Ali Alreda Abbas Plaintiff/Respondent - v. -, 2021 ABQB 303

Court of Queen’s Bench of Alberta Citation: Abbas v Esurance Insurance Company of Canada , 2021 ABQB 303 Date: 20210421 Docket: 1701 04565 Registry: Calgary Between: Ali Alreda Abbas Plaintiff/Respondent - and - Esurance Insurance Company of Canada Defendant/Appellant _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice B.B. Johnston _______________________________________________________ Appeal from the Oral Decision of B. Summers, Master in Chambers Dated the 4th day of August, 2020 [ 1 ] The Plaintiff, Mr.

Ali Abbas advances a claim against the Defendant, Esurance Insurance Company of Canada, for coverage under a Standard Endorsement Form (“SEF”) 44 endorsement under his policy of insurance. Esurance claims Mr. Abbas forfeited his right to recover indemnity pursuant to sections 554(1) (b) & (

c) of the Insurance Act , RSA 2000 , c I-3 . Esurance seeks

summary dismissal of Mr. Abbas’ claim. [ 2 ] On August 4, 2020, the Master declined to summarily dismiss Mr. Abbas’ action. [ 3 ] Esurance appeals the Master’s decision. Background

[ 4 ] The parties filed an agreed statement of facts. None of the facts are in dispute. [ 5 ] On November 17, 2016, Mr. Abbas was a passenger in the backseat of a motor vehicle driven by Mr. Sheldon Vijay. The motor vehicle was in an accident. Mr. Abbas was thrown from the vehicle. He sustained injuries. [ 6 ] Mr. Abbas filed a statement of claim against Mr. Vijay on March 28, 2017. Mr. Vijay was uninsured and was noted in default. The Administrator of the Motor Vehicle Accident Claims Act filed a statement of defence on Mr. Vijay’s behalf. [ 7 ] Mr.

Abbas had an Alberta Standard Automobile Policy SPF No. 1 that included an SEF 44 endorsement provided by Esurance. [ 8 ] On May 11, 2017, Mr. Abbas filed a claim for disability benefits under

Section B of his SPF No. 1 and sought coverage under his SEF 44 endorsement. Esurance appointed separate adjusters to adjust the

Section B claim and the SEF 44 claim. [ 9 ] Mr. Abbas was required to complete a form to access

Section B benefits under the policy. In the form, he lied about his employment situation to qualify for benefits. He subsequently lied to the adjuster and provided a false employer’s certificate and hiring letter. He had his uncle perpetuate the lie by suggesting falsely that Mr. Abbas worked for his business under the table. [ 10 ] Mr. Abbas was denied

Section B benefits because he did not qualify. He was also denied SEF 44 coverage on the basis of his false statements. [ 11 ] This action relates only to the SEF 44 endorsement. The Master’s Decision [ 12 ] The Master dismissed Esurance’s application for

summary dismissal under Rules 7.2 and 7.3 of the Alberta Rules of Court , AR 124/2010 . [ 13 ] In his analysis, the Master applied the principles in Weir-Jones Technical Services Incorporated v Purolator Courier Ltd , 2019 ABCA 49 . He noted this was a pure question of law as no facts were in dispute. [ 14 ] The Master stated that “a claim” was not defined in the Insurance Act , but an analysis of the principles of statutory

interpretation did not follow in the decision. [ 15 ] The Master was concerned with a fair and balanced approach in interpreting the Insurance Act . He opined that a determination that Mr. Abbas had forfeited all of his rights under the contract by virtue of the fraud, dishonesty and lack of good faith, would be “draconian”. He found that the false statements and fraud related to

Section B benefits only and that the misrepresentations related to employment were immaterial to the SEF 44 coverage. Given an overriding principle of the Insurance Act was to produce fairness between the insurer and insured, the Master held that it would be patently unfair to deny Mr. Abbas his SEF 44 coverage based upon misrepresentations made in his

Section B benefit application. [ 16 ] The Master concluded that the forfeiture under

section 554 of the Insurance Act , only relates to a claim that is materially connected to the fraud or dishonesty. As the SEF 44 claim was not materially connected to fraud or dishonesty, the Master declined to summarily dismiss the SEF 44 claim. Standard of Review [ 17 ] The standard of review for an appeal under Rule 6.14 of the Rules of Court is correctness. An appeal from a Master is de novo. No deference is owed: McGowan v Lang , 2015 ABCA 217 at para 32 . Issue [ 18 ] Should the action be summarily dismissed under Rules 7.2 and 7.3 of the Rules of Court ? Specifically, did Mr.

