VALENTIN HAIDUC, Plaintiff - v. -, 2003 ABPC 61

Haiduc v. Alberta Motor Association Insurance Company, 2003 ABPC 61 Date: 2003 03 28 Docket: P0190308505 IN THE PROVINCIAL COURT OF ALBERTA BETWEEN: VALENTIN HAIDUC, Plaintiff - and - ALBERTA MOTOR ASSOCIATION INSURANCE COMPANY, Defendant JUDGMENT OF THE HONOURABLE JUDGE D.G. INGRAM COUNSEL : Hamish Henderson , for the Plaintiff Robert J. Katzell , for the Defendant [ 1 ] The Plaintiff claims under an Alberta Standard Automobile policy, S.P.F. Number 1,

section C, comprehensive coverage, for loss due to theft for the actual cash value of his automobile, plus the cost of rental of a substitute automobile. The Defendant says the Plaintiff misrepresented material facts when applying for the policy and wilfully made false statements in respect of the claim, which is thereby invalidated and the right to recover indemnity forfeited, under section 613(1) of the Insurance Act.

The Defendant also says the Plaintiff failed to protect the automobile from further loss after the alleged theft (statutory condition 4), failed to permit the Defendant to inspect the automobile (statutory condition number 5) and denied the Defendant the opportunity to obtain an appraisal (statutory condition 4(8).

The Defendant also counterclaims for punitive damages for breach of the obligation of good faith. [ 2 ] In the result I find that any misrepresentation by the Plaintiff at the time the policy was placed is not a defence by virtue of section 613(2) as there was no signed written application for the insurance contract in respect of the automobile. I find, however, that the Plaintiff wilfully made false statements in respect of the within claim and the action is therefore dismissed. The Plaintiff was in breach of the statutory conditions, post loss, but this was of no consequence in the circumstances.

I award punitive damages in this case. [ 3 ] The Plaintiff purchased a 1993 Intrepid automobile in or about February 1999 at a dealer auction at a price, inclusive of buyer’s fee and G.S.T., of $2,717.80. The vehicle had been written off in an accident and was not driveable. The Plaintiff took it home and fixed it himself. He then had it inspected and obtained an inspection certificate on April 10, 1999.

The Plaintiff had an existing automobile insurance policy with the Defendant and the Intrepid was added to his existing policy based on information provided by the Plaintiff to the Defendant sometime in April 1999. When adding the automobile to the policy, the Plaintiff provided the Defendant with a copy of a bill of sale showing the vendor of the vehicle as Erho Darasz, dated April 8, 1999 at a price of $8,700.00.

The Plaintiff then drove the vehicle and did additional work on it including a wheel alignment and changing of the tires and brakes. [ 4 ] The Plaintiff says that during the night of March 4 -5, 2000, the automobile disappeared from in front of his residence. He immediately reported it to the police as stolen and shortly thereafter to his insurer. The Plaintiff filed a proof of loss showing the amount of the loss as $6,500.00 with a deductible of $500.00 claiming of loss of $6,000.00.

The proof of loss form had spaces to be filled in to show the date of purchase, the name of the vendor and the price paid but these were all left in blank. The Plaintiff completed and signed a report concerning the loss on March 11, 2001, which contains seven pages of detailed questions about the vehicle, its background and the loss.

The report included questions as to the purchase price of the vehicle and the date of purchase, left unanswered; the condition of the vehicle when purchased, to which the reply was “good”; and what repairs have been done to the vehicle since the purchase, to which the reply was front “end c.v. joints”. The adjuster who obtained this report says that she later phoned the Plaintiff and obtained a further answer to the question as to the purchase price and was told “approximately $9,000.00". An investigator for the Defendant interviewed the Plaintiff at the Plaintiff’s residence on April 11, 2001.

On cross-examination, the Plaintiff stated that he had been asked who the vehicle was bought from and had replied Erho Darasz; the Plaintiff was asked how much he paid for it, and replied $8,700.00; he was asked its condition when he purchased it and replied “good”; he was asked if it had any body damage, and replied “no”; and was asked how he paid the purchase price and replied “in cash”. [ 5 ] The information concerning the true purchase price of the vehicle, the true name of the person from whom the Plaintiff purchased it, and the vehicle’s background as a “written off” vehicle was all uncovered by the Defendant as a result of its investigations.

The claims supervisor of the Defendant company testified that when the Defendant learned of the background of the vehicle they gave the Plaintiff a chance to explain but the Plaintiff refused to change his story and did not admit to the truth until under oath at examinations for discovery. The Defendant denied liability relying on the misrepresentation of the vehicle when it was added to the policy of insurance. These proceedings were commenced in October 2001, claiming the sum of $6,000.00.

At trial, an additional claim for the cost of rental of a replacement vehicle in the sum of $1,061.44, inclusive of G.S.T., was added. [ 6 ] In April 2002, the Plaintiff learned that the vehicle was in the possession of the Edmonton Police Service. The Plaintiff advised his solicitor of this information and went and looked at the vehicle in the police compound. He found the headlights and the instrument panel, the back lights, and the stereo speakers were all missing but did not investigate further as, he says, the car was locked.

The Plaintiff assumes the police sold the vehicle for storage charges and says he has received nothing for it. He took no steps in connection with the vehicle as he says he believed that as he had claimed under the policy, the Defendant owned the vehicle. The Plaintiff thought he had signed a paper to that effect but the insurance company says they do not take a bill of sale until they settle a claim. I note that the proof of loss appears to contain a transfer of the vehicle to the Defendant.

The Plaintiff maintained throughout his evidence that he thought he was being honest with the Defendant and that he didn’t think it mattered what the bill of sale said or whether the vehicle was previously damaged.

