2011 NBCA 96, 2011 NBCA 96

COURT OF APPEAL OF NEW BRUNSWICK 7-11-CA AVIVA INSURANCE COMPANY OF CANADA (Defendant) APPELLANT AVIVA COMPAGNIE D’ASSURANCE DUCANADA (Défenderesse) APPELANTE - and - - et - HUBERT THOMAS (Plaintiff) RESPONDENT HUBERT THOMAS (Demandeur) INTIMÉ Aviva Insurance Company of Canada v.

Thomas,2011 NBCA 96 Aviva Compagnie d’Assurance du Canada c.Thomas, 2011 NBCA 96 CORAM: The Honourable Chief Justice Drapeau The Honourable Justice Larlee The Honourable Justice Quigg CORAM : L’honorable juge en chef Drapeau L’honorable juge Larlee L’honorable juge Quigg Appeal from a decision of the Court of Queen’sBench: December 17, 2010 Appel d’une décision de la Cour du Banc de la Reine: Le 17 décembre 2010 History of Case: Historique de la cause : Decision under appeal: 2011 NBQB 26 Décision frappée d’appel : 2011 NBQB 26 , 2011 NBBR 26 Preliminary or incidental proceedings: N/A Procédures préliminaires ou accessoires : s.o.

Appeal heard: June 17, 2011 Appel entendu : Le 17 juin 2011 Judgment rendered: October 27, 2011 Jugement rendu : Le ​​​​​​27 octobre 2011

Reasons for judgment by: The Honourable Chief Justice Drapeau Motifs de jugement : L’honorable juge en chef Drapeau Concurred in by: The Honourable Justice Larlee The Honourable Justice Quigg Souscrivent aux motifs : L’honorable juge Larlee L’honorable juge Quigg Counsel at hearing: For the appellant: Nadia M. MacPhee For the respondent: Brenda J. Lutz, Q.C. Avocats à l’audience : Pour l’appelante : Nadia M. MacPhee Pour l’intimé : Brenda J. Lutz, c.r.

THE COURT Statutory Condition 4, which obligates the insured to notify the insurer in writing of any change material to the risk within his or her control and knowledge, has application to the respondent insured’s claim for indemnity under the “insurance against loss of or damage to property arising from the peril of fire” provided by Aviva’s multi-peril policy. However, Aviva could not resort to that condition to cancel its insurance contract with the respondent.

To conclude otherwise would require turning a blind eye to the insignificance Aviva attributed in the pre-loss period to the information it claimed post-loss was material to the risk. It would also require the Court to overlook the fact that it is Aviva’s own acts and omissions that resulted in the nondisclosure of what it contended post-loss was a change material to the risk.

Those reasons suffice to dismiss the appeal and, consequently, the Court need not decide whether the trial judge correctly ruled Statutory Condition 4 is only engaged where the insured knows the insurer views a particular change in circumstances as material to the risk.

LA COUR La condition légale n o 4, qui oblige l’assuré à aviser l’assureur par écrit de tout changement essentiel pour l’appréciation du risque sur lequel il a un contrôle ou dont il a connaissance, s’applique à la demande d’indemnisation que l’assuré intimé a présentée en vertu de l’« assuranc[e] contre les pertes ou dommages matériels dus aux risques d’incendie » fournie par la police multirisque d’Aviva. Toutefois, Aviva ne pouvait recourir à cette condition aux fins d’annuler le contrat d’assurance qu’elle avait passé avec l’intimé.

Pour tirer une autre conclusion, il faudrait faire fi du peu d’importance qu’Aviva a attribué pendant la période qui a précédé le sinistre aux renseignements dont elle a prétendu, après le sinistre, qu’ils étaient essentiels pour l’appréciation du risque. Il faudrait également que la Cour passe outre au fait que ce sont les actes et les omissions mêmes d’Aviva qui ont donné lieu à la non-divulgation de ce qui, a-t-elle prétendu après le sinistre, constituait un changement essentiel pour l’appréciation du risque.

Ces raisons sont suffisantes pour rejeter l’appel et il s’ensuit que la Cour n’a pas à décider si c’est à bon droit que le juge du procès a décidé que la condition légale n o 4 ne s’applique que lorsque l’assuré sait que l’assureur considère un changement précis des circonstances comme essentiel pour l’appréciation du risque. The judgment of the Court was delivered by

DRAPEAU, C.J.N.B. I. Introduction [ 1 ] In 2000, Hubert Thomas, an elderly gentleman with very limited formal education, secured fire insurance for his modest home by way of a “Homeowners Broad Package Form Policy” issued by Aviva Insurance Company of Canada. This multi- peril policy, which was renewed annually until its post-loss cancellation by Aviva in 2007, featured a condition providing for the avoidance of the part of the insurance contract affected by any change material to the risk, absent prompt written notification of the change to the insurer.

That condition has application only if the change material to the risk was within both the control and the knowledge of the insured. [ 2 ] In its wisdom, the Legislature has included the condition mentioned above in the list of “Statutory Conditions”, which, as a matter of law, apply unaltered to insurance against loss of or damage to property arising from the peril of fire and are deemed to be part of every contract of insurance in force in the Province.

Moreover, Aviva’s policy expressly incorporated those Statutory Conditions, including the “Material Change” condition (Statutory Condition 4), as contractual conditions applicable to all insured perils, albeit subject to certain exceptions. [ 3 ] By Mr. Thomas’ original application for insurance, Aviva was advised, in answer to a very precise question on point, that his home’s primary heating source was electrical. At the time, it was the home’s sole non-natural heating source and, had he been asked, Mr. Thomas would undoubtedly have disclosed that state of affairs.

At any rate, no issue is made of the statement confirming the home’s primary heating source was electrical, and I will say no more on the subject. More pertinently, no response was recorded by Aviva’s agent in answer to the application’s specific questions regarding auxiliary heating sources and any “solid fuel heating unit”. Subsequently, Mr. Thomas concluded his home needed a complementary heating source to reduce his outlay for electricity. To that end, in the fall of 2001, he installed a woodstove in the back porch.

In the result, the information provided in the original application, including the fact that the home’s “primary” heating source was electrical, became punctiliously accurate. Moreover, Aviva did not, at any time post-application, draw to Mr. Thomas’ attention that the installation of a woodstove as an auxiliary heating source might constitute a change material to the risk. In fact, and as will be demonstrated, it effectively suggested the opposite in its renewal documentation. At any rate, Mr.

Thomas did not volunteer, post-application, further information on the subject of his home’s heating. [ 4 ] Shortly before Christmas of 2007, Mr. Thomas’ home was damaged by fire, which somehow escaped from the woodstove he had installed. As would be expected, the follow-up investigation acquainted Aviva with the stove’s presence and use in the insured property, a state of affairs that was invoked as justification for the cancellation of the insurance contract, retroactive to the date of its last pre-loss renewal. Not surprisingly, it is on that basis that Mr.

Thomas’ action for indemnity and damages was defended in the court below. [ 5 ] After hearing comprehensive submissions on a number of contentious issues, the trial judge ruled the insured’s knowledge of materiality was a linchpin for the application of the “Material Change” condition. He then found, over Aviva’s forceful objection, that Mr. Thomas did not know the installation and use of the woodstove might constitute a change material to the risk. That finding of credibility, and ultimately of fact, stands unchallenged on appeal.

There being no “guilty knowledge”, the judge rejected Aviva’s defence and allowed the action for indemnity under the policy, to the tune of $23,662, with costs ( see 2011 NBQB 26 ). However, the judge dismissed the claim for general damages for the emotional distress occasioned by Aviva’s failure to honor its policy obligations. [ 6 ] Aviva appeals, arguing the trial judge erred in law in his

interpretation of the “Material Change” condition. In its submission, that condition may trigger cancellation of the insurance contract even where, as here, the insured has no appreciation whatsoever of the materiality (for risk purposes) of the change in circumstances. It is sufficient, so goes Aviva’s argument, if the insured knows of the change; absent notification in writing, and in the event the change, even if unbeknownst to the insured, is material to the risk, the insurer is entitled to cancel the contract and, effectively, leave a wholly innocent insured without indemnity for his or her fire losses. [ 7 ] Predictably, Mr. Thomas disagrees with Aviva’s proposed policy

interpretation. And in making the case for the more insured-friendly understanding of the “Material Change” condition, he underscores a critical aspect of Aviva’s annual renewal notices: they call only for the disclosure of changes to the information provided in the original application for insurance. Since that information was accurate in every respect, Mr. Thomas would have simply followed Aviva’s instructions in not notifying it of the installation and use of an auxiliary heating source. Finally, Mr. Thomas raises a preliminary objection to Aviva’s reliance upon the

“Material Change” condition. In his submission, two decisions out of the Supreme Court of Canada, KP Pacific Holdings Ltd. v. Guardian Insurance Co. of Canada , 2003 SCC 25 , [2003] 1 S.C.R. 433 and Churchland v. Gore Mutual Insurance Co. , 2003 SCC 26 , [2003] 1 S.C.R. 445 , hold the “Material Change” condition qua Statutory Condition 4 has no application to a multi-peril policy of insurance. Relying on Co-operators General Insurance Co. v. Burry , 2007 NLCA 52 , [2007] N.J. No. 277 (QL) , Mr.