Abbas’ actions invalidate his SEF 44 claim and thereby forfeit his right to claim indemnity under sections 554(1) (

b) and (

c) of the Insurance Act ? Legislation Insurance Act [ 19 ] Sections 554 (1) (

b) and (

c) of the Insurance Act state: 554(1) If ... (

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. Rules of Court [20] The

summary judgment rules are set out in Rules 7.2 and 7.3 of the Rules of Court and provide: 7.2 On application, the Court may at any time in an action give judgment or an order to which an applicant is entitled when (

a) admissions of fact are made in a pleading or otherwise, or (

b) the only evidence consists of records and an affidavit is sufficient to prove the authenticity of the records in which the evidence iscontained. 7.3(1) A party may apply to the Court for

summary judgment in respect of all or part of a claim on one or more of the following grounds: ... (

b) there is no merit to a claim or part of it; ...

(3) If the application is successful the Court may, with respect to all or part of a claim, and whether or not the claim is for a single andundivided debt, do one or more of the following: (

a) dismiss one or more claims in the action or give judgment for or in respect of all or part of the claim or for a lesser amount; ... Analysis [21] Following a motor vehicle accident on November 17, 2016, Mr. Abbas sought coverage for

Section B benefits and coverageunder the SEF 44 endorsement in his policy of insurance with Esurance. [22]

Section B of the policy is mandatory coverage that provides medical treatment or disability benefits to the insured and theinsured’s passengers. An SEF 44 endorsement provides optional insurance coverage to named insureds and their family members forinjuries and damages arising from a motor vehicle accident where the wrong doer is under-insured or uninsured. [23] Mr. Abbas advances a claim against Esurance for SEF 44 coverage. [24] Esurance asserts that based on sections 554(1)(b) & (

c) of the Insurance Act, they were justified in denying benefits to Mr.Abbas and his claim should be summarily dismissed. Based on Mr. Abbas’ conduct, Esurance argues he has forfeited his right to claimindemnity under the policy of insurance. [25] Esurance argues that there is an implied obligation to initiate and advance claims honestly and in good faith and that Mr.Abbas breached that duty. Esurance submits that Mr. Abbas willfully made false and misleading statements to Esurance and his conductwas fraudulent. [26] Esurance further asserts that the claim under

Section B of SPF No. 1 and the SEF 44 endorsement arose from the same motorvehicle accident and arose under the same policy. Esurance argues that there is only one claim. Regardless, Esurance asserts that thelanguage of forfeiture under section 554(1) arises whether or not there is more than one claim. [27] Mr. Abbas acknowledges he willfully made false and misleading statements and his conduct was fraudulent. He notes hisconduct was inappropriate and regrettable. He also acknowledges that he owed Esurance a duty of good faith. However, Mr. Abbasclaims that the lies that he perpetrated were with respect to his

Section B benefits and not with respect to the indemnity under the SEF 44endorsement. Specifically, he argues that the SEF 44 endorsement is not part of an SPF No. 1 policy, but is optional coverage to protectan insured against the risk of being injured by an uninsured or under-insured motorist. Therefore, only his claim for

Section B benefits isaffected and he should not lose his right to indemnity under the SEF 44 endorsement as it is a different claim. Additionally, he arguesthat his misrepresentation was materially related to his claim for

Section B benefits and not to the SEF 44 claim. [28] Mr. Abbas further submits that insurance legislation is a form of consumer protection legislation that is intended to protectinsureds and that an

interpretation that limits insureds’ right to indemnity under the SEF 44 endorsement would be contrary to thepurpose of such legislation. Principles of Statutory

