The claim for loss of insurability… If you are plaintiff counsel you may be wondering what it is, why you haven’t heard of it, and should you be worried that you have not been considering it in all your cases.  If you are defence counsel, you may similarly be wondering what it is, why you haven’t heard of it, and is it something that you are going to have to watch out for in the future.  Hopefully after reading this paper, some of those questions will be a little clearer for you, but I warn you that there remain many specific questions that have yet to be answered by the jurisprudence.

In this paper we will look at the basis for a claim for loss of insurability, the limited jurisprudence that has considered it to date in Canada and the challenges to either bringing or defending this type of claim.

When you go through the jurisprudence in Canada that has considered claims for loss of insurability, there arises one common theme; the Courts have provided very little by way of in-depth analysis of the necessary evidentiary requirements of the claim or the basis on which the decisions are being made to accept or deny the claim.  Although the majority of cases have denied claims for loss of insurability, there are two reported decisions in British Columbia, which granted what appear to be purely arbitrary damages for loss of insurability.

As you will see below when we go through the history of the reported cases, it is quite clear that the Courts continue to wrestle with the evidentiary issues that have plagued the claims for loss of insurability and are reluctant to definitively pronounce themselves on the legal basis of the claim, the evidentiary requirements and the ultimate quantification of the claim.  With the exception of the two cases, Courts have usually relied on lack of evidence as the basis to deny claims.  In the two that somehow made it past the first hurdle of finding a compensable loss, the Courts have not provided any reasoning as to the amounts being awarded.

a) The WHO, the WHERE and the WHAT:

Simply put, at its core, a claim for the loss of insurability is a claim for damages advanced by an injured plaintiff who, due to the direct effects of injuries sustained in the litigated event, is alleging that the availability of various insurance products has been completely eliminated, partially restricted or has increased in costs.

To try and narrow the definition to any greater degree is impossible in the face of the reported decisions to date.  The cases that have gone before the Courts in Canada are very limited and the reported decisions are almost exclusively originating from British Columbia.  The only exception that could be found was one case from Ontario in 1973.  So the question is… has British Columbia counsel figured out something that the rest of Canada has not.  Short Answer… not yet, but they are still trying.

One of the uncertainties in defining the claim is whether it is a separate category of damages, or does it simply belong as a component of the general damage awards.  I think that question depends on the pecuniary nature of the claim.

There has been no real definition in the jurisprudence of which type of insurance coverage could be the object of a claim for loss of insurability, but to date the cases have generally involved policies for long-term disability insurance.  This said, there are reported cases that are not so specific on the type of coverage that is being affected.  (Spoiler alert… these general type claims have not been successful.)

At the very least, I think it is understood that a claim for loss of insurability could only apply to an insurance product that relies on the personal characteristics of the Plaintiff as the basis for the underwriting decision.

Also not so clear is whether the claim is purely pecuniary or if there is some judicial willingness to consider it as a quasi-general damage type award, especially when it comes to quantifying the loss.  As we go through the different cases, you will see that most Courts dealing with the claim for loss of insurability do not get beyond the search for a concrete causal connection between the alleged loss of insurability and the effects of the litigated event.  No court has gone as far as to discuss the reasoning behind the quantification of damages for such a loss, or what information it would require before awarding damages.

I anticipate that to establish a loss in the first place, some evidence of a pecuniary nature will be required, but the only cases that have allowed damages are silent on the basis for quantification, so there is still considerable uncertainty on how a Court will ultimately deal with the question of quantification.

b) The road so far…

The 1972 Ontario case of Seniunas v. Lou’s Transport, 25 D.L.R. (3d) 277, did not discuss the claim for loss of insurability, but mentions it as a reason for adjourning the matter and requesting further information.  The Court said the following:

21   Addy, J.: — As to the final two points concerning the damages of the plaintiff, as stated during the hearing, the question of the general damages of the plaintiff has been reserved pending further evidence as to the insurability or non-insurability of the plaintiff resulting from the injuries suffered in the collision. I did, however, require that counsel argue on the two headings of loss of memory and numbness on the outer aspect of the two little fingers in so far as these matters may or may not be related to the accident. I will, therefore, deliver my findings on these two matters.