Generally, he appears to believe that he did not have to volunteer any information and that if he was asked something he did not want to answer, it was not “dishonest” to say he did not remember. [ 7 ] I specifically find that the Plaintiff wilfully made false statements to the adjuster, Catherine Properzi, and the investigator, Ron Rocko, in respect of his claim under the contract as to the person from whom he purchased the vehicle, the price he paid for it, the condition of the vehicle when he purchased it and whether it had any body damage at that time.

Further, the bill of sale showing a purchase price of $8,700.00 which he provided to the Defendant when he insured the vehicle was a wholly fictitious document. One of the questions in the report obtained by Catherine Properzi was “from whom was the vehicle purchased (name and address)?”. The Plaintiff’s reply was “I don’t remember. I lost the bill of sale. (Bill of sale is on my file at AMA)”.

I find these answers were wilfully false as to the Plaintiff’s memory and that the Plaintiff was deliberately referring the Defendant to the bill of sale showing the purchase price as $8,700.00 which was, of course, deliberately false and misleading. The Plaintiff’s claim is therefore dismissed. [ 8 ] Notwithstanding the above, I am obliged to determine the amount of the claim which would have been allowed had I found for the Plaintiff. The evidence as to the true value of the automobile was almost non-existent. I am satisfied that the Plaintiff paid $2,717.80 for it.

I am satisfied the Plaintiff made extensive improvements to it after that date and before the alleged theft. The Defendant’s appraiser would have valued the vehicle at $5,470.00 based on the description of the vehicle which he received. However, the appraiser did not know the vehicle had been written off and he had been told that the vehicle was in good condition. I would have to regard this valuation as the upper end of the range of the fair market value of the vehicle in March 2001. I find that the actual cash value of the automobile at the time of the loss was $4,000.00. I note that under

section C of the Alberta Standard Automobile Policy there is no deductible applied to a loss of the entire automobile by theft. I also note that a loss of use by theft claim under the Standard Policy is limited to $25.00 per day to a total not exceeding $750.00. The Plaintiff’s claim in this matter, had it not been forfeited by reason of the Plaintiff’s wilfully false statements, would therefore be the sum of $4,750.00. [ 9 ] The Defendant is asking not only that the claim be dismissed but that I should follow Mr. Justice Murray of the Alberta

Court of Queen’s Bench in Andrusiw v. Aetna Life Insurance Company of Canada 2001 CanLII 61004 (AB KB) , [2001] A.J. No. 789 where his Lordship awarded punitive damages by reason of wilfully false statements made by an insured in respect of a claim under a disability policy.

In the Andrusiw case, the insured was ordered to repay to Aetna Life some $260,000.00 in benefits which had been paid by the company to him as a result of the insured having successfully “pulled the wool over” the eyes of the therapist and doctors who attended upon him and was thereby able to persuade Aetna to continue disability payments on the basis that he was totally disabled when he was not.

Murray, J., stated “if the only consequence of this behaviour is forfeiture of his claim then in effect he is no worse off than if he had been truthful in the first place and deterrence which is one of the objects of granting punitive damages is given no effect.” His Lordship noted that a contract of insurance is one of “utmost good faith”, the breach of which is in itself an actionable wrong. Punitive damages of $20,000.00 were awarded against the insured . [ 10 ] Haiduc was guilty of deceit in providing false information to the Defendant’s adjuster and investigator.

The Supreme Court of Canada has recently dealt with punitive damages in Whiten v. Pilot Insurance Company 2002 SCC 18 and Performance Industries Limited v. Sylvan Lake Golf and Tennis Club 2002 SCC 19 Punitive damages are awarded only in exceptional cases where there is some highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour and is deserving of denunciation or where such damages would achieve some required retribution or deterrence.

Where assessed, the amount should be reasonably proportionate to any harm caused, the seriousness of the misconduct and any other penalties or losses suffered by the miscreant for the misconduct. In this case, the Plaintiff provided the fictitious bill of sale for the purpose of obtaining the insurance, not making a claim under the policy.

As losses are paid under motor vehicle policies on the basis of the value of the property at the time of loss, the amount shown on the fictitious bill of sale did not directly bear on the claim; it was only when the investigation of the claim occurred and the Plaintiff repeated the false representations as to the facts contained in the bill of sale that the Plaintiff breached the Insurance Act. Had the Plaintiff been truthful in asserting his claim, he would have collected $4,750.00.

His falsehoods have cost him that amount. [ 11 ] However, as stated by Murray, J., the deceit is more than a contractual or statutory breach that results in the loss of a claim; it is a breach of an obligation of utmost good faith. The Plaintiff did not appreciate the high standard of candour and honesty required of him in dealing with his insurer. In fact, the Plaintiff displayed a sense that what was going on between himself and the insurer was a game in which, if he won, he would get paid, and if he lost he wouldn’t.

It appeared that he saw the insurer as an adversary and that if he could get paid when he shouldn’t, or be paid more than he should have been paid, he would simply be “winning” and outsmarting his opponent. Counsel for the Defendant suggested there was a crisis in the insurance industry due to the prevalence of fraudulent and exaggerated claims resulting in escalating insurance premiums which must be borne by the insuring public. The Defendant seeks punitive damages as an example, a message to others, a deterrent to discourage fraudulent claims.

This is, in my view, a rational and appropriate use of punitive damages. [ 12 ] Having regard to all the circumstances, I dismiss the Plaintiff’s claim and I allow the Defendant’s counterclaim for punitive damages which I award in the amount of $1,000.00. In addition, the Defendant is entitled to the costs of this action, which I set at the sum of $750.00 inclusive of disbursements. Dated at the City of Edmonton , in the Province of Alberta this 28th day of March , 2003. Judge D.G. Ingram