Thomas also seeks to excise the “Material Change” condition from the agreed-upon terms of the insurance contract on grounds of public policy: in brief, it is his contention that to allow the condition to stand as a consensual term of the policy would allow the insurer “to do indirectly what it cannot do directly”. [ 8 ] With respect, I cannot agree with Mr. Thomas’ preliminary objection. In my respectful judgment, the cases cited in support deal with materially different legislation and are easily distinguishable on that basis. That being so,

Part IV (“Fire Insurance”) of the Insurance Act , R.S.N.B. 1973, c. I-12, is in play and all Statutory Conditions are deemed to be part of the parties’ “contract”, Aviva’s multi-peril “Homeowners Broad Package Form Policy”. Thus, Statutory Condition 4 applied, at the very least, to the insurance Aviva’s policy provided “against loss of or damage to property arising from the peril of fire”. Those are precisely the “insurance” and the “peril” involved in the case at hand. [ 9 ] Because the parties put so much energy into convincing this Court of the correctness of their proposed

interpretation of Statutory Condition 4, some observations on point are warranted. As will be seen, on the arguments put forward by the parties, I am non-committal on the correctness of the trial judge’s ruling that the “Material Change” condition is engaged only where the insured knows the change in circumstances is material to the risk. [ 10 ] That said, I prefer to dispose of the present appeal on the narrow ground that Aviva failed to make the appropriate enquiries, treated the matter of auxiliary heating sources as inconsequential and effectively advised Mr.

Thomas in its various renewal notices that only the information provided in the original application was material to the risk. As that information did not touch upon auxiliary heating sources, in particular solid fuel heating, and was entirely accurate following the woodstove’s installation, Mr. Thomas cannot be prejudiced by the nondisclosure invoked by Aviva. In my view, Aviva’s acts and omissions evince a failure to abide by its duty of good faith disentitling it from canceling the policy. That result also flows from s. 100(2), which preserves the contract’s validity where

an act or omission of the insurer results in non-compliance with any provision of the Insurance Act . [ 11 ] I would wrap up these introductory remarks by noting that the dismissal of Mr. Thomas’ action for indemnity under the policy would not be appropriate even if knowledge of materiality on the insured’s part were irrelevant to the application of Statutory Condition 4 and Aviva had not engaged in the acts or omissions referenced above. That is so because the issue of relief against forfeiture remains unresolved. Although raised in the pleadings, that question was not addressed by the trial judge.

Had it been necessary, I would have referred the issue back to him for determination. [ 12 ] For the reasons summarized hereinabove, which are expanded upon in the text that follows, I would dismiss the appeal, with costs. II. The Context [ 13 ] The findings of fact made in the court below are, for the most part, beyond challenge. Indeed, only one of the trial judge’s factual observations is objectionable and it is that the initial application for insurance indicated “there was no solid fuel heating unit in the home”. In fact, the application was mute on the subject.

I make this last assertion while fully alive to the admission in the Respondent’s Submission that the Appellant’s Submission correctly reports the trial judge’s

summary of the facts includes the objectionable observation. Mr. Thomas did not concede the trial judge’s

summary was accurate. And, in any event, the Court of Appeal may, in the interests of justice, disregard a respondent’s failure to object to a statement of fact in the Appellant’s Submission, particularly where, as here, the record does not substantiate the statement in question. Be that as it may, an adumbration of the salient facts and procedural steps remains in order, having particular regard for the narrow basis upon which I propose to dispose of the appeal. [ 14 ] Mr. Thomas’ home was damaged by fire on December 15, 2007. [ 15 ] The home had been insured by Aviva since mid-April, 2000.

At that time, an insurance broker and Aviva agent, who had “seen” the home, filled out a Habitational Insurance Application in which it was noted the home’s primary heating source was electrical and no answer was provided to the question pertaining to the presence of a “solid fuel heating unit” in the home. Indeed, a diagonal line was drawn by Aviva’s agent across the

section pertaining to auxiliary heating sources, likely reflecting his understanding that the use of a woodstove in a dwelling heated primarily by electricity was not a circumstance material to the risk. At any rate, Mr. Thomas did not state in the application that his home’s sole source of heating was electrical. Nor did he state his home did not have a solid fuel heating unit. He confirmed his home’s “primary” heating source was electrical. As will appear shortly, there is no gainsaying the importance of that particular informational pool.

[ 16 ] In the fall of 2001, Mr. Thomas installed a woodstove in the back porch to supplement his home’s electric heating. He later replaced that stove with another, which was unlabelled. [ 17 ] Each year, Aviva sent a “Renewal policy notice” to Mr. Thomas. The last pre-loss notice offered the following advice: “Enclosed is the renewal of your policy. Please ensure that all information is accurate, as your coverage and premium are based upon the information you provided ” (emphasis added). The information Mr.

Thomas had provided was set out in brief compass in the accompanying Certificate of Property Insurance: “One family, Frame, 1942 built, Updated: Heating: 1999, Plumbing: 1999, Wiring: 1999, Roofing: 1999, Primary Heat: Electric Heat, Within 13 Km of Fire Dept. […]”. That information was accurate at the time of renewal. Recall that Mr. Thomas had informed Aviva that his home was heated primarily by means of electric power and that he provided no information regarding auxiliary heating sources, including any “solid fuel heating unit”. Moreover, none of the yearly renewal notices made any reference to woodstoves.

Mr. Thomas renewed his insurance contract with Aviva year after year without seeing the need to disclose the woodstove’s presence and use as an auxiliary heating source. [ 18 ] Following the fire of December 15, 2007, a firm of independent adjusters retained by Aviva reported the woodstove’s use in Mr. Thomas’ home, as well as its role in the occurrence of the loss. As a result, Aviva denied Mr. Thomas’ claim, contending the installation of an “unlabeled” woodstove constituted a change material to the risk within the meaning of the “Material Change” condition.

Aviva’s cancellation letter, which is dated December 27, 2007, reads as follows: Re: Policy # P16033929HAB Dear Mr. Thomas: As the Insured, you are required to advise Aviva Insurance Company of Canada of any material changes made to the risk, to allow Aviva Insurance Company of Canada to judge the new characteristics of the risk and determine if we wish to continue providing insurance coverage. We confirm that you failed to advise Aviva Insurance Company of Canada of the installation of an unlabelled woodstove at your premises at 576 Main Street, Hampton, N.B.

Accordingly, your contract with Aviva Insurance Company of Canada with respect to Property Insurance is hereby voided as of April 12, 2007. Enclosed with this letter is a cheque payable to you in the amount of $285.00 representing a refund of the premium you have paid. [ 19 ] In an email dated December 24, 2007, Ross Bethune, the broker and Aviva agent who had filled out Mr.

Thomas’ initial application form, urged his principal to reconsider its cancellation of the policy and denial of the claim: The purpose of this email is to request that you might consider reviewing the status of our insured’s fire claim of Dec. 15/07. The situation was brought to my attention by the independent adjuster, Dave Belyea of Crawford Adjusters who was appointed by Aviva to investigate the said fire claim. I was advised by the adjuster that Aviva was denying the claim due to a material change in the risk.

As you can appreciate, the denying of a claim is a very serious matter and can have serious ramifications on the broker’s office and the Insurance Company. For the purpose of this communication, I would like to point out that our insured has been a client of our office and a policyholder of Aviva’s for many years. His auto policy # is A16026768 and the above-numbered Homeowners policy has claims free discount, mortgage free discount and over 50 discount. Our insured’s current status is as follows:- He has a hearing disability and is a senior citizen with very little means.

Due to his lack of means and in an attempt to save money on hydro, he installed a wood stove incorrectly which I understand lead to the small fire. His dwelling has electric heat.

It appears that his only mistake in judgment was that he didn’t inform our office that he had installed an auxiliary heat wood stove several years ago. He indicated to the adjuster that he didn’t realize he was required to inform his insurance office regarding the said installation. I am not sure who made the rapid decision to deny the claim due to a “material change in risk”. It is possible that many Aviva policyholders may use temporary heating units without the knowledge of Aviva or the broker. Would all of these situations be considered a material change in the risk?