At first glance, it appears that the Court, at least in its initial reasoning, was ready to consider evidence of non-insurability as a general damage component.  It is unclear exactly what the court was looking for in terms of evidence for general damage purposes but they do not appear to be contemplating an independent compensable head of damages.

To find any other reported cases, we have to turn to British Columbia.  As you will see, the lack of evidentiary support has usually spelled disaster for Plaintiffs.  However, I invite defence counsel to keep reading because the two successful cases may lead to future debates on whether loss of insurability requires the same evidentiary specificity that we require of other pecuniary claims.

The 1992 decision in Dupuis v. Daniels [1992] B.C.J. No. 517, was the first published decision in British Columbia on loss of insurability.  In that case the plaintiff alleged that he could not increase his long-term disability insurance because of the injuries he suffered in the litigated event, a car accident.  The Court said the following in its reasoning:

The plaintiff seeks damages because he is unable to increase his long term disability insurance as a result of the injuries he sustained in the accident. Thus he cannot top up his insurance to allow for inflation or increases in income, thereby making his future a little less secure.  This is, in my opinion, a proper claim, but one which is impossible to quantify especially since it must be taken into account that the plaintiff saves premium which he would otherwise have to pay, and the many contingencies which must be considered.  Accordingly I have decided to award the plaintiff $7,500 under this heading.

It is interesting that the Court in that case seems to be saying that although there is no proof of a pecuniary loss or a likely pecuniary loss, and potentially a savings by not having to pay higher premiums, the plaintiff should be compensated in a way that cannot be quantified in any way other than an arbitrary basis.  I would argue that the reasoning in Dupuis is nothing more than an extension of the principle of non-pecuniary general damages and is not consistent with the principles of pecuniary damage awards.  But the door was now open for this “new” head of damage, independent from that of general damages.

The initial honeymoon period with the claim for loss of insurability was short-lived.  The Court in Dingee v. Williams [1994] B.C.J. No. 2301, was faced with a situation where the Plaintiff sustained an injury to her thoracic spine and after her injury, her long-term disability policy carried an endorsement as follows:  “The insured is not covered for any loss resulting from the thoracic spine.”  The Plaintiff claimed damages of $20,000 to $30,000 because of this endorsement.  In denying the claim (and I would argue, taking a step back from Dupuis), the court said the following at paragraph 23:

23…  She maintains that coverage free of this endorsement is not available to her, and, because she is without coverage for any disability attributable to her thoracic spine, even a disability wholly unrelated to the injury she sustained in the accident, she is entitled to be compensated for a loss.  She says she has spoken to an insurance agent and inquired about coverage through the government’s medical insurance plan.  On this evidence alone, it is suggested she should be awarded between $20,000 and $30,000.  Reliance is placed on a decision of this court where, a plaintiff established that, because of the nature of his injury, he was unable to increase the limits of the disability coverage he carried and was awarded $7,500: Dupuis v. Daniels and Preiss (March 3, 1992), Kamloops No. 16605, p. 6.

24    I do not consider the evidence adduced established that coverage for a disability attributable to Dr. Dingee’s thoracic spine but unrelated to the injury she sustained in the accident is not available to her at some price.  No underwriting explanation has been tendered as to why the risk is uninsurable, if in fact it is, nor is there any evidence of any broker’s serious attempt to place the risk for Dr. Dingee with carriers other than The Paul Revere.  In any event, no attempt has been made to tender evidence to facilitate any assessment of the loss such as the incidence of the kind of disability that it is said cannot be insured having regard for Dr. Dingee’s age, gender, vocation, etc.  As is conceded, the amount of the award that is sought is not based on any assessment of loss.  On the evidence that has been adduced, an award could not be more than a wild guess.

The Plaintiff appealed the award of loss of income from the trial level, but the decision on loss of insurability was not addressed.

This case is the first case that raises the evidentiary issues with the claim.  It resembles the analysis that we would undertake to assess a pecuniary loss.  The court also considered the nature of the evidence that had been produced, underwriting basis (causal connection), attempts at mitigation or at least evidence of limitation in access or increased premiums and some basis for quantification.