Interpretation [29] Statutes are to be read “in their entire context and in their grammatical and ordinary sense harmoniously with the scheme ofthe Act, the object of the Act, and the intention of Parliament”: Elmer Driedger, Construction of Statutes, 2nd ed (Toronto: Butterworths,1983) at para 87, cited in Rizzo & Rizzo Shoes Ltd (Re), (SCC), [1998] 1 SCR 27 at para 41. [30] If the statutory text supports only one plausible or permissible meaning, the inquiry is complete: Alexis v Alberta(Environment and Parks), 2020 ABCA 188 at para 49.

[31] If there is more than one plausible meaning, the purpose of the statute should be examined. In such cases, the option that bestadvances the purpose of the statute should be selected: Alexis at para 52. Plain and Ordinary Meaning [32] In this case, the analysis begins with sections 554(1)(b) & (

c) of the Insurance Act. This

section describes the consequences ofmaking misrepresentations when advancing claims under an automobile insurance policy. [33] The parties disagree on the

interpretation of “a claim”. I note that “claim” is not defined in the Insurance Act. [34] Esurance argues that “ a claim” means “any claim” which means that if an insured contravenes a term of their policy orcommits a fraud then any claim made under the policy is invalid and their right to recover indemnity is forfeited. [35] Mr. Abbas argues that a plain reading of “a claim” in

section 554 means that two types of coverage under a single policy arenot contemplated. Therefore, the invalidation of a claim or forfeiture of the indemnity provided by the policy would be confined to theclaim in which the insured perpetrated the fraud. I disagree. The analysis does not stop at the lack of definition of “a claim”. [36] A plain reading of section 554(1) confirms that if there is a violation of (b) “or” (c), a claim by the insured is invalid “and”the right of the insured to recover indemnity is forfeited. [37] The word “or” in section 554 (1) has significance.

In Haraba v Wawanesa Co., 2017 ABQB 190 at para 8, the court statedthat a claim will be invalid and the right to recover indemnity forfeited, if among other things, the applicant: a. knowingly mispresents or fails to disclose any required fact; b. contravenes a term of the contract; c. commits a fraud; or d. wilfully makes a false statement in respect of a claim under the contract. [Emphasis added] [38] Regard must also be had to what is included in a contract of insurance.

Section 1 (

j) of the Insurance Act provides clarity. A“contract of insurance” includes any policy, certificate, interim receipt, renewal receipt or writing evidencing the contract, whether sealedor not, and a binding oral agreement. [39] Policy is then defined in

section 1(uu) as “an instrument evidencing a contract of insurance.” [40] Therefore, the reference to “contract” in section 554(1) confirms that the

section is to be read as meaning a claim under theentirety of the contract of insurance and not simply under one

section of the policy. Hence, “a term” of the contract includes “any term”of the contract of insurance and “a claim” means “any claim” under the contract of insurance. [41] Applying this meaning results in the invalidation of claims and the forfeiture of an insured’s right to recover indemnity forcontravention of any term of the contract or wilfully making a false claim in respect of any claim under the contract. [42] The policy of insurance itself is consistent with the plain and ordinary

interpretation of

section 554 of the Insurance Act, inthat a claim under a policy, includes a claim under the SEF 44 endorsement. I note that the SEF 44 endorsement is “attached to andforms part of the policy”: SEF 44 at

section 11. [43] Section 554(1)(

b) further refers to “commits a fraud” without reference to “a claim” as an instance where a claim will beinvalidated, and the right to indemnity is forfeited. This wording covers instances where the fraud is perpetrated in connection with anapplication for insurance and not just in respect to a claim for benefits under the insurance policy. Hence the focus on just the meaning of“a claim” in interpreting this

section is not reasonable. [44] Furthermore,

section 554 provides that “a claim by the insured is invalid and the right of the insured to recover indemnity isforfeited.” The use of the word “and” is significant. The

