance application of any company (other than by conversion)? Yes Is this application replacing an existing policy , a pending application, or a policy which has terminated in the last 6 months or will terminate in the next 6 months (including conversions)? Yes Is the original base plan to stay in force? No [ 24 ] A separate document entitled “Life Insurance Disclosure Form” was dated April 15, 2009 and signed by Dr. Moss and Sun Life’s agent.

It includes the following: If you are replacing a current Insurance policy , you should be given this form before you fill out an application for the new insurance. The form outlines some of the details of your current policy and the proposed policy. … Ask yourself the following questions as you look over this form. ... • Are there circumstances where your new policy does not pay benefits? Part A of this form tells you if your policy will not pay because of suicide or because you provided incomplete information. … PART A – General Information This

section [illegible] some basic information about the life insurance policy you now have and about the new policy you are thinking about applying for. The Policy You Now Have The Policy You Are Considering … 11. The contestability period on this policy expires: A policy may not pay if information on the application was incomplete (for example: if the insured person did not disclose a previous illness to the insurance company). If this information is not discovered within a certain period (usually two years), however, the policy will pay in the absence of fraud.

This is called the contestability period. 18/10/96 15/04/11 [ 25 ] A separate page entitled “Electronic insurance application declaration and authorization” dated April 15, 2009 and signed by Dr. Moss as applicant, contains the following statement: Declarations : The applicants, proposed insureds and pre-authorized chequing (PAC) payors confirm:

…

d) they understand that if they do not fully, completely and truthfully answer all of their questions (if they misrepresent any of their answers or statements) the company may void the policy [ 26 ] Sun Life issued the 2009 Policy on May 23, 2009 but backdated it to April 15, 2009 (the date of the application). The 2009 Policy includes a provision that Dr. Moss could unilaterally cancel the policy at any time by written notice to Sun Life.

The 2009 Policy also includes the following statement: Information about our contract with you Once your policy is in effect, the following documents make up our entire contract with you: • your application for insurance, including any evidence of insurability, and • this policy . All of our obligations to you are contained in the documents described above. Any other document or oral statement does not form part of this contract.

This policy or any part of this policy may not be amended or waived except by written amendment signed by two authorized signing officers of the company. (the “Entire Agreement Clause”) [ 27 ] Other than the 2009 application for insurance, there is nothing in writing from Dr. Moss requesting the cancellation of the 1994 Policy. [3] Sun Life cancelled the 1994 Policy after Dr. Moss approved the 2009 Policy. [4] [ 28 ] Sun Life’s Brief at para 90 asserts that the 1994 Policy was cancelled before the 2009 Policy was issued. The evidence cited by Sun Life does not support that assertion. Ms.

Gascon’s testimony in paras 15 – 17 of her 2016 Affidavit and at pages 35 – 36 of her questioning transcript is that Sun Life relied on an advisor’s statement submitted by Sun Life’s agent to cancel the 1994 Policy. The advisor’s statement was done prior to the processing of the application for the 2009 Policy, but the 1994 Policy was not cancelled until after the 2009 Policy was issued by Sun Life and approved by Dr. Moss. [5] [ 29 ] By letter dated August 15, 2011, Sun Life advised Dr. Moss’s estate that Sun Life had discovered misrepresentations in Dr. Moss’s 2009 application for insurance.

The letter goes on to read as follows: If Sun Life Financial had received accurate health information we would not have accepted the application for insurance. We have cancelled the contract because accurate health information was important to our assessment of the application. [ 30 ] If Dr. Moss had provided accurate information in the 2009 application, Sun Life would have declined to issue the 2009 Policy. In that case, the 1994 Policy would have remained in force. [6] [ 31 ] The evidence reviewed above supports the conclusion that the parties entered into a single contract in 2009.

The contract was created through Dr. Moss making an offer in the insurance application, the terms of which included Dr. Moss’s representations regarding his health, the issuance of the 2009 Policy and the cancellation of the 1994 Policy. Sun Life accepted Dr. Moss’s offer and performed the contract by issuing the 2009 Policy and cancelling the 1994 Policy. [ 32 ] It is not possible to separate the cancellation of the 1994 Policy from the issuance of the 2009 Policy because the only thing in writing between Sun Life and Dr.

Moss authorizing the cancellation of the 1994 Policy is the 2009 application for insurance, which is, by definition in the Entire Agreement Clause, part of the 2009 Policy. Furthermore, throughout the documents, the 2009 Policy is referred to as replacement insurance, and Sun Life’s evidence is that if it had declined to issue the 2009 Policy, the 1994 Policy would have remained in force. It is clear that the parties intended the cancellation of the 1994 Policy to be contingent on the issuance of the 2009 Policy. [ 33 ] All of the documents used by the parties in 2009 were created by Sun Life.