Lynn, this is a small town and our office survives on the service we provide to our policyholders. This insured lives alone. He has only survived this situation with the help of his family. They helped him install a new hydro entrance so that he could use his electric heat. I would like Aviva to take a second look at this claim. In addition, underwriting contacted our office via phone on Dec. 21/07 indicating the insured’s policy was being cancelled and the cancellation date was being backdated to April 12/07. I would refer to Statutory Conditions, Item #5-1 to 5.

Am I missing something as it relates to policy cancellations? Lynn, please feel free to give me a call on his matter as it is extremely important to our office and Aviva that this claim be handled in a fair and just manner under the circumstances. Any assistance on this file would be sincerely appreciated. All the best to you at this Christmas Season.

Thanks again. [Emphasis added.] [ 20 ] The key policy provisions are the following: Your Homeowners Broad Package Form Policy is written in plain language so that you may properly understand the protection you have purchased . […] Insured Perils – Coverage A [Dwelling Building] […] you are insured against all risks of direct physical loss or damage to the property described in [Coverage] A […] subject to the exclusions and conditions of this form. Insured Perils – Coverage C You are insured against direct loss or damage caused by the following perils as described and limited: 1. FIRE or LIGHTNING. 2.

EXPLOSION […] 3. SMOKE […]

4. FALLING OBJECT […] 5. IMPACT BY AIRCRAFT OR LAND VEHICLE […] 6. RIOT. 7. VANDALISM or MALICIOUS ACTS […] 8. WATER ESCAPE, RUPTURE, FREEZING […] 9. WINDSTORM or HAIL […] 10. TRANSPORTATION […] 11. THEFT, INCLUDING DAMAGE CAUSED BY ATTEMPTED THEFT […] 12. COLLAPSE OF BUILDING […] 13. ELECTRICITY […] 14. FUEL OIL ESCAPE […] […] Conditions Required By Law – with respect to

Section II – Liability Coverage, including Voluntary Compensation for Residence Employees Endorsement when added, Statutory Conditions 1, 3, 4, 5 and 15 only apply. Otherwise, all of the conditions set forth under the titles Statutory Conditions and Additional Conditions apply with respect to all of the perils insured by this policy except as these Conditions may be modified or supplemented by the Forms and Endorsements included hereto or attached.

Statutory Conditions The “Statutory Conditions” set out in his policy are renamed “Policy Conditions” and now apply, as modified or supplemented in forms or endorsements attached to this policy, as “Policy Conditions” to all coverages and all perils (including fire ) insured by this policy. Misrepresentation 1.

If a person applying for insurance falsely describes the property to the prejudice of the Insurer, or misrepresents or fraudulently omits to communicate any circumstance that is material to be made known to the insurer in order to enable it to judge of the risk to be undertaken, the contract is void as to any property in relation to which the misrepresentation or omission is material. […] Material Change

Any change material to the risk and within the control and knowledge of the Insured avoids the contract as to the part affected thereby, unless the change is promptly notified in writing to the Insurer or the local agent, and the Insurer when so notified may return the unearned portion, if any, of the premium paid and cancel the contract, or may notify the Insured in writing that if the Insured desires the contract to continue in force, the Insured must, within fifteen days of the receipt of the notice, pay to the Insurer an additional premium, and in default of such a payment the contract is no longer in force and the Insurer shall return the unearned portion, if any, of the premium paid. [Emphasis added.] [ 21 ] Mr.

Thomas brought an action under Rule 79 of the Rules of Court (“Simplified Procedure”). In the Amended Statement of Claim, he denies a change material to the risk occurred and alleges Aviva “failed to comply with Statutory Condition 4” in voiding the policy. His first fallback contention is that the court should grant relief from forfeiture pursuant to s. 130 of the Insurance Act , and ss. 26(2) and (3) of the Judicature Act , R.S.N.B. 1973, c. J-2. In the further alternative, Mr.

Thomas states Aviva is not entitled to rely on Statutory Condition 4 because its multi-peril policy is “excepted from the application of

Part IV of the Insurance Act pursuant to s. 122(1)(

c) as the peril of fire was an incidental peril to the coverage provided”. He claims indemnity for the damage caused to his home and its contents ($32,793.08). Thus, the claims bring into play the policy’s Property Coverages A (“Dwelling Building”) and C (“Personal Property”). In addition, Mr. Thomas claimed general damages ($15,000) for the “severe emotional distress” occasioned by Aviva’s breach of contract. [ 22 ] In its Statement of Defence, Aviva admits that, on April 12, 2000, Mr.

Thomas completed a Habitational Insurance Application at the request of its agent , Ross Bethune, in which he truthfully reported his home was heated electrically , and that it renewed annually Mr. Thomas’ multi-risk insurance policy on six occasions without requesting he complete another application form. Aviva also acknowledges Mr. Thomas installed a woodstove in his home “to help reduce heating costs” before asserting it voided the insurance contract because he “failed to notify [it] of a change material to the risk within his control and knowledge contrary to Policy Condition number 4”.

Aviva goes on to deny Mr. Thomas is entitled to relief from forfeiture, without providing any supporting reasons. [ 23 ] The trial took place under the aegis of Rule 79, the presiding judge rightly noting the claim “was almost a Small Claim”. While two liability-related issues were raised by the pleadings, namely whether Mr. Thomas breached the “Material Change” condition and, if he did, whether relief against forfeiture should be granted, the oral representations in first instance focused on the former. That said, the latter issue is raised in the Statement of Claim and discussed in Mr. Thomas’ pre-trial brief.

Aviva’s pre-trial brief is silent on the subject. [ 24 ] In the affidavit he filed at trial, Mr. Thomas deposed to the following: 1. […] 2. I am 74 years of age, having been born on May 5, 1935. I am in good health but have a hearing problem which requires I wear a hearing aid. 3. […] I quit school before completing Grade 7 when I was 16 years old to go to work for Habbs Glass. 4. I never returned to any type of school. I worked for other glass companies for ten years before I started my own glass business. 5.

By working with others, I learned how to build a house, build decks, install doors and windows and replace glass in windows. […] 19. In 1999 and 2000, the following renovations were done to the house at 576 Main Street:

• Purchased and installed new vinyl siding of the entire exterior of house • Removed all the cedar paneling on the inside of the house and put in sheetrock, crack-filled and painted the walls and ceiling. • Renovated the bathroom including the installation of new fixtures. • Reggie Merritt, an electrician re-did the wiring in the house and installed electric baseboard heaters in every room . • Portions of the roof were replaced or repaired. 20. On the first floor of 576 Main Street, there is a bathroom, my bedroom, a living room, kitchen and a porch adjacent to the kitchen […]. 21.

The door to the back yard of my home is in the porch and is the only door used to enter the house. There is also a door that separates the kitchen from the porch. 22. […] 23. All rooms in the house at 576 Main Street are heated with electric baseboard heaters except the porch. […] 25. In April 2000, when renovations were completed, I met with Ross Bethune to get insurance on 576 Main Street. 26. While at Ross Bethune’s office, he asked me questions about 576 Main Street that I answered truthfully and signed a paper. 27. I am informed by my solicitor, Brenda J.

Lutz, and believe the paper I signed was an Application for Insurance […]. 28. I never read the insurance policy covering my house and I don’t remember ever receiving a copy of it. 29. In the fall of 2001, I installed a woodstove in the porch of 576 Main Street. […] 35. The only furniture in the porch was a table, a chair, a dryer and a woodstove. The porch basically operated as an entranceway and a windbreaker for the kitchen. 36. The stove installed in the fall of 2001 had glass doors that sometimes broke and had to be replaced. In 2006, I replaced it with a stove, given to me by Vernon Hickey.

37. The stove I received from Vernon Hickey had a name on it but I could not read the name. […] 78. Before December 15, 2007, I never had a problem with the woodstove, stovepipe or insulated flue and no one ever told me that there was anything wrong with my installation of the stove. 79. On December 15, 2007, I put the stove on at 8 a.m. and went to take a shower. 80. When I came out of the shower and set to watch TV in the living room, I heard the smoke alarm around 8:30 a.m. 81. I looked out into the porch and saw the wall behind the stove next to the ceiling on fire. […] 90.

The actual fire damage was confined to the porch ceiling above the stove in the area of the insulated flue […]. 91. I do not know what happened to the insulated flue that it would allow fire to escape. Usually you can touch an insulated flue and they don’t get hot. […] 105. At the end of December 2007, I received […] a letter dated December 27, 2007 from Aviva Insurance with a cheque for $285.00 dated December 21, 2007. 106. When I read the letter from Aviva, I thought the company made a mistake because the stove in my porch had a name on it. 107.