section provides that the consequence of the insured’s actions listed in (

b) and(c), results in not only the invalidation of the insured’s claim but also, the forfeiture of the insured’s right to recover indemnity. [45] A plain reading of sections 554(1)(b) & (

c) confirms that a violation of (

b) or (

c) results in the forfeiture of the right to recoverindemnity under a policy of insurance. The Insurance Act as a Whole Supports the Forfeiture of anIndemnity in the Face of Fraud [46] The plain reading ascribed above, is in harmony with the scheme of the Insurance Act, the object of the Act and the intentionof Parliament. The obvious intention behind

section 554 is in keeping with the requirement of utmost good faith between insured andinsurer and to provide significant consequences for clearly improper and intentional conduct by the insured. [47] An

interpretation that results in fraudulent behaviour forfeiting indemnity under a policy, is consistent with the purpose of theAct and the statute as a whole and what a reasonable person would expect in such circumstances: Scott v Wawanesa Mutual InsuranceCo., (SCC), [1989] 1 SCR 1445, 1989 CarswellBC 105 at para 13; National Bank of Greece (Canada) v

Katsikonouris, (SCC), [1990] 2 SCR 1029, 1990 CarswellQue 84 at para 18. [48] Mr. Abbas argues that the Insurance Act is “consumer protection legislation”. This however, is a one sided view. There is nodoubt that the Insurance Act has built in protections to ensure insurers act in good faith.

However, the legislation places similarexpectations on insureds. [49] A contract of insurance between an insurer and an insured is one of utmost good faith: Halpern Investments Ltd. v SovereignGeneral Insurance Co., 2005 ABQB 105 at para 6. [50] If an insured fails to put forward his claim honestly and act in good faith, the consequences of his actions include theforfeiture of indemnity under the policy: Section 554(1); Andrusiw v Aetna Life Insurance Co. of Canada, (ABKB), [2001] A.J No 789 at para 82. I do not find such a consequence to be “draconian”. [51] Even if it could be seen to be draconian,

section 554 does not stand alone. The Insurance Act contains provisions that providebalance. Specifically, the Insurance Act protects insureds from forfeiture of an indemnity due to mere inadvertence. Where there isimperfect compliance under the terms of a policy of insurance, rather than non-compliance, the court has the discretion to relieve againstforfeiture:

Section 520 Insurance Act; Elance Steel Fabricating Co. v Falk Brothers Industries, (SCC), [1989] 2 SCR778 at paras 19-22; Andrusiw at paras 57 and 58. [52] The seriousness with which insurance fraud is taken, is also reflected in the decisions of this court. In Andrusiw, an insuredwas denied coverage under a policy of disability based on his fraudulent and wilful misrepresentations in his application. The insurer wasawarded general damages for benefits improperly paid to Mr.

Andrusiw and punitive damages. [53] In upholding the decision of the insurer to deny coverage, the trial judge noted that there is a high onus to establish fraudulentbehaviour. Because the Defendant had satisfied the onus, “ the policy [was] invalidated and the Plaintiff forfeit[ed] all claims under it”:Andrusiw at para 53. [54] In reaching this conclusion, the trial judge reviewed the common law position articulated in Britton v Royal Insurance Co.,[1886] 4 F. & F. 905, 176 E.R. 843 (Eng.

Nisi Prius) at para 844: The law is, that a person who has made such a fraudulent claim could not be permitted to recover at all. The contract of insurance is oneof perfect good faith on both sides, and it is most important that such good faith should be maintained. It is the common practice to insertin fire policies conditions that they shall be void in the event of a fraudulent claim; and there was such a condition in the present case.Such a condition is only in accordance with legal principle and sound policy.

It would be most dangerous to permit parties to practicesuch frauds and then, notwithstanding their falsehood and fraud, to recover the real value of the goods consumed. And if there is wilfulfalsehood and fraud in the claim, the insured forfeits all claim whatever upon the policy. [55] In Al-Asadi v Alberta Motor Assn. Insurance Co., 2003 ABQB 289, the trial judge stressed the need for both the insured andinsurer to act in good faith when dealing with insurance claims. The Plaintiff filed a fraudulent insurance claim because he lied aboutbeing the victim of auto theft and vandalism.