This stricter evidentiary requirement continued in Lang v Rabel [1996] BCJ No 1691, where the plaintiff, an insurance representative, claimed $63,000.00 for loss of insurability.  This was based on 1.5 years of premiums at $3,500 per month.  He argued that the premiums were higher than that which was available under his previous group plan and that as a result of the injuries he could not get access to insurance at a rate comparable to his previous group plan rate. The evidence at trial showed that the termination of this group plan, post-accident, was not accident related but rather a company policy which applied to everyone who was insured under that plan.  The Plaintiff did make two inquiries for disability insurance but only made one application to the company for which he was an insurance representative. This disability policy, from Canada Life, contained certain limitations on coverage for certain types of injuries, similar to those suffered by the plaintiff in the litigated event.

The Plaintiff alleged that he ‘shopped’ around for insurance policies but provided no evidence that he tried to place the risk with other insurance carriers. There was no evidence of underwriting explanation as to why the risk was uninsurable without the conditions imposed or regarding the costs of the policy. The Court stated at paragraph 54:

54     The paucity of evidence of either cost or loss would render this claim in the ultimate of sheer speculation. I find no basis to fix damages on the submission of the plaintiff either as to time or amount

The limitations of the policy mentioned above would also be re-assessed within three years, which the Court stated added to the guessing factor. There was no evidence of continuing loss of insurability post judgment as the modification of coverage was only until the action was finalized.

The Plaintiff appealed the decision and, in dismissing the appeal on the issue of loss of insurability, the Court of Appeal said the following:

3    This court has never decided whether such a claim is supportable. The learned judge in the case at bar did not find any facts upon which the issue of law arises. He was not persuaded that the plaintiff had established any such loss of insurability.

The Court of Appeal’s decision is not the sledgehammer that defence counsel were likely looking for in defending these types of claims and it fell short of clarifying if this type of claim will survive in Canadian Jurisprudence.  The door definitely remained open following the Court of Appeal decision in B.C. to entertain claims for loss of insurability.

In 1999 the British Columbia Supreme Court took that opening and took us back into the world of a quasi-non-pecuniary characterisation of the claim for loss of insurability.  In Nicolls v. B.C. Cancer Agency, [1999] B.C.J. No. 1475, the basis of the claim was a medical malpractice case with a delayed diagnosis of cancer.  The Plaintiff claimed and was awarded an amount of money for the potential loss of disability insurance, on the basis that should the Plaintiff ever choose to leave her employment and become an entrepreneur, she may have reduced access to disability insurance.  She claimed that even if she could be insured privately, it would cost more for the insurance premiums as a result of her condition than it would have otherwise.  There was, however, no evidence that the Plaintiff was actually expecting to become an entrepreneur and she had no history of working as an entrepreneur.  It appears from the written decision that there was no evidence of plans to leave her employment, there was a pattern of employment that lead to the presumption that she would not leave her employment, and there was no evidence that the premiums for long-term disability would be increased if there was alternate insurance obtained when compared to her employer provided plan.

I know what you are thinking… it seems somewhat speculative.  So the question becomes how this gets reconciled with the conservative approach Courts typically take with regard to claims for future pecuniary losses and the direction the Courts had been taking in British Columbia since Dingee.

In reading the decision I looked for the discussion on the evidence that was received that satisfied the evidentiary issues raised in Dingee.  However, there is no mention of an expert report to back up the statistical likelihood of leaving the job, the likelihood that she would not look for another job where disability insurance was part of the remuneration package, the likelihood that the disability insurance carrier of the new mystery employer or the private plan would deny benefits to the plaintiff, or that the plaintiff would be required to pay additional premiums and finally that the denial or the extra premiums would be related specifically to the effects of the injuries suffered as a result of the litigated event.  There was also no discussion that there was evidence of no other insurers offering similar products and that the increased premium or denial was solely based on the effects from the litigated event.  There does not appear to be any underwriting evidence submitted either.

There is also no discussion of the evidence that the Court looked at for quantification.  The Plaintiff was claiming $10,000.00.  Where this figure came from is unclear in the written decision.  After noting that there was little jurisprudence on the subject, the Court commented as follows, starting at paragraph 87:

87    I approach consideration of this claim with considerable reservations. In the decisions to which I was referred, there was little evidence to support the claims and much speculation required as to what the future held. Here, as submitted by counsel for the defendant, one can ask why would the plaintiff, contrary to the pattern of her employment in recent years, choose to change such employment and move to an entrepreneurial enterprise, losing the benefit of the long-term disability coverage she presently possesses. While I do not suggest it is a complete answer, at some time in her working life expectancy such employment or similar employment with long-term disability coverage may not be available or available at a greater price.