I did not know I had to report to my insurance company that I installed a wood stove. 108. About 20 years ago, I insured one of my camps (a three-bedroom bungalow with a basement) with Ross Bethune. I was informed by Ross Bethune and believe it was okay to have a woodstove at the camp as long as the camp was electrically heated. 109. I did not contact Ross Bethune when I installed the woodstove in the house because I thought it was okay to have a woodstove because the house was electrically heated. 110. It was in the 1970’s I installed my first woodstove.

Since then, I have installed woodstoves and flues on seven occasions. […] 112. Between April 2000 and December 2007 I never received a letter or instructions from Mr. Ross Bethune or Aviva Insurance telling me that if I installed a woodstove I should report it to him or the insurance company.

113. Between 2001 and December 2007, neither Mr. Bethune or Aviva Insurance asked me to sign any papers or provide any information about 576 Main Street. They only asked me to pay the premium each year. 114. After I learned Aviva was not going to pay for the replacement of my porch, I became quite upset. 115. Until the spring of 2008, I had many sleepless nights worrying about how I could finally replace the shed. […] 121. My taxable income in 2005 was $7,120.7 and in 2006 was $10,118.93. My income sources include Canada Pension, Old Age Pension and rental income from 582 Main Street. 122.

My income in 2007 reduced as I no longer had any rental income. I sold 582 Main Street to my son Robert so I could pay off the mortgage on 576 Main Street. [Emphasis added.] [ 25 ] In his affidavit, the insurance broker and Aviva agent, Ross Bethune, asserts Aviva did not advise him, at any time prior to the fire of December 15, 2007, that it considered the installation of a woodstove (in the circumstances described above) to be a change material to the risk. He also confirms he never provided advice of that nature to Mr. Thomas or, for that matter, to any other similarly situated Aviva policyholder: 1. […] 2.

I am employed as a licensed insurance broker and for over 30 years I sold insurance policies to the Plaintiff, Hubert Thomas, and as such have personal knowledge of the matters herein deposed to except where otherwise stated. 3. My insurance broker business is known as Bethune & Associates and is located at my home at 1590 Main Street, Hampton, NB. 4. Aviva Insurance Company (“Aviva”) and I have a brokerage agreement whereby, subject to terms and conditions, Bethune & Associates is authorized to bind Aviva for personal property risks . 5.

For all new applications for property insurance, I am required by Aviva to have the Applicant complete and sign an Application for Insurance, which application is usually provided to Aviva within five days. 6. For over 30 years, I sold Hubert Thomas insurance policies providing coverage on his automobiles and his glass business called Thomas Glass Ltd. 7. I placed insurance coverage for Thomas Glass Ltd. for several years with CGU Insurance, which company is now known as Aviva. 8. The automobiles of Hubert Thomas were also insured with CGU and then Aviva for many years. 9.

In April 2000, Hubert Thomas requested insurance coverage for his property located at 576 Main Street, Hampton, N.B.

10. Hubert Thomas completed an Application for Insurance dated April 20, 2000 and an insurance policy was issued for CGU for the policy period April 20, 2000 and April 21, 2001. 11. […] 12. […] 13. […] 14. […] 15. Before the fire on December 15, 2007, I did not know Hubert Thomas had installed a woodstove at 576 Main Street. 16. […] 17. Between the years 2001 and 2007, Aviva did not request I have Hubert Thomas complete a further Application for Insurance prior to the company issuing a renewal policy notice . 18.

I have never received a memo or letters from Aviva providing information on what the Company considers a material change in risk. 19. I have never told any policy holders, including Hubert Thomas, that the installation of a woodstove could void their policy or that they have to contact me or the insurance company if they intend to install a woodstove. 20. I have never received a request from Aviva to notify any policy holders, including Hubert Thomas, that they are to notify the insurer if they install a woodstove. […] [Emphasis added.] [ 26 ] In his affidavit, Mr.

Armand Gaudet, who also testified at trial as an expert on the subject of risk materiality, offers the following insights into his background in the field of underwriting and his views on the materiality of adding a woodstove to a dwelling whose primary heating source is electrical: 1. Between 1963 and 1965, I was employed as Property Lines Underwriter with Royal Exchange Atlas Group in Toronto. 2. Between 1966 and 1968. I was employed as a Commercial Underwriter with Dale & Company. 3. Between 1968 and 1970, I was employed by Wawanesa Mutual Insurance Company as a Personal Line and Commercial Underwriter. 4.

Between 1970 and 1975, I was employed as a Commercial Underwriter with Allstate.

5. Between 1976 and 1983, I was employed with The Co-Operators as a Field Underwriter to Personal and Commercial Lines. I also trained agents by reviewing underwriting manuals with them. 6. In 1987 or 1988, I became an Associate of the Insurance Institute of Canada (“AIIC”). 7. Between 1984 and 2004, I was Property Manager of the Underwriting Department of Wawanesa Mutual Insurance Company. 8. In addition to being employed as an underwriter, I also taught underwriting for Personal Lines, Property and Commercial policies for the Insurance Institute of Canada between 1988 and 1998. 9.

After working almost 41 years as an underwriter, I retired in 2004. 10. When employed as an underwriter, I was familiar with the practice of insurers inspecting risks every three to five years. 11. I personally conducted many inspections while employed as a field underwriter for The Co-Operators. 12. Inspections of properties were performed to confirm that the information on the Application for Insurance remained true, particularly before the policies were renewed. 13. Only by doing inspections could I, as an underwriter, know what the company was insuring. 14.

When employed at Wawanesa some risks were inspected by internal inspectors employed by the company and on other risks independent contractors were retained. Occasionally, the agent requesting the policy was asked to inspect the property. 15. By letter dated August 27, 2009 I received from Brenda Lutz of the law firm of Canty Lutz Delaquis Grant, a copy of the Affidavit of Hubert Thomas sworn to on June 12, 2009 and David Belyea sworn to on August 21, 2009, which did not have attached to them the exhibits referenced in the Affidavits. 16.

By letter dated August 27, 2009 I received from Brenda Lutz the Affidavit sworn by Susanne Paulsen on August 4, 2009 together with exhibits attached thereto. 17. By letter dated August 27, 2009, Brenda Lutz requested my opinion on whether the installation of the stove by Hubert Thomas would be considered a material change in risk. 18. Attached As Exhibit “1” is an updated letter wherein I express the opinion that the installation of a wood stove is not a material change in risk. 19.

To constitute a material change in risk, the change in the property risk has to be of such a nature as to change the property from the description of a homeowner’s to something that no longer qualifies as a homeowner’s policy. 20. A material change in risk occurs when a property is changed into a rooming house or to another commercial occupancy that no longer fits the definition of a homeowner.

21. As an underwriter, I approved payment of a total loss even though the loss occurred because the homeowner incorrectly installed an electrical switch. 22. As an underwriter, I approved payment of damages caused by water escaping due to the homeowner incorrectly installing a bathtub. [Emphasis added.] While Mr. Gaudet adhered to those opinions in his direct examination at trial, he wavered somewhat under cross-examination. [ 27 ] Aviva responded with an affidavit by David Belyea, the adjuster retained to investigate the fire loss, in which he states: 1.

I am employed as a Senior Claims Adjuster with Crawford & Company (Canada) Inc. and have worked as an adjuster for property damage claims for over 20 years, and as such have personal knowledge of the matters hereinafter deposed unless otherwise stated. 2. In December of 2007 I was retained by Aviva Canada to conduct an investigation with respect to a fire that occurred at 576 Main Street, in Hampton, New Brunswick on December 15, 2007. 3. When I attended at the property on December 17, 2007 Mr. Thomas showed me a woodstove in his shed that had been installed in his home.

The woodstove had been moved to the shed after the fire at his home. Mr. Thomas advised that it had been installed in the area of his home damaged by the fire. 4. On speaking with Mr. Thomas, he informed me that he had installed the woodstove himself approximately five years before the fire. 5. The stove in question was unlabeled, as an example, no CSA, Warnock Hersey, (ULC) etc. Its model name was “Independence New Brunswick”. There were no heat shields built in on the stove. 6. Mr.

Thomas advised that: the stove had been sitting on two metal squares which were one inch thick; the squares were on a 2 x 2 wood frame with a gap between them, there was asbestos fireboard mounted directly to a combustible wall with screws and no spacers and accordingly no protection at all above four feet from the floor. 7. Tim Nickerson, fire prevention office of the Hampton Fire department, spoke with me about the fire. 8. Based on my conversation with Mr. Nickerson I asked Mr.

