Joyce Elizabeth Clark v. the Estate of Terry Clark, 2011 SKPC 11

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2011 SKPC 011 Date: January 7, 2011 File: SC 117-09 Location: Moose Jaw, Saskatchewan _____________________________________________________________________________ Between: Joyce Elizabeth Clark and the Estate of Terry Clark - and - First Canadian Insurance Corporation Mr. Ken Cornea For the Plaintiff Mr. Jason Mohrbutter For the Defendant _____________________________________________________________________________ JUDGMENT D.J.

KOVATCH , J _____________________________________________________________________________ Background [ 1 ] Prior to death, the deceased, Terry Clark, purchased a new truck from Murray GM in Moose Jaw, pursuant to a conditional sales contract. At the same time, Mr. Clark purchased decreasing term life insurance from the Defendant. Very shortly after these agreements were entered into, Mr. Clark was diagnosed with pancreatic cancer, and he passed away the following year. The issue here

is whether he had a pre-existing illness, disease or physical condition within the meaning of the policy. This in turn requires an

interpretation of the policy to determine the effective date of the policy. The Facts and Evidence [ 2 ] Counsel presented to the Court an agreed statement of facts that included a number of appended documents. The Plaintiff supplemented this with brief evidence from Mr. Clark’s widow, Joyce Elizabeth Clark, Mr. Clark’s doctor, Dr. C.F. Wigmore, and from Paul Tonner, the Comptroller of Murray GM. Counsel for the Defendant did not really challenge the Plaintiff’s evidence. He did not present any other viva voce evidence. The facts of this matter are really undisputed.

I will set out those facts, as they were presented to me. [ 3 ] In the first part of October, 2008, Mr. and Mrs. Clark began negotiating with Murray GM regarding the purchase of a new GM truck. They had a vehicle for trade-in, and were able to make a significant cash down payment. It was clear however that a significant portion of the purchase price would have to be financed. [ 4 ] Murray GM had a standing business arrangement with the Royal Bank of Canada. Under this arrangement, the Royal Bank supplied Murray GM with “blank fixed rate conditional sales contracts”.

These blank contracts contained the Royal Bank logo. In addition, these contracts specifically provided that the purchaser would make payments directly to the Royal Bank of Canada. A representative of Murray GM would fill in the details regarding the repayment, and execute the conditional sales contract. In addition, the representative of Murray GM testified that Murray GM would submit financial information on the purchaser to the Royal Bank.

Prior to execution of the conditional sales contract, the Royal Bank would “approve the purchaser” and agree to purchase the conditional sales agreement and accept an assignment of the seller’s rights almost immediately after the execution of the conditional sales contract. The Court was advised that in some rare situations, the Royal Bank did not accept an assignment and purchase the conditional sales contract. In such situations, the purchaser was then required to make payments under the conditional sales agreement directly to Murray GM, and Murray GM was then of course responsible for collection.

This was however a rare case. [ 5 ] The representative of Murray GM was also equipped with blank forms from the Defendant, First Canadian Insurance Corporation. The representative of Murray GM was authorized to act as agent of First Canadian Insurance Corporation. He would gather certain personal information from the purchaser, and complete the blank contract form to provide life insurance coverage on the financed portion. [ 6 ] Mr. Clark had been a long time patient of Dr. C.F. Wigmore, who practiced in Moose Jaw. Mr. Clark saw Dr. Wigmore in February of 2008. He then did not see or consult with Dr.

Wigmore until October 14, 2008. There was no evidence that Mr. Clark consulted with any other medical professional between February of 2008 and October 14, 2008. [ 7 ] Mrs. Clark testified that for a period of approximately two weeks prior to October 14, 2008, Mr. Clark had not been feeling well. He thought he had the flu and felt nauseated. He looked a little jaundiced. She recalled that October 14, 2008 was a Tuesday immediately after Thanksgiving Day. On the morning of October 14, she called Dr. Wigmore’s office and made an appointment for Mr. Clark to see Dr.

