IN THE SUPREME COURT OF BRITISH COLUMBIA
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Citation: |
Gish v. Hooper Insurance and Financial Services Inc., |
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2010 BCSC 605 |
Date: 20100429
Docket: S105362
Registry: New Westminster
Between:
Margaret Carolyn Gish
Plaintiff
And
Hooper Insurance and Financial Services Inc, Bernard David Hooper
and Transamerica Life Insurance Company of Canada
doing business as Transamerica Life Canada
Defendants
Before: The Honourable Madam Justice Ker
Reasons for Judgment
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Counsel for plaintiff: |
K. H. Wirsig B. Trainor |
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Counsel for Hooper defendants
Counsel for Transamerica: |
T. R. Darby
A.S. Dosanjh |
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Place and Date of Hearing: |
New
Westminster, B.C. |
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Place and Date of Judgment:
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New Westminster, B.C. April 29, 2010 |
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[1] The dispute in this action concerns the cancellation of two life insurance policies owned by the plaintiff's husband, Robert Gish. Mr. Gish held the life insurance policies for approximately 20 years. In October 2004 Mr. Gish faxed a handwritten letter to the defendant insurer, Transamerica Insurance Company of Canada ("Transamerica"), directing it to cancel his two life insurance policies immediately. Unbeknownst to the Gishs at this time, Mr. Gish likely had inoperable brain cancer. Mr. Gish was diagnosed with the brain cancer three months after writing and sending the letter directing Transamerica to cancel the two life insurance policies and died one month later. The plaintiff does not allege that Mr. Gish was incapacitated at the time he sent the faxed letter to Transamerica or that he was acting under any disability at the time.
[2] The defendants Hooper Insurance and Financial Services Inc. and Bernard David Hooper (collectively the "Hooper Defendants"), became the appointed insurance agent/broker of record for the Gishs in May 2002 when a financial planner working with them asked the Hooper Defendants to review the insurance policies held by the Gishs. It should be noted that no argument was advanced by any of the parties as to the legal effect of this designation.
[3] The plaintiff has brought an action in negligence against both Transamerica and the Hooper Defendants for what she argues is the premature loss of the two life insurance policies due to the negligent misrepresentations of the defendants as to the actual status of the cancellation of the life insurance and the failure to advise the plaintiff and her husband that the policies in fact were not cancelled but simply lapsed for non-payment of the premiums which the plaintiff, as the beneficiary of the policies, could have assumed paying pursuant to s. 40 of the Insurance Act, R.S.B.C. 1996, c. 226.
[4] For over 20 years Robert and Marilyn Gish owned and ran a jewellery business in Burnaby, B.C. In April 1985, as part of their financial and business planning, they each purchased two life insurance policies from Transamerica, one each with a face value of $150,000 and one each with a face value of $100,000. Mr. Gish also purchased a third insurance policy from Transamerica that had a face value of $50,000. Mr. Gish was the policy owner and the insured life on each of his three policies. The plaintiff was the beneficiary of these three life insurance policies. Mr. Gish was the beneficiary of each of the plaintiff's two life insurance policies.
[5] In the summer and fall of 2004 the plaintiff and her husband were winding up their business and trying to consolidate their finances and reduce expenses. They turned to the Hooper Defendants for advice and assistance. The Hooper Defendants were the appointed insurance agent/broker of record for the Gishs in respect of their various life insurance policies with Transamerica and had been so since May 2, 2002.
[6] The plaintiff and Mr. Gish met with the Hooper Defendants on October 7, 2004 to discuss their insurance portfolio.
[7] On October 22, 2004, Mr. Gish telephoned Transamerica inquiring about how to cancel insurance. The call centre operator advised Mr. Gish that Transamerica required written instructions to effect cancellation of insurance policies. Shortly after the telephone call Mr. Gish faxed a hand written letter to Transamerica directing it to cancel two of his policies immediately. Transamerica sent Mr. Gish letters dated October 23, 2004, confirming receipt of his instructions and advising that each of the two policies had been cancelled as requested.
[8] Unbeknownst to the Gishs, Transamerica allowed the coverage for the policies to continue up to the "paid to date" of the October 1, 2004 premium which was November 15, 2004 for one policy and November 22, 2004 for the other policy (policy #465185 and policy # 465184 respectively – collectively "the Policies").
[9] On November 3, 2004, in response to inquiries about the status of all the insurance policies the Gishs held with Transamerica, the Hooper Defendants received an e-mail from Transamerica indicating that the Policies owned by Mr. Gish had been cancelled on October 22, 2004 effective the paid to dates of November 15 and 22, 2004.
[10] The Hooper Defendants conducted no follow up with the Gishs about the cancellation of the Policies. Nor did the Gishs discuss the cancellation of the Policies with the Hooper Defendants after October 22, 2004.
[11] One of the issues in this litigation is whether, by virtue of Transamerica's electing to continue coverage of the Policies until the paid to dates in November 2004, Mr. Gish actually cancelled the Policies with Transamerica. The plaintiff argues that by allowing the Policies to continue to the paid to date, Mr. Gish's Policies were not cancelled by Transamerica and instead lapsed through the defendants' negligence.
[12] Broadly stated, the plaintiff alleges in her statement of claim that both defendants breached their contractual duty, their fiduciary duty, and their duty of care owed to the plaintiff by, among other things, (i) failing to provide information and advice in a timely manner regarding the options under the Policies; (ii) failing to obtain the fully informed consent of both the plaintiff and Mr. Gish before cancelling the Policies; and (iii) failing to counsel or discuss with the plaintiff options for reinstating the Policies.