Thomas a number of questions about the installation of the wood stove and he confirmed that the following facts were accurate: there was a single wall stove pipe approximately 12 inches from the combustible wall with no heat shield, a used chimney hanger and one short

section of chimney extended through a porch roof by only about one foot [above the] lattice and railing for an outside deck on the roof adjacent to the chimney (within 12 inches). [ 28 ] In another affidavit filed on behalf of Aviva, Ms. Susanne Paulsen, Aviva’s “Manager, Personal Lines Atlantic Region”, states: 1. […] 2. [Mr.] Thomas first obtained insurance with Aviva Insurance on his home located at 576 Main Street in Hampton, New Brunswick

in the year 2000. […] 5. After being contacted by the broker, we conducted an inspection of [Mr. Thomas’] home. […] 6. [Mr. Thomas] renewed his policy with Aviva each year. When [Mr. Thomas] renewed his policy he would receive a Certificate of Property Insurance. Attached hereto as Exhibit “B” is a copy of the Renewal Policy Notice issued to the Plaintiff in April of 2007. 7. Exhibit “B” specifically notes that the primary heat is “electric heating and that the heating was last updated in 1999” [ N.B. The underlined word is, in fact, not to be found in the document ].

Under the heading of “Discounts Applied” the certificate notes that Mr. Thomas received the “heat discount”. 8. Attached hereto as Exhibit “C” is a copy of a Policy Change Notice issued to the Plaintiff on May 30, 2007. The Plaintiff’s premium was adjusted at that time as his mortgage had been paid out and he was now eligible for the mortgage free discount. 9. Exhibit “C” also notes that the Plaintiff’s home uses electric heating as a primary heat source, the heating was last updated in 1999, and that he received the “heat discount”. [ N.B. The document does not feature the underlined word ] 10.

Attached hereto as Exhibit “D” is a copy of the Broker Binding Authority which we issued to all independent brokers who are contracting on behalf of Aviva. R.L. Bethune would have received a copy of the Broker Binding Authority which would have applied when contracting with Mr. Thomas both on the initial contract for insurance and each subsequent renewal. 11. Exhibit “D” provides at page A15 that certain types of heat are considered standard while others are non-standard.

Specifically, the guidelines provide that a heating questionnaire and photograph must be submitted if the insured heats their home by means of a wood burning stove. 12. Attached hereto as Exhibit “E” is a blank Solid Fuel Heating Questionnaire of the type which would have been provided to the broker in the case the insured heated their home by means of a woodstove. 13. The manner in which an insured heats their home is an important consideration in deciding whether Aviva will insure the risk and what premium will be charged.

Specifically, those insureds who heat their homes by means of a woodstove are charged a higher premium than those that do not. Thus, Mr. Thomas received a heating discount because he heated his home by means of electric heat and did not, to Aviva’s knowledge, have a woodstove. 14.

Aviva will not insure a homeowner if they have a woodstove that is not CSA, ULC or Warnok-Hersey approved and professionally installed or inspected by a W.E.T.T. certified individual as noted on the underwriting guidelines. [Emphasis added.] [ 29 ] After ruling subjective knowledge of materiality was determinative of the insured’s disclosure obligations under Statutory Condition 4, the trial judge found Mr. Thomas did not know the addition and use of the woodstove as an auxiliary heating source was a change material to the risk. In the trial judge’s opinion, Mr.

Thomas did not have the requisite “guilty knowledge”. In coming to that finding, the trial judge took into account a host of circumstances which, in his judgment, buttressed the reasonableness of Mr. Thomas’ subjective ignorance of the materiality of the woodstove’s installation and use as an auxiliary heating source. The following personal attributes weighed in the balance: Mr. Thomas is 74 years of age. He says he quit school before completing grade seven when he was 16 years old. He is a man of very limited education.

I infer that if he was 16 and still had not yet completed grade seven that he had some interruptions or difficulties with

his elementary education. [para. 9] As mentioned, there is no challenge to the finding that Mr. Thomas did not subjectively appreciate the woodstove’s materiality for risk purposes. It is Aviva’s position that the sustainability of the judgment in first instance turns on the relevance of Mr. Thomas’ lack of appreciation of materiality in determining the applicability of the “Material Change” condition.

With respect, I do not share that view, and consider the judgment must be confirmed on a basis specific to the case at hand. [ 30 ] In its Notice of Appeal, Aviva contends the trial judge committed reversible error in identifying and applying “the law relating to material change in risk”. For his part, Mr. Thomas filed a Notice of Cross-Appeal against the trial judge’s dismissal of his claim “for damages for emotional distress as a result of [Aviva]’s breach of contract”. Prior to the hearing, however, Mr. Thomas discontinued his cross-appeal.

He has filed a Notice of Contention, arguing the judgment under appeal should be sustained on the ground that the “Material Change” condition was not a statutorily prescribed part of the policy and could not be incorporated therein as an agreed-upon term. III. Analysis and Decision [ 31 ] In the text that follows, I address three issues. The first is whether the “Material Change” condition formed part of the multi-peril policy Aviva issued to Mr. Thomas. As mentioned, he contends it did not. It is Mr. Thomas’ submission that the applicable part of the Insurance Act is

Part III (“Insurance Contracts in New Brunswick”), which does not feature any provision resembling Statutory Condition 4 and does not authorize cancellation of an insurance contract for innocent non-disclosure, “a material misrepresentation” being required by virtue of s. 98(4). The second issue is whether Aviva is disentitled from the benefit of the “Material Change” condition by its failure to alert Mr. Thomas to the alleged materiality of the installation and use of a woodstove as an auxiliary source.

The third issue concerns the relevance of the insured’s knowledge of materiality in connection with the application of the “Material Change” condition. Admittedly, my observations in relation to the last-mentioned issue are not essential to the disposition of the appeal and, accordingly, none purport to settle the parties’ interpretative debate. Rather, those observations seek to flesh out some of the interpretative arguments that might be made if and when the right case arises.

In that regard, I confess to being concerned with the lack of in-depth interpretative analysis that accompanies jurisprudential attribution of an insurer-friendly meaning to the phrase “change material to the risk within the […] knowledge of the insured”. Truth be told, I might be persuaded the phrase’s meaning is, at the very least, doubtful. A. Applicability of

Part IV of the Insurance Act and Statutory Condition 4 [ 32 ] In KP Pacific Holdings Ltd. v. Guardian Insurance , the insured’s hotel was damaged by fire and it claimed indemnity for the resulting loss under an all-risks insurance policy. The claim was made beyond the limitation period set by Statutory Condition 14, which is found in

Part 5 of British Columbia’s Insurance Act , but within the limitation period set by the statute’s part of general application (Part 2). The trial judge and the Court of Appeal agreed with Guardian Insurance’s submission that the former limitation period applied and that, as a result, the insured’s action was time-barred. However, the Supreme Court of Canada reversed, concluding the all-risks insurance policy was not captured by s. 119, which expressly provided that

Part 5 applied to “contracts of fire insurance”. The Court could not conclude either from “the language of s. 119 or its history that the Legislature intended a multi-risk policy […] to fall within

Part 5” (p. 443). It expressed the hope “that legislators will rectify the situation by amending the Insurance Act to provide specifically for comprehensive policies”. The Court went on to observe that in “an […] era dominated by comprehensive policies, it is imperative that Canada’s Insurance Acts specifically and unambiguously address how these statutes are to operate and the rules by which comprehensive policies are to be governed” (p. 443).

New Brunswick has not heeded that advice, likely because it was concluded the pertinent provisions of our Insurance Act do not suffer from the ambiguity underscored in KP Pacific Holdings . As I understand the ruling in that case, it is tethered to the view that s. 119 of the British Columbia insurance statute targets “fire insurance contracts”, not the modern comprehensive homeowner’s insurance policy. Since the policy at issue was not a “contract of fire insurance” within the meaning of s. 119,

Part 5 did not apply, and the claim was governed by

Part 2 and its longer limitation period. [ 33 ] In Churchland v. Gore Mutual Insurance , property was stolen from the residence of the insured. More than one year after the theft, but less than one year after filing an amended proof of loss, the insured sued for indemnity under a multi-peril homeowners' insurance policy.

Gore Mutual defended on the ground that the action was time-barred because it had not been launched within the limitation period prescribed for “contracts of fire insurance” within the meaning of s. 213 of British Columbia’s Insurance Act , the practically identically worded predecessor of s. 119, which was at the heart of the debate and the ultimate decision in KP Pacific Holdings. Gore Mutual’s motion for dismissal of the action as time-barred was allowed in first instance, but dismissed on appeal.