The trial judge denied the insured’s claim for benefits under the policy of insurance andawarded punitive damages of $5000. In highlighting the reprehensible nature of insurance fraud, the trial judge noted that “the Courtsmust play their

part in penalizing those insured who engage in insurance fraud in appropriate cases as equally as they must punishinsurers who fail to deal with the claims advanced by an insured in good faith”: Al-Asadi at para 71. [56] Mr. Abbas argues both Andrusiw and Al-Asadi are distinguishable because they involved claims by insureds under singleheads of coverage. Although I agree that these cases were based on fraudulent claims under single heads of coverage, the overarchingthesis of these cases applies: insurance fraud is serious and will result in the forfeiture of coverage. [57] In this case, I find the conduct of Mr.

Abbas reprehensible. This was not a case of mere inadvertence. He lied on multipleoccasions and falsified documents. The fraud was also perpetuated in multiple contexts: in the original application; over the phone; andthen through fabricated records. He provided a false certificate of employer and falsified a hiring letter. He also has his uncle participatein the fraud by advising the adjuster that Mr. Abbas had worked for him under the table, when such assertion was false. [58] Mr. Abbas asserts that the SEF 44 claim is a separate claim and his fraud in the claim for

Section B benefits ought not tocarry over to impact his claim under the SEF 44 endorsement. [59] In this case there is a single policy and a single motor vehicle accident. Although there are different elements to the claim oreven perhaps different claims, these claims arose out of one accident and the claims were under one policy of insurance. [60] Mr. Abbas’ argument that they are different claims still does not assist him given the clear language of

section 554 whichprovides “and the right of the insured to recover indemnity is forfeited.” In my view, this wording is clear and applies to all claims underthe policy as opposed to just the

Section B benefits. [61] I disagree with the Master that there is a level of materiality required between the claim in which the fraud is present and otherclaims that may be advanced under the same policy. If this was the case, the legislation ought to have said so. [62] I agree with the concerns raised by the Master, that courts should not lightly restrict the rights of insureds to indemnity underpolicies of insurance.

However, in my view there are protections in place that protect insureds against insurers who fail to appropriatelydeal with claims advanced in good faith. [63] In cases where fraud is alleged there is a high burden that is not displaced lightly: Andrusiw at para 51. [64] A further protection is embedded in

section 520 of the Insurance Act. Specifically, in cases of imperfect compliance, asdistinct from non-compliance, the court has the discretion to relieve against forfeiture:

Section 520 Insurance Act; Elance Steel at paras

19-22.

Summary Judgment is Appropriate [ 65 ] Rules 7.2 and 7.3 of the Rules of Court provide for the

summary disposition of claims. [ 66 ] The test for

summary judgement was articulated in Weir-Jones at para 47. As the Court of Appeal in Hannam v Medicine Hat School District No. 76 , 2020 ABCA 343 at para 12 , leave to appeal refused, 2021 CarswellAlta 641 noted: The Weir-Jones standard sanctions

summary judgment if “the presiding judge ... [is] left with sufficient confidence in the ... record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute”. More specifically, if the moving party has proved the material facts on a balance of probabilities and advances the law that vindicates the moving party’s position,

summary judgment is appropriate. The outcome does not have to be obvious I find this case is appropriate for

summary judgment. There are no facts in dispute and this matter involves a pure question of law. The fraud by Mr. Abbas is admitted. He has forfeited his right to indemnity in accordance with sections 554(1) (a) & (

b) of the Insurance Act . His claim is without merit. There is no genuine issue requiring a trial. The action is dismissed. Conclusion [ 67 ] The appeal is allowed and the action is dismissed. Heard on the 5 th day of March, 2021. Dated at the City of Calgary, Alberta this 21 st day of April, 2021. B.B. Johnston J.C.Q.B.A. Appearances: David Pick for the Defendant (Appellant) Martin Hoornaert for the Plaintiff (Respondent)