Earlier this month, the Ontario Court of Appeal in Wong v. Aviva Insurance Company of Canada (2024 ONCA 874) upheld an insurer’s denial of automobile coverage as a result of deceptive and fraudulent conduct.
What Happened in Wong v. Aviva Insurance Company of Canada Case?
Ms. Wong was operating her mother’s vehicle with consent when she was involved in a motor vehicle collision. Worried of potential criminal consequences of driving with an expired licence, Ms. Wong called her mother, Ms. Tieu, and asked her to come to the accident scene. Ms. Wong then asked her mother to say that she had been the one driving the car. Ms. Tieu agreed.
At the accident scene, Ms. Wong and Ms. Tieu convinced the other driver, Ms. Robertson to go along with the story. Ms. Wong and Ms. Tieu later went to the Collision Reporting Centre and named Ms. Tieu as the driver of vehicle on the necessary forms. Ms. Wong later called Aviva (who insured the vehicle) to report the accident pretending to be Ms. Tieu and told them that she was the driver.
Several months later, Ms. Robertson filed a lawsuit against Ms. Tieu seeking damages sustained in the collision. Pursuant to Ms. Wong and Ms. Tieu’s insurance policy, Aviva appointed counsel to defend Ms. Tieu. Two years later, Ms. Tieu continued with the misrepresentation while testifying under oath at her examination for discovery. Ms. Wong later admitted that she had helped Ms. Tieu answer some of the questions off-camera.
During Ms. Robertson’s examination for discovery, Aviva discovered that a young woman, not Ms. Tieu, had been driving the vehicle. Based on this new information, Aviva denied coverage to both Ms. Tieu and Ms. Wong under section 233(1)(b) of the Insurance Act, which states, in relevant part, as follows: “Where,…the insured contravenes a term of the contract or commits a fraud…a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited.”
After the denial, Ms. Wong filed an application seeking a declaration that Aviva still owed her a defence. Alternatively, she sought relief from forfeiture under section 98 of the Courts of Justice Act and section 129 of the Insurance Act, arguing that the misrepresentation was an imperfect compliance with the automobile insurance policy.
Court's Findings on Insurance Fraud and Breach of Insurance Policy
Application Hearing (2024 ONSC 1111)
Justice Antoniani dismissed Ms. Wong’s application on the basis that she had breached her automobile insurance policy and committed civil fraud. The judge also found that Ms. Wong’s conduct, which included lying to police and to Aviva and helping Ms. Tieu’s lying under oath during the examination, prevented her from receiving relief from forfeiture.
In making her decision, Justice Antoniani considered whether Ms. Wong had committed civil fraud, the elements of which include:
A false representation made by the defendant;
Some level of knowledge of the falsehood of the representation on part of the defendant;
The false representation caused the plaintiff to act; and
The plaintiff’s actions resulted in a loss.
At the hearing, Ms. Wong admitted that the first two elements were met. Upon further analysis, the Court found that the remaining elements were also met.
Court's Ruling on Loss and Irreparable Harm
With regard to loss, Ms. Wong argued that Aviva did not sustain any loss because her misrepresentations had no impact on the only issue at play in the civil action—Ms. Robertson’s damages. Ms. Wong claimed that her credibility or Ms. Tieu’s credibility would have no impact on the damages. Justice Antoniani disagreed. She pointed out that Ms. Tieu’s testimony with respect to Ms. Robertson’s appearance and conduct at the scene of the accident made her evidence with respect to speed, sobriety, and vision unreliable.
While Ms. Wong was prepared to compensate Aviva for the defence costs so far, Justice Antoniani found that the loss was irreparable. Paying back the money could not return Aviva to its original circumstance.
The judge then considered Ms. Wong’s request for relief from forfeiture. In denying the request, she considered the three factors:
(i) The conduct of the applicant,
(ii) The gravity of the breach, and
(iii) The disparity between the value of the property forfeited and the damage caused by the breach.
Justice Antoniani was determined that Ms. Wong’s actions were serious and the fraud was neither brief nor insignificant. She emphasized that this was not a case of imperfect compliance. The judge stated, - “Lying about who the actual driver was and perpetuating the misrepresentation (in her case, by both inaction and action) in civil litigation for over two years, is a breach which goes to the heart of the contract between the insured and the insurer.”
Court of Appeal Affirms Denial of Coverage
Ms. Wong appealed to the Court of Appeal (2024 ONCA 874) on the basis that Aviva did not suffer a quantifiable loss as a result of her breach. The Court of Appeal did not agree, and in brief reasons, confirmed that Justice Antoniani had made no error in ruling that Aviva was at a disadvantage since the credibility of Wong has been significantly impacted.
Key Takeaways
Insureds must be honest and forthright with their insurance companies. Any dishonesty, misrepresentation or fraud may result in coverage being denied.
While insurance companies owe a duty of good faith to their insureds, it is a reciprocal duty. Insureds are also obligated to act in good faith. Making misrepresentations or withholding information in an attempt to secure a coverage and/or indemnification under an insurance policy, is a breach of that duty of good faith.
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