On further appeal to the Supreme Court of Canada, the decision of the Court of Appeal was confirmed on the grounds that the longer limitation period provided by

Part 2 was applicable for the reasons set out in KP Pacific Holdings . In the Court’s view the insured’s multi-peril policy could not be characterized as “a policy of Fire Insurance”, i.e. a “contract of fire insurance” within the meaning of s. 213. [ 34 ] Mr. Thomas submits that, as a result of KP Pacific Holdings and Churchland , a multi-peril policy of insurance,

like the one issued to him by Aviva, is not a “contract of fire insurance”, but one providing for insurance against a number of perils, including fire. I pause to record my acceptance of that proposition, but take issue with its implications for the law of insurance in our Province. At any rate, in Mr. Thomas’ submission, it follows from the proposition in question that

Part IV of the Insurance Act , which prescribes the inclusion of the “Material Change” condition, is inapplicable here. Support for that view is expressed in Brown and Menezes, Insurance Law in Canada , vol. 2 (Toronto: Carswell, 2002) at p. 20-12, where the authors, relying upon Burry v. Co- Operators General Insurance Company , [2003] N.J. No. 290 (Nfld.T.D.) (QL) , state the rulings in KP Holdings and Churchland are “broad enough” to apply to differently worded insurance legislation in provinces other than British Columbia. The authors attach the label of “minor” to those differences.

I respectfully disagree, at least insofar as this Province’s legislation is concerned and would emphasize what the Court stated in Lévesque v. New Brunswick , 2011 NBCA 48 , [2011] N.B.J. No. 163 (QL) : […] a truism bears repeating: in the Canadian federation, New Brunswick, like all other provinces, is fully entitled to adopt, within constitutional limits, legislation that differs from statutes on the same topic enacted elsewhere.

When our Legislature adopts its own legislative framework to address a problem that may be common to some or all sister jurisdictions, its sovereign will in fashioning a solution must be respected. In particular, that sovereign will cannot be sacrificed by courts at the altar of pan-Canadian legislative uniformity. [para. 43] [ 35 ]

Part IV of our Insurance Act is entitled “Fire Insurance”. It includes ss. 122 and 127, which provide as follows:

122 (1)This part applies to insurance against loss of or damage to property arising from the peril of fire in any contract made in the Province except , (

a) insurance falling within the classes of aircraft, automobile, boiler and machinery, inland transportation, marine, plate glass, sprinkler leakage and theft insurance; (

b) where the subject matter of the insurance is rents, charges or loss of profits; (

c) where the peril of fire is an incidental peril to the coverage provided ; or (

d) where the subject matter of the insurance is property that is insured by an insurer or group of insurers primarily as a nuclear risk under a policy covering against loss of or damage to the property resulting from nuclear reaction or nuclear radiation and from other perils. 122

(2) Notwithstanding subsection (1), this Part applies to insurance of an automobile as provided in subsection 24(7). […] 127

(1) The conditions set forth in this

section shall be deemed to be part of every contract in force in the Province , and the insurer shall ensure that they are printed on every policy with the heading “Statutory Conditions” and no variation or omission of or addition to any statutory condition shall be binding on the insured. [Emphasis added.] 122

(1) La présente

partie s’applique aux assurances contre les pertes ou dommages matériels dus aux risques d’incendie dans tout contrat conclu dans la province, sauf

a) une assurance entrant dans les catégories d’assurance-aéronefs, d’assurance- automobile, d’assurance des chaudières et machines, d’assurance des transports terrestres, d’assurance maritime, d’assurance contre le bris des glaces, d’assurance contre le coulage des extincteurs automatiques, et d’assurance contre le vol;

b) lorsque l’objet de l’assurance est un loyer, une charge ou une perte de bénéfice;

c) lorsque le risque d’incendie constitue un risque accessoire à la couverture fournie ; ou

d) lorsque l’objet de l’assurance est un bien assuré par un assureur ou un groupe d’assureurs, principalement comme risque nucléaire, par une police le couvrant contre les pertes ou dommages matériels résultant de réactions ou de radiations nucléaires ainsi que d’autres risques. 122

(2) Nonobstant le paragraphe (1), la présente

partie s’applique à l’assurance d’une automobile prévue au paragraphe 24(7). […] 127

(1) Les conditions énoncées dans le présent

article sont réputées faire

partie de tout contrat en vigueur dans la province et l’assureur doit s’assurer qu’elles sont imprimées sur chaque police sous la rubrique « Conditions légales » et aucune omission dans une condition légale ni aucun changement ou rajout qui y est apporté ne lie l’assuré. [Je souligne.] [ 36 ] It is my view that the differences in wording between, on the one hand, ss. 122 and 127(1) and, on the other,

the corresponding provisions considered in KP Pacific Holdings and Churchland are sufficiently significant to warrant divergent results.As noted, the key provision at issue in both of those cases limited the application of Statutory Conditions to “contracts of fire insurance”.The scope of application of

Part IV of our Insurance Act is not so limited: s. 122(1) states

Part IV applies to “insurance against loss of ordamage to property arising from the peril of fire in any contract made in the Province”. Moreover, it is beyond dispute that our insurancestatute draws a distinction between “contracts of fire insurance”, on the one hand, and “fire insurance” or “insurance against loss ordamage arising from the peril of fire”, on the other. [37] It is trite that Aviva and Mr. Thomas were not parties to a “contract of fire insurance”.

They entered into a“contract made in the Province”, which provides, among other insurance, “fire insurance”, which is none other than “insurance againstloss of or damage to property arising from the peril of fire”. That equation is readily apparent when one considers the title of

Part IV(“Fire Insurance”) and the definition found in s. 1 of the Insurance Act: “fire insurance” means insurance, not beinginsurance incidental to some other class ofinsurance defined by or under this Act,against loss of or damage to property throughfire, lightning or explosion due to ignition; « assurance-incendie » désigne une assurance,laquelle n’est pas contractée accessoirement àtoute autre catégorie d’assurance définie parla présente loi ou en application de celle-ci,contre les pertes ou dommages matérielscausés par le feu, la foudre, ou l’explosiondue à la combustion;

Part IV targets those parts of all contracts made in this Province that provide insurance against loss of or damage to property arising fromthe peril of fire, so long as none of the exceptions identified in s. 122(1) are in play. Moving from the general to the particular, it isindisputable that Aviva’s multi-peril policy evidenced a “contract made in this Province” and that it provided “insurance against loss ofor damage to property arising from the peril of fire”, within the meaning of s. 122(1).

Just as clearly, coverage for loss of or damage toproperty arising from fire was not limited to instances where the fire loss or damage occurred as a by-product of some other peril insuredagainst (e.g. explosion). Thus, the peril of fire was not “incidental” or “accessory” (“accessoire” in the French version) to the coverageprovided or to “some other class of insurance defined by or under [the] Act” (see Lloyd’s of London v. Norris (1998), (NB CA), 205 N.B.R. (2d) 29, [1998] N.B.J. 351 (C.A.) (QL), at paras. 27-34; in that case, the Court applied its previous decision inChiasson v.

Century Insurance Company of Canada (1978), (NB CA), 21 N.B.R. (2d) 192, [1978] N.B.J. 65 (C.A.)(QL), there being no request to consider overruling it). None of the exceptions specified in s. 122(1) being in the mix,

Part IV governsand, as a result, Statutory Condition 4 is engaged. [38] That conclusion makes it unnecessary to consider the advisability of following Co-operators GeneralInsurance Co. v. Burry, 2007 NLCA 52, [2007] N.J. No. 277 (QL), where the Court upheld a ruling denying, on public policy grounds,the insurer’s right to incorporate the text of Statutory Conditions as agreed-upon policy terms.

This is a most interesting question and Iwould, for now, simply bring into the discussion the contrary views on point expressed in Brown and Menezes, Insurance Law inCanada, vol. 2 at 20-12 – 20-13: The parties may contractually agree that the statutory conditions apply to more than just the peril of fire. The case of International MovieConversions Ltd. v. ITT Hartford Canada provides an example. In that case the plaintiff made a claim against its insurer for the theft ofaudio-visual equipment. The insurer took the position that the claim was barred by the one-year limitation period in statutory condition14.

The policy contained the following incorporation clause: Otherwise, all of the conditions set forth under the titles Statutory Conditions And Additional Conditions apply with respect to all of theperils insured by this policy … A statutory condition is not applied by statutory prescription because the loss was by theft, not by fire. The issue was therefore whetherthe foregoing clause was sufficient to contractually incorporate the statutory conditions. The Court of Appeal agreed with the insurer andheld that it was, and the claim was barred by the limitation period. In Burry v.