[13] Counsel for the plaintiff elaborated in submissions that the plaintiff's action against the defendants is an allegation of negligence by omission in failing to advise the Gishs that the Policies had not been cancelled immediately and that they were still in effect and could be saved by means of the grace period for lapsed policies allowed under both the terms of the Policies and s. 40 of the Insurance Act, and also that the plaintiff had a right to assume payment of the monthly premiums pursuant to s. 40 of the Insurance Act. The plaintiff argues that the negligence of the defendants in this case caused the premature loss of the Policies which named Mrs. Gish as the beneficiary.
[14] Each of the parties to the overall action filed applications pursuant to Rule 18A of the Rules of Court and all three applications were heard together.
[15] The plaintiff's application under Rule 18A seeks a declaration that the cancellation of Mr. Gish's Policies was invalid at law. The defendants argue that Mr. Gish's faxed letter of October 22, 2004, is a clear, unequivocal, and unconditional notice of cancellation that Transamerica properly acted upon and over which the Hooper Defendants had no control.
[16] In its Rule 18A application Transamerica seeks to have the plaintiff's action dismissed, arguing her claim is without merit as Mr. Gish requested that the Policies be cancelled and Transamerica acted upon those instructions in cancelling the Policies. Thus Transamerica argues the cancellations were valid at law. Transamerica further argues it breached no duties to the plaintiff and seeks to have the plaintiff's action against it dismissed.
[17] In their Rule 18A application, the Hooper Defendants seek to have the plaintiff's action against them dismissed arguing they have breached no duty owed to the plaintiff. They further argue that the uncontradicted evidence discloses that Mr. Gish's cancellation could not be revoked and therefore the cancelled Policies could not be reinstated.
[18] The plaintiff opposes the defendants' applications arguing that their applications are not appropriate for disposition by means of a summary trial under Rule 18A. The plaintiff argues there are many issues of fact that involve significant credibility issues that must be canvassed at a full trial. The plaintiff relies upon an expert report prepared by an underwriting consultant outlining the accepted industry standard as support for its argument that the defendants' applications are not suitable for disposition under Rule 18A and that the matter should proceed to trial.
[19] Collectively then, the following issues arise on these applications:
i. Is Mr. Gish's written cancellation instruction of October 22, 2004 invalid at law;
ii. If the written cancellation instruction is invalid due to Transamerica's continuation of the policy until the end of the premium coverage period on November 15 and 22, 2004, was the grace period and Transamerica's 14 day administrative period triggered by the non-payment of the premiums on November 1, 2004 such that the Gishs had a further 45 days to pay the premiums on the Policies;
iii. Are the defendants' applications suitable for disposition under Rule 18A; and,
iv. If the defendants' applications are suitable for disposition under Rule 18A and the policies were not properly cancelled but simply lapsed by Transamerica's conduct in continuing coverage to the paid to dates in November, did either of the defendants owe any contractual duty, fiduciary duty or duty of care to the Gishs to advise them of the ability to preserve the policies and that the plaintiff had a right to assume payment of Mr. Gish's premiums.
[20] There are also two evidentiary issues that must be addressed in the context of the applications. The defendants take issue with the admissibility of two aspects of the plaintiff's evidence.
[21] The first evidentiary issue relates to the admissibility of certain statements contained in Mrs. Gish's affidavit which the defendants say are inadmissible hearsay evidence.
[22] The second evidentiary issue relates to the admissibility of an expert's report prepared by an underwriting consultant retained by the plaintiff to prepare and provide expert opinion evidence as to accepted industry standards and whether or not the conduct of the defendants in this case followed those standards. The defendants argue this report is inadmissible as the author improperly weighs evidence, provides interpretations of the Policies, and provides legal opinions and conclusions on the merits of the case. This issue is more properly determined in the context of the defendants' Rule 18A applications.
[23] In order to put the three applications in their proper context and to address the evidentiary issues, it is necessary to outline in detail the background facts that give rise to this litigation and these applications.
[24] On April 15, 1985 the plaintiff and her husband each completed applications to acquire life insurance policies with Transamerica. Mr. Gish purchased three policies, two of which are the Policies at issue in these proceedings. The Policies were pure insurance policies that required Mr. Gish to pay monthly premiums in advance and contained no conversion option available to Mr. Gish regarding the premiums on the Policies. Mr. Gish was the policy owner and the insured life on both Policies. Mrs. Gish was designated the beneficiary under the Policies, but was not an irrevocable beneficiary. Policy #465184 had a face value of $150,000 and was issued on May 22, 1985. Policy #465185 had a face value of $100,000 and was issued on April 15, 1985. The Policies were not purchased through the Hooper Defendants.
[25] In addition to being pure insurance policies, both Policies had no surrender value. This is to be distinguished from the third policy that Mr. Gish owned and the two policies the plaintiff owned. These three other policies, none of which are in issue in these proceedings, had a "reduced paid up" option that permitted the insured to stop paying the premiums but continue coverage on the policy albeit at a lower amount of coverage in proportion to the time left in the policy's term.
[26] The total monthly premium on the Policies was $317.07. These premiums were paid by means of automatic withdrawal from Mr. Gish's bank account on the first of the month in advance of the coverage period. The monthly coverage period for policy #465184 was from the 16th of the month through to the 15th of the following month. The monthly coverage period for policy #465185 was from the 23rd of the month through to the 22nd of the following month.
[27] Mr. and Mrs. Gish jointly operated a jewellery business in Burnaby for about 20 years and in July 2004 began to wind up their business. Policy #465184 had been assigned to the CIBC bank in 1987 in connection with loans for the jewellery business. The assignment was released on July 26, 2004, contemporaneous with the time frame when the Gishs ceased to operate their jewellery business.