Wigmore later that afternoon. [ 8 ] The couple then went to Murray GM. At Murray GM, they executed the conditional sales agreement. The conditional sales contract had a base price of $30,118.01. It had a charge of $605.47 for the life insurance premium. Taxes and other extras brought the total for the conditional sales contract to $33,423.82. The Clarks were allowed $3,790.00 for the trade- in of their 1998 Ford truck. They made a further cash down payment of $11,013.64 and were required to pay a balance of $18,620.18 by regular monthly installments. Mrs.

Clark testified that the dealership agreed to do a couple of things to the truck prior to delivery to the Clarks. As a result, the truck was not delivered to the Clarks until two or three days later. However, the Clarks made their down payment and executed all of the documents on the morning of October 14. [ 9 ] The representative of Murray GM testified that the Clarks had been approved in advance by the Royal Bank. As a result, Murray GM was certain that the conditional sales contract would be purchased by the Royal Bank.

If Murray GM hadn’t been required to do a couple of things to the truck prior to delivery, it would have been given over to the Clarks immediately on the morning of the fourteenth. Lastly, the representative from Murray GM testified that the conditional sales contract was in fact sold to the Royal Bank of

Canada. On October 16, 2008, the Royal Bank deposited the funds for purchase of the conditional sales contract to the account of Murray GM. [ 10 ] The amortization

schedule prepared for the Clarks, regarding their financing, indicates that a loan advance was made to them on October 14, 2008, in the amount of $18,620.18. Thereafter, it shows payments to be made on the thirteenth of each month. [ 11 ] On the morning of October 14, 2008, at the same time as the parties completed a conditional sales contract, the representative of Murray GM and Mr. Clark completed the life insurance contract. As mentioned above, the premium for the life insurance contract was paid as part of the financing under the conditional sales contract.

The blank contract was completed by the representative of Murray GM and executed by Mr. Clark. The life insurance contract is clearly dated October 14, 2008. The face page of the life insurance contract contained personal information on Mr. Clark. It states that the dealership is “Murray Chevrolet Cadillac Pontiac Buick GMC Sales Moose Jaw”. It indicates that the insured amount of $18,620.18 and is a “monthly decreasing term life insurance.” Six medical questions were put to Mr. Clark, which he answered. There is no suggestion of any misrepresentation or inaccuracies in Mr. Clark’s answers.

The face page of the contract contained the following notation: “Effective date - 2008 10 14". The face page also contains the following: First Canadian Insurance Corporation (FCIC) certifies that: 1. Either the Customer Only, or the Co-signer only, or the Customer and Co-signer jointly, as indicated in the Election of Coverage is/are enrolled in a Policy of Group Creditor Insurance and this certificate is evidence of that insurance. Your insurance coverage will be provided by FCIC under this policy. 2. The dealership is sponsored by FCIC, and in arranging this insurance the dealership is representing FCIC.

The dealership will receive a commission from FCIC in respect of this transaction. This transaction does not obligate you to transact additional or other business with FCIC. 3. Enrollment, and all benefits paid are subject to the terms, conditions, limitations and exclusions contained herein. [ 12 ] The second page of the insurance contract contains a number of detailed

definitions and other clauses. Under the heading “Limitations and Exclusions” is the following: FCIC shall have no liability, except to refund unearned premiums, where the insured is not eligible, or Death, Dismemberment or Total Disability results from or is caused or contributed to directly or indirectly by any of: (

a) a Pre-existing illness, Disease or Physical Condition... [ 13 ] In the

definitions section, the terms “Effective Date” and “Pre-existing illness, Disease or Physical Condition” are defined as follows: “Effective Date” means the later of the date set out in the Election of Coverage or the date that my Loan or Lease Funds are advanced. “ Pre-existing Illness, Disease or Physical Condition” means illness, or disease, or physical condition for which any one of: medical advice, treatment, service, prescribed medication, diagnosis; or consultation, including consultation to investigate and/or diagnose (where diagnosis has not yet been made), was obtained or recommended within a six month period immediately preceding the effective date.