Co-Operators General Insurance Co. a trial court held that an insurer was not entitled to contractually incorporate thestatutory conditions into a homeowner’s policy. In the words of the court, this was an attempt to do by the back door what could not bedone by the front. This case is contrary to a long line of authorities permitting contractual incorporation. However, the Court may havecome to the right result for the wrong reason.

It appears that the insurer used insufficient wording to incorporate the statutory conditionscontractually, as the clause does not clearly state that the conditions apply to all perils insured under the policy.

I note parenthetically that in Lloyd’s of London v. Norris and Chiasson v. Century Insurance Company of Canada , the Statutory Conditions were incorporated into the policies as agreed-upon terms. B. Change Material to the Risk [ 39 ] As mentioned, Aviva admits in its Statement of Defence that Mr. Thomas completed a Habitational Insurance Application in April of 2000 at the request of its agent , Ross Bethune, in which Mr. Thomas truthfully reported his home was heated electrically . It also confirms the annual renewal of Mr.

Thomas’ multi-risk insurance policy on six occasions without any request that he complete another Habitational Insurance Application. [ 40 ] Although Aviva has consistently claimed, at least post-loss, that Mr. Thomas’ installation and use of the woodstove constituted a change material to the risk, the question of materiality is a question of fact to be determined by the court (see s. 98(6) of the Insurance Act ) and the burden of proof on point rests on the insurer’s shoulders. The trial judge did not determine whether Aviva established Mr.

Thomas’ installation and use of the woodstove constituted a change material to the risk. On the evidence at our disposal, I can only conclude that Aviva has not. [ 41 ] The record shows Aviva’s own agent, Ross Bethune, did not agree that a change material to the risk had taken place. In fairness to Aviva, it may be that its stated view of materiality is founded on a misapprehension of the facts: contrary to Ms. Paulsen’s affidavit evidence, Mr. Thomas did not indicate in the original application for insurance that his home’s heating system had last been updated in 1999.

If he had, Aviva might legitimately complain that information had ceased to be accurate well before renewal time in 2002, and continued to be inaccurate in the subsequent years. [ 42 ] Moreover, each year, Aviva sent a “Renewal policy notice”, which did not request Mr. Thomas notify it of all changes material to the risk. Indeed, it bears repeating that the last pre-loss Renewal policy notice simply stated: “Enclosed is the renewal of your policy. Please ensure that all information is accurate, as your coverage and premium are based upon the information you provided ” (emphasis added). The information Mr.

Thomas had provided was summarized in the accompanying Certificate of Property Insurance: “One family, Frame, 1942 built, Updated: Heating: 1999, Plumbing: 1999, Wiring: 1999, Roofing: 1999, Primary Heat: Electric Heat, Within 13 Km Of Fire Dept. […]”. That information was accurate. Recall Mr. Thomas had informed Aviva that his home’s primary source of heating was electrical. Recall, as well, that he was not asked to provide any information regarding auxiliary heating sources, including any “solid fuel heating unit”, and that Aviva’s agent drew a diagonal line across the blank

section dealing with the last-mentioned topic. In addition, none of the yearly renewal notices made any reference to woodstoves. [ 43 ] At trial, Mr. Thomas contended Aviva had not, in those circumstances, established materiality. The judge acknowledged the argument without passing upon its correctness, choosing to dispose of the case on the basis that Mr. Thomas did not know the installation and use of a woodstove was material to the risk. The trial judge did acknowledge nonetheless that the wording of the renewal-related documents was unhelpful to Aviva’s case.

He astutely pointed out those documents referred to the home’s primary heating source as electrical, which implicitly allowed for auxiliary sources, the details of which were neither requested nor provided. The informational deficiencies of Aviva’s renewal documents are best highlighted by their comparison to the caution provided to the insured in Jackson v. Canadian Northern Shield Ins. Co. , 2010 BCSC 1532 , [2010] B.C.J. No. 2113 (QL) : 4) Let us know about any changes ! If a "Material Change" arises during the policy period, this must be reported to our office immediately.

Failure to do so may result in a voiding of the Insurance Policy involved. A "Material Change" is something important enough to change the original agreement between the insurance company and the policy holder. Some examples of "Material Changes" which would require that you notify your insurer would include: * ... * Using an auxiliary wood heat source without the insurer's knowledge [para. 9] [Emphasis added.] [ 44 ] In Baer & Rendall’s Cases on the Canadian Law in Insurance (6 th ed.) (Scarborough, Ont.: Carswell, 2000),

the authors state: The modern application form requires the applicant to answer specific questions. This tends to lead an applicant to the conclusion thatthe information that the proposed insurer has requested constitutes everything that it regards as material. [p. 366] [Emphasis added.] As noted in Brown & Menezes, Insurance Law of Canada, vol. 1, where an insurer fails to ask about a matter, the court may draw aninference that the insurer does not consider that matter relevant. The authors go on to observe that if a “customer answers truthfullyaccording to a reasonable

interpretation of a question which is ambiguous or inadequately worded, s/he will not likely forfeit a claim ongrounds of misrepresentation or nondisclosure” (p. 5-4). In a related footnote, the authors opine that cases where the insured succeeds“may turn less on the court’s perception that the information is not material than on its view that an insurer should not be allowed tobenefit from a problem it has created through poor drafting of its application forms”. In the right circumstances, the same approach isapposite with respect to poorly drafted renewal notices. [45] In Landry and Poirier v.

Co-operators Insurance Co. (1991), (NB CA), 121 N.B.R. (2d)101, [1991] N.B.J. No. 1052 (C.A.) (QL), Angers J.A., who delivered the Court’s unanimous decision, endorsed the view that theinsurer’s actual knowledge of a fact releases the insured of his or her related disclosure obligation.

More pertinently for our presentpurposes, he went on to refer, with apparent approval, to statements in standard insurance law textbooks which extend that release toinformation the insurer could have discovered by making enquiry at the time of renewal: [TRANSLATION] In Ivamy, General Principles of Insurance Law, London: Butterworth’s 1966, at page 89, the author states that certain material factswhich should be disclosed may become immaterial and thereby release the insured from his obligation to disclose them.

For example,the author mentions the following: “Facts which are known to the insurers or which they may reasonably be presumed to know.” He alsoincludes: “Facts which they could have discovered by making enquiry”. Under this heading, he states as follows, at page 91: Actual knowledge is not essential if the insurer knew that he had the means of knowing the fact. . . . If the insurer chooses to neglect the information which he receives, he cannot take advantage of his wilful blindness or negligence.

Furthermore, it is now established that at the time of renewal, an insurer waives its right to update its information if it has not requestedthe information. See Brown & Menezes, Insurance Law in Canada, 2nd edition, Toronto: Carswell 1991, page 173, para. 8:4:6. Finally,the principle of actual knowledge was relied upon by Barry, J. of the Court of Queen’s Bench in Paget v. Belyea (1969), (NB KB), 2 N.B.R. (2d) 96.

Without minimizing the contractual duty of an insured to notify his insurer of any material change in risk, and without requiring theinsurer to carry out an independent investigation, there may be rare cases, such as this one, in which actual knowledge on the part of theinsurer or occasion to inform itself is such that the insured is released from her duty to disclose. [paras. 8-10] [46] In Sagl v. Cosburn, Griffiths & Brandham Insurance Brokers Ltd., 2009 ONCA 388, [2009] O.J. No. 1879(QL), the insurer relied upon Statutory Condition 1 to resist a claim for indemnity as a result of a fire loss.

It was argued the insured hadbreached that condition by failing to disclose her serious financial problems and the fact that she was not the sole owner of the homedestroyed by fire. The trial judge rejected that defence for the following reasons: Only an insurer knows what it considers a “material fact” in relation to a risk it is assuming. How does an insured know what a “materialfact” is unless so advised by the insurer? I am incensed that an insurer can hide behind this express condition without advising an insuredof what the insurer considers to be a “material fact”. [para. 138]

[…] But, fairness requires that an insurer also act in the utmost good faith. It is my view that an insurer cannot rely on the above expresscondition unless the applicant for insurance is advised of what the insurer considers to be material facts, and the consequences ofconcealment and misrepresentation.

Chubb failed to act in the utmost good faith toward the plaintiff at the time she requested insurancecoverage. [para. 151] In upholding the trial judge’s rejection of the defence based on Statutory Condition 1, the Ontario Court of Appeal adverted to theinsurer’s duty of good faith and the concomitant obligation to cooperate in the facilitation of full disclosure: […] while the applicant has a duty to disclose all material facts, an insurer’s conduct may be relevant to the analysis of whether aparticular fact is material.

