Appeal court judge upholds decisions to reject life insurance claims
Insurers have won a court case over $218,000 in life insurance claims, because the death took place while a criminal offence was being committed.
A 38-year-old man died of a drug overdose in February 2018 and his estate claimed on two separate life insurance policies with TD Life Insurance Company and the Canada Life Assurance Company, one for $213,000 outstanding mortgage balance and a further $5,000 for a line of credit.
The insurers rejected the claims on the basis that the man, who is named in court papers but we have chosen not to identify, had died while in possession of cocaine and a Court of Queen’s Bench judge granted summary judgment in favour of the insurers after accepting evidence that the man was in possession of the drug at the time of his death.
The coroner had accepted a pathologist’s report that cited death by “a combined drug intoxication of cocaine and alcohol,” and stated the cause of death was “Accidental” and noted that police had ruled out any foul play.
The claims were refused due to exclusions in the life insurance policies that were summarized by the judge as:
a. the insured dies as a result of committing a criminal offence [Result Exclusion];
b. the insured dies while committing a criminal offence [While Exclusion];
c. the insured’s death is associated with committing a criminal offence [Associated Exclusion].
The judge ruled that the circumstances of the man’s death met the definitions of clauses b and c but not a, because ingesting cocaine is not a criminal offence, but possessing it is (based on the appropriate law at the time).
Appeal court
The appeal was heard in the Court of Appeal for Saskatchewan on July 5, 2023, to determine whether the original judge had correctly interpreted and applied the law and the exclusion clauses in the life insurance policies.
The appeal court judge said that the estate’s appeal must be dismissed and stated:
“The [original court] judge erred when he found that there was no coverage under the two policies because [the deceased] possessed a small quantity of cocaine in his wallet when he died. However, the insurers properly denied coverage because [the deceased] died as a result of committing the crime of possession of the cocaine that he consumed. Accordingly, as a bottom line, the judge did not err in granting the insurers summary judgment dismissing the claim against them.”