88    While I consider I am entering into an area of speculation, I do not think as Lowry J. put it in Dingee v Williams, [1994] BCJ No 2301, BCWLD 1635 ‘an award could not be more than a wild guess”.

The Court came to the conclusion that the plaintiff should receive a sum of $5,000 for loss of insurability.  It is interesting to note that the Court is not very clear in the decision as to exactly what the award represents other than a purely arbitrary award.

If the award was meant to represent the loss for the increased price of premiums, surely some evidence would be required to show that this is a legitimate possibility and the actual cost that will be borne by the plaintiff.  If the damages are to compensate for coverage being unavailable, how can there be a pecuniary loss to the plaintiff unless and until there is evidence that access to that type of coverage is going to be available for the plaintiff in the future?  These are all questions that the Court in Nicolls left unanswered despite the fact that they were raised in the Dingee decision.

The Court’s reasoning in Nicolls regarding loss of insurability has not been relied on by any other Court and no decision since has awarded any damages for this type of claim.  It stands in stark contrast with more recent reported decisions, where the evidentiary burden was held much more strictly against the plaintiffs.

It is difficult to reconcile the Lang and Dingee decisions with the Nicolls decision because at least in Lang there was some evidence produced by the plaintiff that there were restrictions, although temporary, on the insurance policy and of significant premiums. This was still insufficient for the Court in Lang to find a loss of insurability, but in my opinion represents infinitely more evidence than what appears to have been before the Court in Nicolls.

It should also be noted that the Court in Lang and Dingee approached the analysis of the claim much more strictly on the pecuniary aspects, whereas the Nicolls decision almost looks to be a quasi-general damage award consideration.  Once the Judge in Nicolls determined that a loss of insurability was proven, it appears that the quantification was on a purely arbitrary basis.  It looks like the Court had taken a step back to the Dupuis reasoning on damages.  The other reported decisions failed on the evidentiary basis for the causal connection for the loss, not on the quantification.  This is where there is potential risk for defence counsel.  Once the Plaintiff satisfies the Court that a loss of insurability has or could likely occur, is that Court simply going to gloss over the quantification of those damages and award an arbitrary amount like in Nicolls.

Fast forward to 2005, when the B.C. Supreme Court rendered the decision in Butterfield v. Choufour, [2005] B.C.J. No. 297.  In that case, the Plaintiff claimed for loss of insurability resulting from a car accident; however, the Court found that the Plaintiff failed to adduce any evidence of loss of insurability. There was no evidence as to whether or why the risk was uninsurable. There was no evidence tendered of any attempts to place a risk for the Plaintiff.  There was even no evidence of which types of insurance the Plaintiff was no longer capable of obtaining.  The Court concluded that in the face of lack of evidence to facilitate any assessment of the loss; it was too remote at law and unproven.

Again, this is not a case that provides the framework for proving the claim or defending it.  What seems to come from this decision, however, is that it is insufficient to simply rely on the fact that you suffered an injury as the basis of your claim for loss of insurability.  This may also be a signal that the Court was pulling back from Nicolls a bit.

In the 2009 case of Hooper v. Nair [2009] B.C.J. No. 1292, the Court received slightly more evidence of lack of insurability, but still not enough to sway it to approve an award for loss of insurability.  The Plaintiff claimed for loss of insurability on the basis of the refusal of an application made by her employer for increased long-term disability benefits to Manulife Financial. The Court found that it was impossible to know the reason for the refusal, stating:

155    However, it is impossible to know, whether absent the injuries from the Accident, Manulife would have increased the plaintiff’s coverage in light of her history of chronic lower back problems.

156    There was no evidence put before the court from Manulife concerning the basis for the refusal to increase her coverage.

The Court found that the necessary nexus between the denial of increased coverage and injuries from the accident was missing in the evidence presented before the Court. What comes from this decision is that in order to award such damages, the Court wanted evidence that but for the injuries suffered in the accident the Plaintiff would have likely received the benefit of increased long-term disability coverage.