If Sun Life had wanted to create two separate contracts, one for the issuance of the 2009 Policy and the other for the cancellation of the 1994 Policy, Sun Life could have drafted its forms to make that clear. I do not find Sun Life’s documents to be ambiguous on this point, but if I had, I would have construed them in favour of Dr. Moss and his beneficiaries. [ 34 ] I determine the factual dispute in Ms. Moss’s favour; there was a single contract between Dr. Moss and Sun Life in 2009, which included both cancelling the 1994 Policy and issuing the 2009 Policy.

My finding is based on the documents, which are not in dispute, and the evidence of Sun Life’s representative, Ms. Gascon. 4. The Legal Issue: Voiding an Insurance Contract [ 35 ] Sun Life submits that misrepresentations in the 2009 application entitle it to void the 2009 Policy without reviving the 1994 Policy. Ms. Moss submits that, assuming Sun Life is entitled to void the 2009 Policy, it must also revive the 1994 Policy. Both general contract law and the provisions of the Insurance Act , support Ms.

Moss’s position on this issue. 4.1 Rescission in General Contract Law [ 36 ] Rescission requires that the parties be put back into “the position they would have been in had the contract not been made.” [7]

Rescission of one part of the contract without rescinding the other parts is not permitted in law. [8] In this case, there was a single contract between Dr. Moss and Sun Life, encompassing both the issuance of the 2009 Policy and the cancellation of the 1994 Policy. Putting the parties into the position they would have been in had the contract not been made requires cancelling the 2009 Policy and reinstating the 1994 Policy.

In that case, the beneficiaries would be entitled to the $600,000 benefit under the 1994 Policy. 4.2 Rescission Pursuant to the Insurance Act [ 37 ] In my reasons below, I have underlined certain words quoted from the Insurance Act, for emphasis.

The Insurance Act contains the following provision with respect to voiding an insurance contract based on material misrepresentations: 652(1) An applicant for insurance and a person whose life is to be insured must each disclose to the insurer in the application, on a medical examination, if any, and in any written statements or answers furnished as evidence of insurability, every fact within the applicant’s or person’s knowledge that is material to the insurance and is not so disclosed by the other.

(2) Subject to

section 653 and subsection (3), a failure to disclose, or a misrepresentation of, a fact referred to in subsection (1) renders the contract voidable by the insurer. [ 38 ] The Insurance Act distinguishes between the terms “policy” and “contract”. For life insurance, the distinction is set out in

section 642: 642(1) An insurer entering into a contract must (

a) issue a policy , and (

b) furnish to the insured the policy and a copy of the insured’s application .

(2) Subject to subsection (3), the provisions in (

a) the application , (

b) the policy , (

c) any document attached to the policy when issued, and (

d) any amendment to the contract agreed on in writing after the policy is issued constitute the entire contract . [ 39 ] Consequently, pursuant to the Insurance Act , assuming Dr. Moss made material misrepresentations, Sun Life was entitled to void the contract , which included the application. In this case, the terms of the 2009 application included both the issuance of the 2009 Policy and the cancellation of the 1994 Policy. If Sun Life chose to void the contract, all aspects of the contract would be reversed, that is both the issuance of the 2009 Policy and the cancellation of the 1994 Policy.

The 1994 Policy would be revived and the beneficiaries would be entitled to the $600,000 benefit under that policy. [ 40 ] Sun Life argued that if the 1994 Policy were revived, there would be no consequences for Dr. Moss’s misrepresentations in the application. It also argued that such an outcome in this case could have far-reaching implications applied to other cases. I disagree. The consequence of the misrepresentations (which are assumed for the purposes of this

summary trial) is that the 2009 Policy is voidable. The revival of the 1994 Policy when Sun Life voided the 2009 Policy is the result of the parties combining, in a single contract, both the issuance of a new policy and the cancellation of old one. The implications of this case are limited to cases where insurers and their insureds deal with two policies in a single contract. 5. Conclusion [ 41 ] I grant Ms. Moss’s application for a

summary trial and determine the issue for trial in her favour. If the 2009 Policy were voided, the 1994 Policy would be restored and the beneficiaries would be entitled to the $600,000 benefit. Ms. Moss is entitled to judgment against Sun Life in that amount, on her own behalf and on behalf of her brother and Dr. Moss’s adult interdependent partner. [ 42 ] If the parties are not able to agree on interest or costs, they may return before me on either or both issues no later than January 31, 2019. Heard on the 21 st day of September, 2018. Dated at the City of Edmonton, Alberta this 22 nd day of November, 2018.

G.S. Dunlop J.C.Q.B.A. Appearances: Robert M. Curtis, Q.C.and Benjamin M. Seigel McCuaig Desrochers LLP for the Plaintiff/Applicant Sandra L. Hawes and Adrienne S. Funk Miller Thomson LLP for the Defendants/Respondents