[28] In April 2002 the Gishs met with a financial planner to review their finances and insurance portfolio. In order to obtain information about the portfolio of insurance policies, the financial planner forwarded information about the policies to the Hooper Defendants and requested that they review the insurance policies held by the plaintiff and Mr. Gish. In order to carry out the review requested by the financial planner, the Hooper Defendants forwarded a form of authorization letter to the financial planner for the Gishs to execute. The authorization letter designated the Hooper Defendants as the appointed insurance agent/ broker of record for all the life insurance policies held by the Gishs with Transamerica.
[29] On or before May 2, 2002, Mr. Gish signed the authorization letter appointing the Hooper Defendants as the insurance agent/broker of record and authorizing Transamerica to give the Hooper Defendants full access to the Policies. The Hooper Defendants did not meet with the plaintiff and Mr. Gish at this time.
[30] On August 30, 2002, the Hooper Defendants wrote Transamerica in their capacity as Agent of Record for the plaintiff and Mr. Gish, requesting information about the various insurance policies in order to allow the Hooper Defendants to assist in servicing their clients.
[31] On October 8, 2002, Transamerica wrote to Mr. Gish, copying the Hooper Defendants, enclosing copies of the certificates on the Policies which outlined the type of life insurance policy, the face value of each policy, the policy date and date of issue, the monthly premiums, and the designated beneficiary.
[32] In the summer and fall of 2004 the Gishs were looking at ways to reduce their expenses. They also wanted a full understanding of their entire insurance coverage and on which policies they might be able to reduce their insurance premium expenses.
[33] In August 2004, the plaintiff contacted Transamerica to request information about the status of all the insurance policies she and her husband held with Transamerica. The plaintiff was referred to a number of different companies but eventually learned that the Hooper Defendants had conducted a review of the policies for their financial planner in 2002. The plaintiff contacted the Hooper Defendants and indicated that she and her husband wished to review their insurance coverage. The plaintiff and her husband wanted to do a full review and evaluation of the policies and wanted an explanation of what the policies were in order to understand the coverage, who owned what policies, and whether any policies were assigned.
[34] A meeting was eventually arranged between the Hooper Defendants and the Gishs for October 7, 2004.
[35] Between September 23, 2004 and October 3, 2004, the Hooper Defendants prepared a spreadsheet outlining all the existing life insurance policies held by the Gishs.
[36] On October 3, 2004, the Hooper Defendants also prepared a survey of current premiums for the insurance coverage provided by the existing policies held by the Gishs and to demonstrate, for discussion purposes, what the premium for a new policy would be for $100,000 in coverage.
[37] On October 7, 2004, Mr. Hooper met with the plaintiff and Mr. Gish at their home. Mr. Hooper deposes that he was not certain what the purpose of the meeting was, other than to review the insurance coverage. Mrs. Gish deposes that the meeting was unsatisfactory in that Mr. Hooper did not provide her with the information they had asked him to bring to the meeting.
[38] At the meeting, the Hooper Defendants informed the Gishs that the Policies were pure insurance policies with no conversion option available and that Mr. Gish had to pay the monthly premium. The Hooper Defendants advised Mr. Gish to keep the Policies. During this meeting, the Gishs did not indicate to Mr. Hooper that there was any urgency to obtain the information they sought and did not provide any indication that it was their intention to cancel any of the policies, indeed the Hooper Defendants understood the Gishs were going to wait to receive further information before they did anything.
[39] The plaintiff was not satisfied with the course of the October 7, 2004 meeting and requested that the Hooper Defendants obtain further information about all the life insurance policies and about the values and options on her two policies that had a reduced paid up option and whether the monthly premiums on the policies would stay the same until 2008.
[40] The plaintiff expected that the Hooper Defendants would obtain the requested information within a week. About one week after the meeting the plaintiff contacted the Hooper Defendants to ask where the follow up information was but was advised that it had not yet been obtained. The plaintiff contacted the Hooper Defendants again after a further week but there was still no information.
[41] Prior to the October 7, 2004 meeting the Hooper Defendants were aware that Mr. Gish was 74 years of age and had already had a heart attack some years earlier. During the fall of 2004, Mr. Gish's health was declining and he was experiencing dizziness, vomiting, fainting and falling, and a variety of other symptoms. He was initially diagnosed as suffering from cracked ribs.
[42] During this time frame Mr. Gish was very anxious about his expenses and reducing what expenses he could. The insurance premiums were the only fixed recurring payment for the Gishs. The Gishs had at least three other life insurance policies, two insuring Mrs. Gish for the same values as the Policies in issue in this action and at least one insuring the life of Mr. Gish with a face value of $50,000. The total for monthly premiums on these three other policies was $140.02, and when combined with the Policies' premiums of $317.07, the Gishs owed a total of $457.09 per month for all five life insurance policies held with Transamerica.
[43] On October 20, 2004 Mr. Hooper telephoned the Gish residence but has no recollection of what was discussed.
[44] At 10:49:21 hours (eastern time) on October 22, 2004, Mr. Gish telephoned Transamerica. Call records generated at the time of the call indicate that Mr. Gish was calling to inquire about the process of cancelling or surrendering the Policies. The call operator recorded this in the call logs and advised Mr. Gish on how to cancel his policies. The premiums on the Policies had been paid prior to October 22, 2004 with the last premium payment automatically withdrawn from Mr. Gish's bank account on October 1, 2004.