This is irrespective of whether this illness, disease or physical condition was disclosed by you in any application for insurance or any verbal declaration to any party. [ 14 ] As mentioned above, Mrs. Clark testified that on the morning of October 14, 2008, she called Dr. Wigmore’s office and made an appointment for Mr. Clark to see Dr. Wigmore later that afternoon. She testified that later in the day, after concluding matters at Murray GM, Mr. Clark in fact went to Dr. Wigmore’s office. Dr. Wigmore testified that Mr. Clark was mildly jaundiced, but was not clinically jaundiced on the 14 th .

The doctor was unable to make a diagnosis on October 14, but provided requisitions for some tests to be done at the hospital.

[ 15 ] Dr. Wigmore met with Mr. Clark again on October 17, 2008. At this time, he suspected certain liver problems and directed that further tests be taken. On October 27, 2008, lesions were detected and cancer was suspected. Mr. Clark was then diagnosed with pancreatic cancer. Dr. Wigmore testified that pancreatic cancer is often very aggressive, as was the case with Mr. Clark. Pancreatic cancer can be very difficult to operate on or otherwise treat. Mr. Clark passed away on August 17, 2009, as a result of pancreatic cancer. At the time of Mr.

Clark’s death, the balance remaining owing on the vehicle, and presumably the balance payable under the life insurance policy, was $16,594.76. The Defendant’s Applications to Amend Pleadings and Adduce Further Evidence [ 16 ] Mr. Mohrbutter was not retained as the Defendant’s counsel at the time the pleadings in these proceedings were filed or the case management conference held.

The Court has no way of knowing whether the person who prepared the Statement of Defence or dispute note for the Defendant was a lawyer or not. [ 17 ] In paragraph three of the Plaintiff’s Statement of Claim, it is stated that the Defendant “provided insurance coverage having an effective date of October 14, 2008...” In the Defendant’s Statement of Defence, the Defendant admits paragraph three of the Statement of Claim. In closing argument, Mr. Mohrbutter argued that the effective date of the policy was not October 14, 2008, but October 16, 2008. When confronted about the Statement of Defence, Mr.

Mohrbutter applied to amend his pleadings, and applied for leave to re-open his case and adduce further evidence to establish that the stated effective date of October 14 was an error. I reserved decision on these applications. [ 18 ] With respect to the application to amend the pleadings, I am prepared to allow that application. I believe this matter should be decided on its merits.

I am not prepared to decide this matter on the very narrow or technical basis of the wording of the Statement of Defence, particularly when that document may have been drafted by a non-lawyer. [ 19 ] However, I am not prepared to allow the application of the Defendant to re-open the case or the adduce additional evidence. For the reasons that I will more fully set out hereafter, the Court is required to interpret and apply the written contract of insurance, using legal rules of

interpretation that have been set out in the jurisprudence. In my view, evidence as to policies governing employees of the Defendant or evidence of practices followed by those employees is irrelevant and simply not helpful to the Court in interpreting the written contract of insurance. The Argument and Statement of the Issue [ 20 ] During argument, counsel for the respective parties essentially agreed that cancerous lesions did not appear in Mr. Clark for the first time on morning of October 14, 2008, or in the days thereafter.

As a manner of common sense, it stands to reason that the cancer was present and growing from some time prior to October 14, 2008. As a result, this cancer was a condition that was pre-existing to October 14, 2008. [ 21 ] Under the limitations and exclusions clause, FCIC will have no liability for death as a result of a pre-existing illness, disease or physical condition. However, not all or any pre-existing illness or physical condition will exempt the Insurer from liability. In order to exempt the Insurer from liability, the pre-existing illness or condition must be one as defined by the policy document.

Under the definition clause contained in the policy, the pre-existing illness, disease or physical condition, must be one where the applicant sought medical advice, treatment or medication during the six months immediately preceding the effective date of the policy. [ 22 ] Counsel for the Plaintiff, Mr. Cornea, argues that the effective date of the policy is October 14, 2008. He says that the clear evidence is that Mr. Clark did not consult with Dr. Wigmore or any other medical professional during the six months prior to October 14. As a result, Mr. Cornea argues that Mr.

