The impact of the omission of the insured to declare the increase of insurable risk

Haddou c. Alpha (L’), compagnie d’assurances inc., 2016 QCCS 6184

In this case, the insured have their home burnt down.

  • Over the course of the investigation, the insurer realized that the insured operated a family day care center that they never reported in their annual insurance renewal declarations.
  • The insurer also observed that, in addition to the failure to declare their commercial activities within the property, the insured made deceitful representations, this aspect being dealt with in a separate article.
In demand, the insured claims $90.000,00 in repairs, cleaning clothes and damages for inconvenience.
In defense, the insurer argues:
1. failure to disclose circumstances that aggravate the risks stipulated in the insurance policy;
2. Inconsistent and contradictory statements made in the follow-up investigation, including the operation of the day-care center;
3. The loss is the result of willful misconduct;
As a result, the insurer requests (1) the cancellation of the insurance contract, (2) reimbursement of expenses incurred for accommodation, cleaning and partial demolition following the fire, (3) $7.000 in damages for troubles and inconvenients.
Pursuant to sections 2408, 2466 and 2467 of the Civil code of Quebec (C.c.Q.), the insured has a duty to disclose the circumstances that may influence the acceptance of the risk, both at the insurance application stage and at any time during the insurance contract.
However, in order for the insurer to oppose the insured's failure to disclose facts constituting an increase in the insurable risk, it must prove that a reasonable insurer, if it had known the information, would not have issued or renewed the insurance policy.
However, the issue of an internal policy of the insurer constitutes an unacceptable subjective criterion as in the present case. Instead, the insurer had to provide external elements or statistical data.
This ground for refusal of insurance is therefore rejected.
Me Sébastien Fiset
Me Sébastien Fiset