[45] Shortly after making this telephone call to Transamerica, Mr. Gish faxed a handwritten letter to the offices of Transamerica requesting that the Policies be cancelled immediately.
[46] It is however, Mrs. Gish's evidence that it was not their intention to do anything about the insurance policies until she had obtained the full information she sought from the Hooper Defendants.
[47] On October 23, 2004, Transamerica issued two confirmation letters to Mr. Gish, one for each policy, confirming that Mr. Gish's request to cancel the Policies had been received and acted upon. Transamerica directed Mr. Gish to contact Mr. Hooper, his Transamerica advisor, if he had any questions or additional insurance needs.
[48] Although there is no record in the call centre log books, on or about October 25, 2004, Mrs. Gish telephoned the Transamerica call centre to inquire if the Policies had been cancelled and was informed they had been cancelled. The plaintiff also asked if the insurer needed a signed and witnessed form through the agent to cancel a policy and was told that a faxed handwritten letter was sufficient. Mrs. Gish was advised that the owner of a life insurance policy could do what they wanted and that it was not any of her business. Mrs. Gish understood from this call that the cancellation had been completed and that it was final.
[49] The last premium payments made on Mr. Gish's Policies were made on October 1, 2004. The next premium payments would have been due and withdrawn by means of automatic debit on November 1, 2004.
[50] On October 27, 2004 the Transamerica letter of October 23 to Mr. Gish confirming cancellation of the Policies was received by the managing agent and then forwarded sometime thereafter to the Hooper Defendants.
[51] On October 28, 2004, at 9:28 a.m. the Hooper Defendants faxed a request to Transamerica seeking information about the premiums on all five life insurance policies the Gishs held with Transamerica, including the Policies in issue in this action. At the time this request was sent, the Hooper Defendants did not know that Mr. Gish had requested that Transamerica cancel the Policies.
[52] On November 3, 2004, the Hooper Defendants received from Transamerica an e-mail response to its October 28, 2004 inquiries about the Gish policies. At that time they learned that the Policies had been cancelled on October 22, 2004. The e-mail further informed the Hooper Defendants that the Policies had been cancelled on October 22, 2004 effective the paid to date of November 15 and 22, 2004. Mr. Hooper did not contact the plaintiff or her husband about the contents of this e-mail and the cancellation of the Policies as it is not his practice to follow up with a client who has decided to cancel an insurance policy. The decision to cancel, in Mr. Hooper's view, was solely within the discretion of the client.
[53] Not included in the information sent by Transamerica on November 3, 2004 was the requested information on the reduced paid up values on the plaintiff's life insurance policies. Mr. Hooper requested that information again and received the information on November 9, 2004.
[54] On December 9, 2004, Transamerica sent a letter to the plaintiff about her reduced paid-up insurance policies.
[55] In February 2005, Mr. Gish was diagnosed with inoperable brain cancer and died on March 6, 2005.
[56] At no time before Mr. Gish died did the plaintiff or Mr. Gish contact the Hooper Defendants about the cancelled Policies. The Hooper Defendants continued to provide some services to the plaintiff in respect of her insurance policies until October 2006.
[57] The Policies are identical in their coverage terms and contain a term under the heading "General Provisions" which specifies that only the owner of the policy will be entitled to the rights granted by the policy before the insured's death.
[58] Under the beneficiary provisions of the policy terms, a policy owner can change the designation of a beneficiary by filing a satisfactory written notice with Transamerica. However, where the beneficiary is designated irrevocably, the policy term provides that the owner cannot change the beneficiary without the written consent of that beneficiary. In this case, Mrs. Gish was not named as an irrevocable beneficiary.
[59] The Policies define the term "lapse" as meaning termination of the policy for non-payment of the premiums. Under the heading "Premium Payment and Reinstatement of Lapsed Policy" the Policies outline the terms for payment of premiums in advance and permit the payment of premiums within a "grace period".
[60] The Policies specifically define the grace period for paying premiums as a period of 31 days after the premium due date. During this grace period the Policies continue in full force. The Policies further provide that where any premium remains unpaid upon the expiry of the grace period, the policy will lapse. Transamerica also has a further 14 day administrative period beyond the 31 day grace period where it would accept full payment of a premium outside the 31 day grace period without the necessity of the owner applying for reinstatement of the policy.
[61] There are no specific terms within the Policies addressing cancellation by either the insurer or the insured. Transamerica does not accept a simple verbal cancellation request in order for a life insurance policy to be cancelled. Instead, Transamerica requires written instructions from the owner of the policy directing the insurer to cancel the policy. Once a policy is cancelled, Transamerica does not permit reinstatement of the policy nor does it permit revocation of the cancellation.
[62] The plaintiff commenced this action on April 24, 2007. The plaintiff alleges that the defendants were negligent in failing to advise the Gishs that Mr. Gish's direction to cancel his two insurance policies immediately was not followed. By Transamerica failing to convey the true state of the cancellation effective date and the Hooper defendants failing to advise the plaintiff and her husband of the ability to retain the policy by paying the insurance premiums during the grace period, the plaintiff alleges the defendants caused the premature loss of Mr. Gish's two life insurance policies and that as a result the plaintiff as beneficiary under the policies has suffered damages.
[63] The defendants filed separate statements of defence in June 2007.
[64] Examinations for discovery have been conducted both on the plaintiff and on the Hooper defendants in June 2008 and December 2009. An examination for discovery of a representative of Transamerica was also conducted in December 2009.
[65] The matter was set for a three week jury trial, scheduled to commence on March 22, 2010. During the hearing of these three Rule 18A applications counsel for the parties advised that they had agreed to adjourn the trial of the matter pending the decision of the Court on these applications.