Clark had no pre-existing illness, disease or physical condition within the definition of that term contained in the policy and so the Insurer cannot exclude liability. Counsel for the Insurer, Mr. Mohrbutter really has the same

interpretation of the policy and most of the relevant clauses. Where he and Mr. Cornea differ is regarding the effective date. Mr.Mohrbutter says that the effective date of the policy is October 16, 2008, as this is the date that the funds were advanced by the RoyalBank. He further argues that Mr. Clark consulted with Dr. Wigmore regarding this illness or condition on October 14, 2008. This leddirectly to further consultations and the diagnosis of pancreatic cancer. As a result, Mr.

Mohrbutter says there is consultation with Dr.Wigmore during the six months immediately prior to the effective date, and the Insurer can rely upon the exclusion clause. Mr.Mohrbutter relies heavily upon the case of Leveque v. Seaboard Life Insurance, (SK KB), [1996] 138 Sask. R. 125, adecision by Chief Justice Gerein. The ultimate issue to be determined by the Court in this action is the effective date of the policy. Determination of this issue will determine the result of the entire lawsuit.

What is the Effective Date of the Policy? [23] For various reasons that I will set out, I have no hesitation in stating that the effective date of the policy was October 14,2008. In his written brief, counsel for the Defendant, quoted from Van Maele v. Alberta Blue Cross Benefits Corporation, 2004 ABQB46, at paragraph 12, as follows: Where a contract is unambiguous, effect should be given to its clear language, reading the contract as a whole.

Where there isambiguity, effect should be given to the reasonable expectations of the parties. [24] As mentioned above, the face page of the insurance contract contains a clear statement that the effective date of the policy isOctober 14, 2008. In my view this statement is clear and unambiguous. Counsel for the Insurer attempts to rely upon the definition of“effective date” contained on the second page, as being the date the funds are advanced.

I see no reason why I should look to thisdefinition, or attempt to determine that the funds were advanced on a later date, when the face page of the insurance contract says thatthe effective date is October 14, 2008. The Insurer and its agent drafted this document. It seems to me that any reasonable outsideobserver reading the face page of this document would be required to conclude that the effective date was October 14, 2008. That is theconclusion I draw from the face page. [25] In argument against this, Mr.

Mohrbutter rhetorically questioned why his client would agree to this, when it is so clearlyagainst his client’s interest. I don’t know why the insurance company would agree to this. I don’t have to know that. What I know isthat the parties entered into a written contract of insurance, and my reading of the face page of that contract is that the effective date isOctober 14, 2008. [26] Secondly, stating the Defendant’s argument at its highest, the insurance contract is ambiguous. Mr. Mohrbutter cited the caseof Wawanesa Mutual Insurance Company v.

Hewson, 2004 SKCA 112, as authority for the proposition that in order for an insurancecontract to be ambiguous, the provision must be capable of more than one reasonable meaning. He agreed that the contra proferentemrule is commonly applied to resolve a conflict between two reasonable

interpretations and results in the adoption of the

interpretationagainst the insurer. I have already stated that one reasonable

interpretation of the face page of this insurance contract is that the effectivedate is October 14, 2008. Assuming that it is a reasonable

interpretation that the effective date is October 16, based upon funds beingdeposited to Murray GM’s account on that date, then there are two reasonable

interpretations of this insurance contract. The contraproferentem rule, as it has been utilized in various insurance cases, requires me to resolve this conflict in favour of the insured, Mr. andMrs. Clark. [27] Thirdly, I am in agreement with Mr.

Cornea that the definition of “effective date” contained on the second page of the policyis inapplicable here and would not result in a determination that the effective date of the policy is October 16, 2008. [28] It seems to me that the purpose of the effective date clause is to make the existence of this insurance coverage contingentupon the actual creation of a debt obligation in the insured. This insurance company, at least via this insurance policy, has no interest inhaving a free-standing life insurance policy for this insured. By this I mean it has no interest in insuring the life of Mr.