An insurer’s failure to ask a question may be evidence that the particular insurer does not consider the issue tobe material, even if, objectively, the information would have been regarded as relevant by a prudent insurer: see Great NorthernInsurance Co. v. Whitney (1918), (SCC), 57 S.C.R. 543; see also Fordorchuk v. Car & General Ins. Corp. Ltd., (AB KB), [1931] 3 D.L.R. 387 (Alta. S.C.), at p. 390, citing Newsholme Bros. v.

Road Transport and General InsuranceCo., [1929] 2 K.B. 356. [para. 59] […] I agree with the trial judge that it runs contrary to the good faith obligation that the insurer owes to the insured for the insurer to agree toinsure a risk, whether at the binder stage or at the time the policy is issued, when it knows or should know that there is informationrelevant to the risk that it does not have and that it did not even inquire into or that is incomplete, and then to raise the lack of informationas a defence to a claim under the policy.

Through his reasons, the trial judge implicitly put the following question to Chubb: if it regarded these facts as material, why did it notask about them?

Given that that question was left unanswered by the evidence, it was open to the trial judge to draw the inference thatthe undisclosed matters upon which Chubb now relies to void the coverage provided by the binder were not material to its decision toissue the binder and assume a sizable risk. [paras. 62-63] [Emphasis added.] [47] In my view, the nondisclosure upon which the case for the application of the “Material Change” condition isbased results from the cumulative effect of:

(1) Aviva’s failure (through its own agent) to put to Mr. Thomas the questions in theHabitational Insurance Application pertaining to non-electrical heating sources, including the ones relating to a “solid fuel heating unit”,and its failure to record in that document answers on the subject;

(2) Aviva’s ostensible trivialization of that information: I draw thatinference from the diagonal line across the

section of the Habitational Insurance Application designed to deal with that very subject andthe decision to leave the

section blank;

(3) Aviva’s post-application failure to seek answers to the questions in that section; and perhapsmore importantly

(4) Aviva’s advice to Mr. Thomas, at renewal time, that coverage under the policy and the premium depended on theaccuracy of the information he had provided. The only information provided by Mr. Thomas had been recorded six years previous in theHabitational Insurance Application, and that information, which was summarized in the renewal documentation, was accurate at renewaltime. In those circumstances, I can only conclude Aviva did not consider, prior to the fire, that the installation of a woodstove in theporch of Mr.

Thomas’ electrically heated home was a material circumstance requiring disclosure. [48] At any rate, if the event in question truly constituted, in Aviva’s eyes, a change material to the risk, its duty ofgood faith to the insured required that he be so advised in plain language. Having failed to offer the advice it was duty bound to give,Aviva cannot benefit from Statutory Condition 4. [49] Moreover, assuming arguendo there was non-compliance with the “Material Change” condition, I am satisfiedit resulted from the combined operation of the acts and omissions of Aviva detailed above.

Section 100(2) of the Insurance Act, which isnot inconsistent with any provision of

Part IV and, therefore, applies to the contract between the parties stipulates “[a]ny act or omissionof the insurer resulting in non-compliance or imperfect compliance with any of the provisions of this Act does not render a contractinvalid as against the insured”. Since Statutory Condition 4 is a provision of the Act, s. 100(2) comes to Mr. Thomas’ rescue byprecluding Aviva from invalidating their contract of insurance. Furthermore, it is plain to me that an insurer cannot circumvent s. 100(2)by incorporating Statutory Conditions as agreed-upon terms of the insurance contract.

C.

Interpretation of Statutory Condition 4 [50] No one quibbles with the view that, generally speaking, a change material to the risk is one which, if disclosedin timely fashion, would have had a bearing on a reasonable or prudent insurer’s undertaking of the risk or its premium-setting decision.As stated, the interpretative issue raised by the parties is whether Statutory Condition 4 allows an insurer to terminate coverage wherethe insured did not know the change in circumstances was material to the risk. [51] Case law provides divergent views on the relevance of the insured’s lack of appreciation of materiality.

Inagreeing it was relevant, the trial judge relied upon Guitard v. Société Nationale d’Assurance (1992), (NB CA), 123N.B.R. (2d) 399, [1992] N.B.J. No. 30 (C.A.) (QL), and Jackson v. Canadian Northern Shield Insurance Co. While it is debatablewhether either case actually buttresses the case for relevance, dicta in Long v. Commercial Union Assurance Co. of Canada et al., (ON SC), [1981] O.J. No. 2959 (H.C.J.) (QL), definitely does. As well, there is support for this view in Americanjurisprudence.

For its part, Aviva cites a number of Canadian authorities that hold the insured’s ignorance of materiality is not germane:Wolfe v. Western General Mutual Insurance, [2000] O.J. No. 2673 (S.C.) (QL); Iacobelli et al. v. Federation Insurance Co. of Canada etal., (ON SC), [1975] O.J. No. 2237 (H.C.J.) (QL); Mueller v. Wawanesa Insurance Co., [1995] O.J. No. 3807 (G.D.)(QL); and Heer v. Allstate Insurance Co. of Canada, [1993] O.J. No. 3360 (G.D.) (QL).

As well, there is widespread academic support for this understanding of Statutory Condition 4 (see, e.g., Barbara Billingsley, General Principles of Canadian Insurance Law, 1st ed.,(Toronto: LexisNexis, 2008) at 88-89). However, few, if any, of the pronouncements on the subject draw upon accepted principles ofinterpretation to decipher the meaning of the phrase “within the […]knowledge of the insured”. [52] It is universally accepted that Statutory Conditions are remedial in purpose (see Brown and Menezes,Insurance Law in Canada, vol. 2, p. 20-7).

They are designed to protect the insured against unfair avoidance of liability “by means ofexceptions skillfully worded and not particularly brought to the notice of the assured” and any reasonable doubt regarding the meaning ofa particular Statutory Condition should be resolved in favor of “amplifying rather than cutting down the insurer’s liability”: Curtis’s andHarvey (Canada) Ltd. v. North British & Mercantile Insurance Co., (UK JCPC), [1921] 1 A.C. 303 at 310 (P.C.).

Thisinterpretative mindset, which mirrors the contra proferentum rule applicable to consensual policy terms, was echoed, albeit in broaderterms, in Coombe v. Constitution Insurance Co., (ON CA), [1980] O.J.

No. 3714 (C.A.) (QL): The legislation [Ontario’s Insurance Act] was designed for the protection of the insured and should be construed in the way mostfavourable to him. [para. 19] Thus, the first question in the interpretative analysis should be whether Statutory Condition 4 can be reasonably interpreted as requiringknowledge of materiality on the part of the insured. [53] In that regard, one would be well-advised to begin with the observations of Chief Justice McLachlin in Marchev. Halifax Insurance Co., 2005 SCC 6, [2005] 1 S.C.R. 47: Statutory Condition 4 is not a model of clarity.

Arguments can be put for and against the proposition that its application avoids the policyon these facts. [para. 43] [Emphasis added.] [54] In that case, the insured purchased a house in Cape Breton, Nova Scotia, converted it to two apartments andleft to find work in British Columbia. The house remained vacant for a period of time before a tenant moved in. It was subsequentlydestroyed by fire and the insurer, Halifax Insurance Co., denied the claim on the grounds it had not been informed of the earlier vacancy,which, in its stated view, constituted a violation of Statutory Condition 4 of

Part VII (“Fire Insurance”) of Nova Scotia’s Insurance Act.Throughout the proceedings at the various levels of court, it was assumed a breach of Statutory Condition 4 had in fact occurred, and thedebate over liability focused on whether relief against forfeiture was available under s. 171 (our s. 130). The Nova Scotia Court ofAppeal concluded s. 171 did not apply to Statutory Conditions since they were, of necessity, “just” and “reasonable”, having beenprescribed by the Legislature. The Supreme Court of Canada disagreed.

Chief Justice McLachlin, who delivered reasons for themajority, concluded s. 171 applied to both contractual and statutorily prescribed conditions and vested in the courts power to providerelief in all cases where forfeiture was “unjust or unreasonable”. [55] That said, Chief Justice McLachlin’s remark in Marche that Statutory Condition 4 lacks clarity may becontrasted with the following statements in the dissent, which, admittedly, were articulated in obiter dicta:

[…] the alleged good intentions of the insured cannot have any impact on the determination of the applicability of s. 171 to statutoryconditions. Ignorance of the obligation to disclose (which the insured ought to have known) or the failure to appreciate its materialitywill not excuse the insured […] the fact that the insured did not advise the insurer that the property was vacant because they did notknow they had to disclose the information cannot impact on the application of s. 171 to statutory cond

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