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From the Bench: Innocent Co-Insured Entitled to Recover

Haraba v Wawanesa Mutual Insurance Company (The), 2017 ABQB 190

Case Facts

The insured added her boyfriend to her insurance policy believing his Nova Scotia identification card was his driver’s licence. In fact, his driver’s licence had been suspended. 8 days after he was added to the policy he was involved in a collision. The issue before the Court was whether the innocent co-insured could recover under the policy. The Court made the following determination:

[35] Using the modern approach to interpreting insurance contracts set by La Forest J in Scott and Katsikonouris, s 554 should be interpreted based on how an ordinary person would understand it. Following Scott, the ordinary person will generally believe that the interests of multiple co-insureds under the same policy are several and not joint, and that the misrepresentations of one co-insured will not affect the other co-insureds’ interests. Following this interpretation, Mr. Gardiner`s misrepresentations do not affect Ms. Haraba’s ability to claim under the policy because the statute and the insurance contract do not contain express language indicating that the policy will be void against innocent co-insureds if another co-insured makes a material misrepresentation.

The Court also concluded the named insured was not in breach of the Statutory Conditions as a result of her boyfriend’s misrepresentation:

[42] Ms. Haraba had a duty pursuant to Statutory Condition 2(2) under s 556 of the Insurance Act to ensure that anyone she authorized to drive vehicles insured under her policy was legally qualified to drive. She authorized Mr. Gardiner to drive the truck insured under her policy despite his misrepresentation (such as in Bremner, and consistent with McClure). I conclude that she did not breach the Statutory Condition, as she had a reasonable basis to believe that Mr. Gardiner was legally qualified to drive (i.e. she observed him driving at his job site, and she believed his identification card was a driver’s license). Further, she made inquiries to ascertain that this was the case.

Relief from Forfeiture

[43] Having concluded that Ms. Haraba’s claim is not invalid because of her co-insured’s misrepresentation and that she did not breach the statutory conditions, it is not necessary to address whether she is entitled to relief from forfeiture under Section 520 of the Insurance Act or s 10 of the Judicature Act, RSA 2000, c J-2.

The Court concluded that the innocent insured was entitled to recover under the policy stating:

[44] I conclude that Ms. Haraba’s claim in respect of the truck was not invalidated, nor her right to recover indemnity forfeited, under the Insurance Act because she did not knowingly misrepresent or fail to disclose any required fact when she submitted the application to add Mr. Gardiner to the Policy. She was an innocent co-insured who remained entitled to recover under the Policy, notwithstanding Mr. Gardiner’s misrepresentation.

In Conclusion

Although the facts will be determinative in every case, the Court will not generally impute the knowledge of one party to another if the end result will void coverage under a policy for an innocent insured without positive evidence of actual knowledge. Unless the wording of the insurance contract specifically identifies co-insureds as “joint insureds”, they will be treated as several and misrepresentations of one will not necessarily negatively impact the other.