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March 2020

Can a claim be denied due to criminal history from 20 years ago?

Case Study: Mohammed v The Manufacturers Life Insurance Company

Van Krkachovski
Van Krkachovski,
Partner

By Van Krkachovski

In Mohammed v The Manufacturers Life Insurance Company, the Ontario Court of Appeal clarified the meaning of material fact to include criminal activities 20 years prior to obtaining life insurance.

Before Mahmoud Mohammed (“Mahmoud”) arrived in Canada, he had been involved in a terrorist attack in Greece and was convicted of manslaughter. In 1987, Mahmoud arrived in Canada using a false identity. When Mahmoud applied for life insurance, he provided a false social insurance number (SIN) to Manufacturers Life Insurance Company (“Manulife”) and failed to disclose his criminal history.

In 2013, Mahmoud's criminal history was discovered by the authorities and he was deported to Lebanon. In 2015, Mahmoud died and his wife, Fadia Khalil Mohammed (“Fadia”), claimed $75,000 in insurance from Manulife. Manulife refused to pay out Mahmoud's life insurance policy.

At trial, summary judgement was granted in favour of Fadia and she was entitled to payment of the death benefit of Mahmoud. Manulife appealed. On Appeal, summary judgement was granted in favour of Manulife for the following reasons:

  1. Mahmoud's failure to reveal his past criminal activities constituted a failure to reveal material facts that vitiated the policy. His past actions were material to the risk that he posed for the purposes of having his life insured;
    As per s.183(1) of the Insurance Act: An applicant for insurance and a person whose life is to be insured shall each disclose to the insurer in the application, on a medical examination, if any, and in any written statements or answers furnished as evidence of insurability, every fact within the person's knowledge that is material to the insurance and is not so disclosed by the other.

  2. Mahmoud intentionally failed to reveal to Manulife any information that was material to his life insurance application;

  3. As per s.183(3) of the Insurance Act:
    Where a contract, or an addition, increase or change referred to in subsection 183 (3) has been in effect for two years during the lifetime of the person whose life is insured, a failure to disclose or a misinterpretation of a fact required to be disclosed by Section 183 does not, in the absence of fraud, render the contract voidable.
Having concluded there was a failure to reveal a material fact, Mahmoud's intention to withhold his past criminal activities was sufficient to establish fraud.

Read the full decision.
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