Lying to home insurer regarding living expenses leads to denial of entire claim

The Ontario Court of Appeal recently upheld a trial judge’s decision to deny a plaintiff’s entire claim under her home insurance policy. The plaintiff made a false declaration to her insurer relating to additional living expenses (“ALE”), which amounted to fraud.

Facts
In Legault v. TD General Insurance Company, the plaintiff’s home was damaged by a fire. The plaintiff made a claim to her home insurer, TD General Insurance (“TD”), for coverage relating to her home, personal property, and ALE. The plaintiff had insurance coverage totaling $642,000.

One of the plaintiff’s ALE claims was in connection with her move to a friend’s house. The plaintiff made a claim for a lease arrangement of four months and rent expenses of $20,000, which TD paid.

The plaintiff’s friend subsequently reported to TD that the plaintiff’s ALE claim was a scheme; the plaintiff did not reside at her home and the plaintiff had access to the $20,000 TD had paid. TD investigated the matter. The plaintiff signed an interim proof of loss form and submitted to an examination under oath in support of her claim. TD concluded the plaintiff made willfully false statements regarding her claim for ALE and denied her entire claim under the insurance policy.

The action and trial
The plaintiff commenced an action against TD seeking $1 million in damages for the damage to her home and personal property. TD counterclaimed for payment of the total indemnity and expenses it had paid.  At trial, Justice Healey found that a fraudulent insurance claim may result in complete forfeiture under an insurance policy. To prevent an insured’s right to recovery, the statements made by the insured must be material, meaning they must be capable of affecting the insurer in the management or payment of the claim. In this case, the plaintiff’s representation to TD regarding her lease arrangement and rent expenses were material and fraudulent. The plaintiff’s interim proof of loss statement was a knowingly false declaration.

The plaintiff argued that TD breached the contract and failed to act in good faith relating to the proof of loss, the purpose of the plaintiff’s examination under oath, and the investigation. Justice Healey found this irrelevant given the plaintiff’s fraud. The court dismissed the plaintiff’s claim and granted TD’s counterclaim. The plaintiff appealed.

The appeal
The appellant argued on appeal that TD should not be permitted to rely on the insurance contract. Due to TD’s own breaches of contract, the plaintiff claimed she was entitled to damages, which ought to be offset against the damages she owed to TD.

The Court of Appeal found it unnecessary to analyze TD’s alleged breaches of contract. The failure to plead those breaches and seek damages against TD in her statement of claim was unhelpful to the appellant. More importantly, even if those alleged breaches were evaluated, that would not affect the trial judge’s clear findings regarding the appellant’s fraud, which barred her right to recover under the insurance policy. The Court of Appeal found no error with the trial judge’s analysis and conclusions. The appeal was dismissed.

Takeaway
This case serves as a useful reminder that lying to your insurer about a claim, no matter the amount, may be fraud and prevent recovery of all benefits claimed under an insurance policy.