[66] Before addressing the merits of the plaintiff's Rule 18A application there is a preliminary evidentiary issue that must be determined before a conclusion on Mrs. Gish's application can be reached. The merits of the plaintiff's application will be addressed after considering this preliminary issue.
[67] There is no issue raised by any of the parties as to whether the plaintiff's application is suitable for determination under Rule 18A. Insofar as the defendants' Rule 18A applications are concerned, the plaintiff objects to the matters being determined by means of Rule 18A arguing there are significant issues of credibility to be determined and that as such the matters are not suitable for disposition by means of a summary trial. I will address this issue, and the second preliminary evidentiary issue, when I turn to the applications of the defendants.
[68] Mrs. Gish's affidavit outlines background facts from the perspective of the plaintiff, and to an extent her husband, as at the time of the faxed cancellation letter. To that end, it contains references to the intention of both the Gishs' at the material time and their understanding of the cancellation of Mr. Gish's policies. By stating her evidence in the plural and collective, Mrs. Gish incorporates elements of discussions she deposes she had with Mr. Gish at the time of dealing with the policies in October 2004.
[69] The defendants take issue with the contents of paragraphs 20, 21, 22, 26, and 29 of the plaintiff's affidavit arguing these paragraphs contain inadmissible hearsay that lacks "particularity and reliability" and that in one instance the plaintiff was not present for the October 22, 2004 conversation Mr. Gish had with a Transamerica call centre operator. On this last point the plaintiff has provided an account of what she understood her husband to have discussed with the call centre operator.
[70] The plaintiff argues that the impugned paragraphs are not tendered as proof of the truth of the statements made by Mr. Gish but instead are tendered to demonstrate Mr. Gish's state of mind of at the time his letter requesting cancellation of the two policies was faxed to Transamerica on October 22, 2004. The plaintiff argues that the comments are tendered to show Mr. Gish's frustration and confusion prior to sending the fax on October 22, 2004 and his subsequent regret of sending the faxed letter. From this, the plaintiff argues, the state of mind evidence is circumstantial evidence from which the Court may infer Mr. Gish's intent at the time of the cancellation.
[71] One of the traditional exceptions to the inadmissibility of hearsay evidence is the declarant's state of mind. Where a declarant's state of mind is in issue in the proceedings, the statement is admissible to prove it.
[72] Recently, Mr. Justice Romilly provided a comprehensive review of this area of law in R. v. Violette, 2008 BCSC 422 at paras. 66-77. Germane to this application is the following passage from Violette at paras. 69-70:
69 Evidence of state of mind is not tendered for its truth, but rather, as circumstantial evidence of the declarant's state of mind, including his knowledge, purpose and intention respecting the issues addressed. As the House of Lords observed in R. v. Blastland, [1986] A.C. 41 at 54, in a passage adopted by Lamer C.J.C. at para. 23 of Smith:
It is, of course, elementary that statements made to a witness by a third party are not excluded by the hearsay rule when they are put in evidence solely to prove the state of mind either of the maker of the statement or of the person to whom it was made. What a person said or heard said may well be the best and most direct evidence of that person's state of mind. This principle can only apply, however, when the state of mind evidenced by the statement is either itself directly in issue at the trial or of direct and immediate relevance to an issue which arises at the trial.
70 Doherty J. (as he then was), also explained the nature of evidence admitted for state of mind at p. 341 of R. v. P. (R.) (1990), 58 C.C.C. (3d) 334, [1990] O.J. No. 3418 (QL) (Ont. H.C.J.):
... If the statements are explicit statements of a state of mind, they are admitted as exceptions to the hearsay rule. If those statements permit an inference as to the speaker's state of mind, they are regarded as original testimonial evidence and admitted as circumstantial evidence from which a state of mind can be inferred. The result is the same whichever route is taken, although circumstantial evidence of a state of mind poses added problems rising out of the inference drawing process. ...
[73] Once admitted as circumstantial evidence imputing the declarant's state of mind, a further inference may be drawn that the declarant acted in accordance with that state of mind where either the state of mind itself or the resulting action is relevant to a fact in issue: Violette at para. 72. I adopt this analysis for the purposes of determining the admissibility of Mr. Gish's hearsay statements contained in Mrs. Gish's affidavit.
[74] In the present case, the plaintiff seeks to tender the impugned portions of her affidavit as circumstantial evidence of the state of mind of Mr. Gish at the time of the cancellation letter and from which the Court may infer that Mr. Gish was frustrated and confused at the time he sent his faxed cancellation request to Transamerica.
[75] The plaintiff's account at paragraph 22 of her affidavit, of what she understood her husband discussed with the call centre operator at Transamerica, is simply a belief not supported by any reference to her husband advising her of the actual contents of the call, with the exception of Mr. Gish informing Mrs. Gish that he was instructed to send a handwritten fax indicating his desire to cancel the policies. This paragraph is inadmissible hearsay and not something that fits within the parameters of the state of mind exception to the hearsay rule.
[76] However, Mrs. Gish's evidence in the remaining impugned paragraphs is, with the exception of paragraph 22, admissible under the state of mind exception to the hearsay rule. Paragraph 22 of Ms Gish's affidavit is not admissible under the state of mind exception to the hearsay rule as being far too remote from a repetition of statements made by Mr. Gish that went to his state of mind. Rather, it is Mrs. Gish's interpretation and understanding of the conversation her husband had with the call centre operator and contains an element of double hearsay insofar as Mr. Gish telling Mrs. Gish what another person instructed him to do.