It should be noted that in Hooper the evidence was the closest to establishing a causal connection with the reduced coverage and the injury from the litigated event, but the Court was struggling with some of the evidentiary requirement regarding quantification.  The Court denied the claim citing lack of evidence on causal connection. I believe they took the easy road out in this case, and ignored the harder questions: even if you could show that there was reduced access to insurance coverage, how does the Court quantify the loss?  And does lack of access to insurance necessarily translate into an actual or possible pecuniary loss that should be compensable?  If simply restricting access to coverage is a compensable claim in of itself, an award of damages would then become tantamount to indemnity for loss of peace of mind, taking it dangerously close to a general damage claim.

I would argue that the Court in Hooper was signalling that the quantification of damages is not a wholly separate consideration from the causal connection in certain circumstances.  As with all pecuniary claims, there has to be some factual underpinning to the loss and lack of any evidence of loss should be fatal to the claim.

The poor track record since Nicolls did not dissuade the plaintiff in Sekihara v Gill [2013] BCJ No 1700 from seeking damages for loss of insurability, supported by some compelling evidence.  The Plaintiff claimed for loss of insurability based on the evidence that she had applied for and had been turned for life insurance coverage from three separate companies. The three companies indicated that their decisions were based on information which they obtained during their medical examinations. Manulife stated that its decision had been influenced by depression, one of the results of the injuries.

The Court in Seikihara distinguished the case from Nicolls, stating that the evidence was incomplete with regards to the reasons for the denial of coverage. The Court was unable to conclude that this loss was compensable in regards to the accident, and therefore there was no award for loss of insurability.  Again, I am not sure how the Court was able to distinguish the factual basis of Nicolls as that finding is not clear on the face of the written decision in Nicolls.  I believe this is a further message from the Court that this type of claim is not going to be accepted without very compelling evidence of both limited access or increased premiums and the actual loss to the claimant.

c) Where are we going with loss of insurability… if anywhere? 

You can see that plaintiff counsel have been trying to crack the evidentiary burden that seems to be holding the Court back from awarding these types of damages.  Despite this, Courts are clearly reluctant to allow the claim to succeed on an arbitrary basis and I would say are consciously avoiding the issue of quantification of damages.  Some of the more recent cases were getting close to having fairly strong direct evidence of denial of insurance based on injuries suffered in the litigated event, but the Courts did not discuss the exact reasoning for the lack of causal connection.  One can only assume that lack of quantification evidence likely played a role in those decisions, but it is unclear.

In some cases, the questions of causal connection and evidence of immediate pecuniary loss are inextricably linked, but for others, they will involve two separate exercises by the Court.

In some cases a loss of insurability will be related to a denial or cancellation of a policy based causally on the results from the injuries suffered by that individual in the litigated event.  This does not necessarily require that the plaintiff show an actual monetary loss to show a loss of insurability has occurred.  Answering whether there is a compensable loss of insurability will require an examination of the potential access by the claimant of that coverage, which would then require the Court to examine the question of quantification.   For other claims, the loss of insurability is directly proven by an immediate quantifiable loss, including: increased premiums or additional out-of-pocket expenses.

This said, whether there is accompanying monetary loss or not, there are many aspects of quantification that are very speculative and will continue to be hurdles for Courts to consider, such as the following:

1. Net present value calculations, complicated when there are irregular payment schedules for premiums or indemnity, and or changing premiums and benefits over time;
2. Determining net value of a damage award based on backing out the expected premiums but for the incident; (multiple scenario underwriting evidence)
3. Isolating only the additional premium component specifically related to the injuries suffered in the litigated event; and,
4. Isolating the expected quantum and timing of claims for indemnity in the future if there is no historic pattern of claims or indemnity payments.

Another interesting question is whether you need to have coverage in place at the time of the litigated incident to have access to this type of claim.  If the plaintiff did not see fit to get that type of coverage before the accident, is it too speculative to award damages for the loss of ability to access it after the accident.  Again, if Courts start to extend damages for the speculation of potential future purchase of policies that were never purchased before, this would be an award for the loss of opportunity to access insurance, taking this outside the scope of pecuniary losses and venturing into the non-pecuniary realm of the general damages award.