Clark for say$100,000.00, and providing a payment to his estate or beneficiary in the event of his death. Its only interest is to provide life insuranceon the payment of the debt that is being created. [29] When any individual obtains bank financing for the purchase of an item such as a vehicle, most often the purchaser willexecute the loan agreements with the financial institution to establish the legal framework for the loan and debt arrangement. Sometime

thereafter and when required, the bank will advance the purchase funds so that the purchase contract can be concluded. Sometimes these funds will be advanced directly from the financial institution to the vendor. [ 30 ] What happens if, for any reason, the sales transaction is aborted? In this event, the purchaser would have executed the loan agreements and presumably the life insurance contract. If the insurance contract could not be aborted, or was not contingent upon the sales transaction, then the insurer would be insuring the life of the insured and there would be no debt obligation.

Simply stated, the insured does not want this situation to arise. As a result, via the advancement of funds clause, it has effectively made its liability contingent upon the actual creation of the debt obligation. [ 31 ] In this situation however, we do not have bank financing or the advancement of funds per se. Mr. Clark and Murray GM executed a conditional sales contract. The contract is a sale and purchase agreement. Mr. Clark made a trade-in and made a down payment, and agreed he would pay the balance with interest, by regular monthly installments.

The debt obligation was created immediately upon execution of the agreement, and without the advancement of any funds. It is this debt obligation that the parties were insuring. [ 32 ] Following the execution of this conditional sales contract, Murray GM assigned and sold its rights to the Royal Bank of Canada. The Royal Bank of Canada then paid Murray GM for this sale and purchase. The funds from this sale and purchase were deposited to the account of Murray GM on October 16, 2008. We don’t even know if Mr. Clark knew and appreciated that Murray GM would sell its rights to the Royal Bank.

It is impossible for me to believe or accept that Mr. Clark executed this insurance contract with First Canadian Insurance, believing that the contract would come into effect at some later date when Murray GM sold its rights to the Royal Bank. I can’t imagine why he would even care about this, or execute such an agreement. What Mr. Clark intended to insure and did insure was his debt obligation to Murray GM, which was created on October 14, 2008. All of the evidence, including the documents, the amortization

schedule and the charging of interest support the conclusion that the debt obligation was fully created and enforceable as of October 14, 2008. In the event that the effective date clause is applicable to this insurance contract, on the basis of all of the evidence, I would conclude that the funds were fully advanced and the debt obligation fully created on October 14, 2008. I would equate “advancement of the funds” with “perfection and fully establishing the debt obligation.” [ 33 ] The result of all of the above is that no matter how I look at the situation and analyze it, I arrive at the same conclusion.

The effective date of the policy was October 14, 2008. Mr. Clark did not consult with any medical professional regarding this illness or any symptoms of this illness during the period of six months immediately prior to the effective date of the policy. As a result, Mr. Clark did not have any pre-existing illness or condition as that term is defined in the policy. The result is that the Insurer is not able to rely upon the exclusion clause in the policy. Decision and Judgment [ 34 ] Terry Clark passed away on August 17, 2009. The balance owing on the loan on that date was $16,594.76.

The estate is entitled to rely upon its insurance contract and is entitled to judgment in that amount. Had the Insurer met this obligation and paid off the loan on that date, the estate would have incurred no additional interest obligation to the Royal Bank. However, because the loan has not been paid out, the estate has continued to incur liability for interest, and has suffered damages. The annual interest rate charged on the loan is 8.79%.

I calculate interest on the principal sum of $16,594.76, at a rate of .0879% for 508 days to the date of this judgment at $2,030.16. [ 35 ] As a result, the Plaintiff will have judgment for the principal sum of $16,594.76, plus interest/damages of $2,030.16, for a total judgment of $18,624.92. In addition, the Plaintiff shall have its costs in this action, which I fix in the amount of $500.00. Dated at Moose Jaw, Saskatchewan, this 7 th day of January, 2011.

________________________________________________ D.J. Kovatch, J