[77] While paragraphs 20, 21, 26, and 29 of Mrs. Gish's affidavit are admissible as some evidence of Mr. Gish's state of mind at the time he faxed the cancellation letter, it is not the entirety of the evidence providing context to the circumstances. In addition to these observations, the evidence establishes that Mr. Gish was very concerned about the various fixed expenses he had and was looking at ways to reduce his expenses. He had also received advice from the Hooper Defendants not to cancel the Policies in issue. The plaintiff does not take the position that Mr. Gish was incapacitated by his illness. Thus, it cannot be inferred from the circumstances that Mr. Gish was unaware of the consequences of sending a letter to Transamerica directing it to immediately cancel the two policies in issue.
[78] While the content of these passages from Mrs. Gish's affidavit, with the exception of paragraph 22, are admissible as circumstantial evidence going to Mr. Gish's state of mind at the time, being confusion and frustration over the status of the Policies, I am unable to make the further inference from this that Mr. Gish simply faxed a letter requesting that the Policies be cancelled simply because he was frustrated and that he did not intend to do anything until he and Mrs. Gish had the full information about all their policies. Mr. Gish's concern and fixation about reducing his various expenses, as outlined in Mrs. Gish's discovery evidence, is also circumstantial evidence that must be considered in the assessment of his intention at the time the cancellation letter was faxed to Transamerica.
[79] When the totality of the circumstances are examined and considered, including the content of the letter sent to Transamerica, I am unable to draw the further inference urged by the plaintiff that Mr. Gish only sent the cancellation letter out of frustration and confusion in their dealings with the defendants and that he subsequently regretted sending the cancellation letter.
[80] Significantly, the Gishs continued to have dealings with the Hooper Defendants after Mr. Gish sent the letter to Transamerica requesting cancellation of the Policies and at no time did they express to the Hooper Defendants regret over cancelling the Policies or frustration over the dealings they had with either the Hooper Defendants or Transamerica in October 2004.
[81] The plaintiff seeks in her Rule 18A application to have Mr. Gish's purported cancellation declared to be invalid in law. The defendants argue that Mr. Gish's October 22, 2004 letter of cancellation was a clear, unequivocal, and unconditional direction to Transamerica to cancel the two policies immediately and as such is valid in law.
[82] An essential element of any insurance contract is its length. The parties must agree on either a fixed date or the occurrence of a specific event to signify the termination of the contract. Once this date is reached or the event occurs, the contract automatically expires unless the parties have made alternate arrangements. However, it is also possible for the parties to terminate the contract prematurely either by mutual accord (consensual termination) or unilaterally. The jurisprudence and authoritative texts on the topic of insurance law appear to refer to the term cancellation, termination, or surrender of a life insurance policy interchangeably all with the same meaning – the ending of the insurance policy contract before it reaches its automatic expiry by virtue of a particular date or specified occurrence.
[83] Cancellation, termination or surrender of a life insurance policy is a complete termination of the contract. When cancellation is effected, and the life insurance contract comes to an end, the insurer has no obligation and no liability under the policy, and the insured, or beneficiary, or any other party with an interest in the policy, has no further right in respect of it: D. Norwood and J.P. Weir, Norwood on Life Insurance Law in Canada, 3rd ed. (Carswell: Toronto, 2002) at 202 ["Norwood"]; see also Edgar v. Great-West Life Assurance Co., [1982] B.C.J. No. 1427 at para. 9, [1983] 3 W.W.R. 218 (B.C.Co.Ct.).
[84] The case at bar deals with the unilateral termination of the life insurance contracts by the sole policy owner and insured, Mr. Gish. The Policies in issue contain no specific terms outlining how either the insurer or the insured can terminate or cancel the policies prematurely.
[85] The Insurance Act does contain statutory conditions deemed to be part of every contract for fire insurance and accident and sickness insurance that provide the means for one party to unilaterally terminate an insurance contract: see s. 89 (fire insurance) and s. 126 (accident and sickness insurance). These provisions set out the procedure for either the insurer or the insured to notify the other party of termination of the contract. Under these statutory provisions, an insured can terminate the contract at any time by communicating that intention to the insurer. Under the fire insurance provisions, the notice must be in writing and sent by registered mail to the insurer or delivered to an authorized agent of the insurer (s. 89 – statutory condition #5). Under the accident and sickness insurance provisions, an insured may terminate at any time upon request (s. 126 – statutory condition #5(1)(b)).
[86] The Insurance Act does not contain any statutory provisions that are deemed to be part of every life insurance contract and it is silent on the issue of premature termination or cancellation of a life insurance contract. However, the silence of the Insurance Act on this point does not mean that one can infer that from the lack of statutory conditions deemed to be part of every life insurance policy or the lack of specific terms in the policy addressing cancellation or termination, a life insurance contract cannot be unilaterally terminated or cancelled prematurely.
[87] Indeed, the common law recognizes that an insured can unilaterally terminate or cancel a life insurance policy upon notice to the insurer: Edgar; Norwood at 203.
[88] Distinctions on when cancellation, termination or surrender of a policy by an insured have developed in the jurisprudence depending on the type of life insurance policy involved.
[89] Where the insurance policy contains a stated surrender value, it is construed as containing a continuing "offer" by the insurer, and surrender takes effect when the insured communicates acceptance of the insurer's continuing offer by notifying the insurer of the intention to exercise the surrender option: Edgar at para. 12; Norwood at 202. A significant amount of the case law on surrender in these circumstances deals with when surrender is completed or consummated, particularly where the death of the insured intervenes before the surrender notification is processed and the cheque for the cash surrender value of the policy is issued: Norwood at 202.