In my opinion, if the claim for loss of insurability is to succeed, plaintiff counsel will have to focus on what has been missing so far, making the claim a concrete pecuniary loss which is clearly connected to the effects stemming from the litigated event.  Below are some of the considerations that will have to be looked at when advancing such a claim, (defence counsel pay attention because if any of these are missing, this is maybe how you are going to argue the evidentiary burden has not been met):

1. Provide evidence of the specific type of coverage that is unavailable, restricted or more costly, that the plaintiff actually had before the incident in question, or at least was credibly considering before the incident;
2. Provide evidence of attempts to locate coverage after the incident, including the results of same;
3. Provide evidence that coverage was required for a probable eventuality, such as a probable disability;
4. If coverage is denied, restricted or more costly than what was previously provided, get evidence of the specific reasons for the increase;
5. Provide the Court access to question underwriting practices from the companies for which coverage is affected; and
6. Provide specific time periods for the loss, and make sure there is evidence to support that the underwriting reasons were consistent over time as being related to the effects of the litigated event.

The above list is not exhaustive, but I would argue that it is a condition precedent to even getting a chance to argue that your client is entitled to damages for loss of insurability.

Conclusion

To say that loss of insurability is a developing area of personal injury law would be seriously misleading.  It currently lives in the obscurity of British Columbia jurisprudence and failed to get the attention of the British Columbia Court of Appeal on two occasions.  Without finding a creative way to overcome the significant evidentiary hurdles, the claim for loss of insurability may be destined to remain an obscure part of personal injury law for some time to come.

This said, faced with a persuasive expert report and a good set of circumstances, it is not beyond imagination that such a claim could succeed beyond a merely arbitrary award.  I believe that the key to success on that type of claim for the plaintiff is to assess the claim with the following things in mind:

1. Make sure you approach the claim on a pecuniary basis;

• Track the actual monetary loss as much as possible.  If there is no immediate monetary effect, look for concrete evidence of upcoming monetary effects of coverage changes.  Do not rely on the Court making assumptions. Track pre-accident and post-accident insurance patterns for your client so you can show that something has changed specifically as a result of the litigated incident.
• Get confirmation of reasons for underwriting or insurance policy changes.
• Make sure you track losses over time – set a pattern for future losses.
• Approach it with the idea of a past loss of insurability (pre-judgement) and future loss of insurability (post-judgment).  If you can establish a pattern of loss for the pre-judgment period, it will assist in the credibility of a future loss pattern and allow the Court to take that next step.

2. Collect, prepare and request documentary and expert support of the pecuniary loss;

• Insurance underwriting statistics and patterns and also insurance consumption patterns and characteristics will go a long way to alleviate some of the evidentiary burden of the future component of the claim.
• Don’t forget the actuarial calculations.

3. Establish a pattern of mitigation, early and often;

• Use various brokers and/or insurance companies.
• Continue to seek alternative products during the course of the case.

This list does not guarantee that your client’s claim will be successful, quite to the contrary, if you are a plaintiff, this will be a very uphill battle, but this list should help you identify if the circumstances of your client’s case are such that you may be able to advance a claim for loss of insurability.  If you are having trouble coming up with the information in the list above, it is very likely that you are opening the door for a Court to use the lack of evidentiary basis as grounds to deny the claim.

If you are defending against a claim for loss of insurability, do not ignore it.  You may have the “perfect storm” of circumstances that, if ignored, could swell into an insurmountable obstacle.  Do not forget to take advantage of examinations for discovery to clear up the circumstances of the insurability of the insured.  This type of claim opens up many avenues of questioning that may not have been relevant in the past.  Keep in mind some of the following:

1. All types of insurance policies previously purchased or considered;

• Type,
• Policy Periods,
• Amount of Coverage,
• Applications,
• Quotes,
• Renewals,
• Questionnaires,
• Tests,
• Cancellations,
• Changes,
• Refusals,
• Claims,
• Policy Limits,
• Beneficiaries,
• Past insurance claims approved and denied,
• Payment schedules for insurance policies.

2. Insurance purchases or attempts since the incident in question;

3. Underwriting files;

4. Full family health history;

5. Earnings history;

6. Full medical history (even unrelated conditions);

7. Employment Records – including benefits and remuneration packages;

8. Group Insurance plan records;

9. Financial records, including personal finances and investments;

10. Full Medical examinations; and

11. Discovery of expert insurance agents, brokers and underwriters.