[90] When a life insurance policy contains no surrender value, termination or cancellation of the policy will not take effect when the insured simply mails the request to the insurer of their desire to cancel the policy: Norwood at 202. Instead, the insured must clearly, unequivocally, and unconditionally notify the insurer of their clear desire to terminate or cancel the policy and this notification must actually be received by the insurer.
[91] The plaintiff argues that because there is no continuous offer of cancellation by the insurer where a life insurance policy has no cash surrender value, unilateral termination, or cancellation of such policies is impossible at law, citing Bolton Estate v. Allstate Insurance Co. of Canada, [1995] O.J. No. 1225 (Gen. Div) at para. 20.
[92] The facts in Bolton Estate are, however, quite different to the circumstances of the current application. In Bolton Estate, the insured dictated a letter on August 15, 1994 indicating he wished to cancel his ten year term life insurance policy with his insurer, directing his insurer to immediately stop withdrawing money from his bank account to pay the premiums on the policy and to return any premiums withdrawn since the date of the letter. The insurance premiums for the policy in issue were withdrawn on the 15th of each month and a premium payment for the next month of coverage (August 15 to September 15) was made on August 15, 1994.
[93] The letter of cancellation was mailed by the insured's secretary on August 18, 1994. The insured died in an airplane crash on August 19, 1994. The estate of the insured sought a declaration that the insured's life insurance policy was in full force and effect on August 19, 1994.
[94] In Bolton Estate, Leitch J. made two important findings. First, he found the policy was in full force and effect on the date of the insured's death because the letter from the insured to the insurer was not a clear, unequivocal and unconditional offer to cancel the policy effective August 15, 1994. The letter was found to be equivocal as to the actual date of the cancellation of the policy. Although it was clear from the letter that the policy was to be cancelled, the letter merely contemplated that cancellation would occur at a future, unspecified date: Bolton Estate at para. 19. The fact that the insured did not immediately transmit the letter to the insurer on August 15, 1994 and did nothing to stop withdrawal of the premium payment of August 15, 1994 led the motions judge to conclude that the insured intended to continue coverage after August 15, 1994.
[95] I do not construe the decision in Bolton Estate as authority for the proposition that an insured policyholder can never unilaterally cancel a contract of life insurance. Although the decision in Bolton Estate intimates that the policy could not be unilaterally cancelled by the insured, it should be noted that there is reference to provisions in the policy in issue there that related to cancellation but that they were not applicable in the circumstances where the premiums were paid up to date. Consequently, in Bolton Estate the motions judge held that the policy in that case could only be terminated with the agreement of the insured and the insurer and in that case there was no agreement between the parties before the insured died.
[96] In the case at bar, however, there are no terms in the policy relating to cancellation. And, significantly, there was an agreement between Mr. Gish and Transamerica on the issue of cancellation of the Policies as evidenced in his October 22, 2004 letter to Transamerica and in Transamerica's acceptance of the request to cancel and cancellation as requested as evidenced in its letters to Mr. Gish of October 23, 2004.
[97] The second important finding made by Leitch J. in Bolton Estate was a finding in the alternative. If the August 15, 1994 letter was considered to be a clear, unequivocal, and unconditional offer to cancel the policy, cancellation would not be effected until the insurer actually received the letter from the insured. Leitch J. found as a fact that the letter of cancellation was not received by the insurer until August 24, 1994, several days after the death of the insured. Even if the letter had been received by the insurer the day after it was mailed, i.e. August 19, 1994, the policy would remain in force for the whole day on which the notice was received by the insurer and the insurance policy would still have been in effect on the date of the insured's death: Bolton Estate at para. 21.
[98] The ratio of Bolton Estate then is that where an equivocal letter of cancellation is sent by an insured that does not specify when cancellation is to occur, and the premiums are paid up to date, coverage under the policy will continue for the period for which the insured paid the premium. The decision in Bolton Estate is therefore distinguishable on the basis that the insured's notice of cancellation was equivocal as to when cancellation was to take effect. Where an equivocal request for cancellation is made, it does not amount to a valid cancellation and a contract of insurance will continue in force: Bolton Estate at para. 19; Edgar at paras. 14-22.
[99] The plaintiff also relies upon Edgar to support her argument that Mr. Gish's October 22, 2004 faxed letter directing Transamerica to immediately cancel his Policies was not a valid notice of cancellation in this case. In Edgar, Mr. Justice Fisher reviewed the jurisprudence and determined that in order for an insured's notice of cancellation to be valid, it had to be clear, unequivocal, and unconditional.
[100] The facts in Edgar are also distinguishable to the circumstances in the case at bar. In Edgar, one of the terms in the policy provided that the policy owner could surrender the policy for its cash surrender value upon written request. On May 7, 1979, Mr. Edgar attended at the office of an agent of the defendant insurance company and cancelled one of his life insurance policies and discussed the possibility of cancelling a second policy. The defendant continued to withdraw premiums on the second policy by means of the premium loan provision in the policy. On August 26, 1980, more than a year after Mr. Edgar's meeting with the agent, Mr. Edgar wrote the defendant indicating that the second policy was to be cancelled the previous year. Despite this letter, the defendant continued to make deductions from the cash surrender value of the policy by means of the premium loan provision in the policy with the last deduction occurring on October 12 and which covered the period of October 12 to November 12, 1980.
[101] Mr. Edgar died on October 25, 1980. The plaintiff in the Edgar case, the beneficiary of Mr. Edgar's policy, argued that there had been no effective cancellation and that the August 1980 letter did not constitute a letter of cancellation. Mr. Justice Fisher agreed and found as a fact that the letter was not a clear, unequivocal, and unconditional intention to cancel nor did it contain a direction to cancel. At para. 22, Mr. Justice Fisher reached the following conclusion:
22 The letter I find merely explains the events of the previous year and the discussions with Mr. Konner, an insurance agent. Clearly, the writer states that he did tell the agent he was cancelling "BOTH" policies at that time but there was no written notice of the request for cancellation at that time. This letter does not state in the above clear terms that the policy is now to be cancelled.
[102] The lack of clarity of intention and no specific direction to cancel in Mr. Edgar's letter, coupled with the fact that the earlier discussion about cancelling the year before being simply verbal and not amounting to a written request to surrender, all contributed to finding that the cancellation notice in Edgar was not clear, unequivocal, and unconditional. Thus, the May 1979 meeting with the agent could not constitute notice of cancellation of the policy as there was no written notice provided as required by the terms of the policy. The August 1980 letter simply explained Mr. Edgar's interpretation of the meeting in May 1979 but failed to state in clear terms that the policy was to be cancelled in August 1980.
[103] What Edgar establishes, however, is that in order for an insured to effectively cancel a life insurance contract that has no surrender value, the notice of cancellation must contain a clear, unequivocal, and unconditional intention to cancel. As outlined in Edgar at paras. 15 and 20, and the cases reviewed in Edgar, the determination of this issue is done by reference to the whole instrument, i.e. the letter of cancellation, or all the circumstances. In other words, whether the letter should be construed as notice of cancellation will depend on the intent of the writer as ascertained from the whole instrument or all the circumstances and doubts are to be construed against cancellation.
[104] In this case, Mr. Gish's October 22, 2004 letter faxed to Transamerica clearly requested that the two Policies in issue be cancelled and that they be cancelled immediately. Transamerica acted upon that instruction and wrote Mr. Gish on October 23, 2004 indicating that the Polices had been cancelled as requested.
[105] Although Mrs. Gish's affidavit contains information that goes to the state of mind of Mr. Gish at the time they were dealing with these policies in October 2004, the purported confusion and frustration of Mr. Gish is not fully supported on the plaintiff's own evidence. While there may have been some frustration and confusion, it is equally clear that Mr. Gish was concerned about fixed expenses and was looking at ways to reduce them. Both Mr. and Mrs. Gish were advised by the Hooper Defendants at their only meeting on October 7, 2004, that they had good value in their insurance policies and that Mr. Gish should keep paying the premiums on the Policies in issue.
[106] Unlike the circumstances in the cases relied upon by the plaintiff in her argument, it cannot be said that there is anything unclear, equivocal, or conditional about the contents of Mr. Gish's October 22, 2004 letter. It contains a clear statement of intention and a direction to cancel the two policies immediately. Transamerica acted on the written notification and cancelled the Policies.
[107] Mr. Gish as sole owner of the Policies had unilateral control over whether the Policies continued or not. That this is so is inherent in the owner's decision whether to continue to pay premiums or permit a policy to lapse, which constitutes an indirect method of cancellation by an owner. If an owner can cancel a policy indirectly through withholding the payment of premiums, then an owner can equally cancel a policy directly by expressly stating that intention through a written notice of cancellation that is clear, unequivocal, and unconditional.
[108] Even if the decision in Bolton Estate could be construed as requiring an agreement between the insured and the insurer, such an agreement need be no more that the insured's clear direction or notice of cancellation and the insurer's acceptance of that notification and acting upon the clear notification. Thus the right of a policyholder or owner to cancel a life insurance contract is in the nature of a contractual "option" subject to the usual rules of offer and acceptance.
[109] In this case Mr. Gish, as the policyholder or owner, had the contractual right to offer to cancel his life insurance policy which he did by means of a clear, unequivocal, and unconditional written direction which he faxed to Transamerica. Mr. Gish provided a written notice of cancellation on October 22, 2004, that directed Transamerica to cancel the Policies immediately. Transamerica accepted the notice and cancelled the Policies on October 22, 2004, as requested by Mr. Gish, and confirmed the instruction in writing on October 23, 2004. Thus the parties were ad idem on the cancellation of the Policies.
[110] Moreover, it is an implied term of the contract of insurance between the insurer and the policyholder owner/insured, in this case Mr. Gish, that the owner as the person with the contractual rights has the right to end or terminate the contract unilaterally upon proper written notice.
[111] In allowing the coverage to simply continue for the duration of the pre-paid premium submitted October 1, 2004, Transamerica was not rejecting the direction to cancel. Indeed, its correspondence both to Mr. Gish on October 23, 2004, and to the Hooper Defendants on November 3, 2004, clearly show that it accepted the cancellation of October 22, 2004 on that date. No further premiums became due after that date as the contract was at an end. The fact that Transamerica did not provide any premium refund to Mr. Gish for the period after October 22, 2004 and retained the premium does not affect the validity of the cancellation of the insurance policy by the insured: The Globe Indemnity Co. of Canada v. Lomax (1921), 67 D.L.R. 480 (Que. K.B.) at 482-484; Reicker v. Co-operative Fire and Casualty Co., [1976] N.B.J. No. 44 (C.A.); Waldman Estate v. The Excelsior Life Insurance Co., [1991] S.J. No. 237 (Q.B.).
[112] In this case, I find that the cancellation occurred on October 22, 2004 with Mr. Gish's clear written notice of cancellation faxed to Transamerica on that same date. Transamerica's decision to allow the coverage to continue for the period of time already paid by the premium withdrawn on October 1, 2004 did not vitiate Mr. Gish's cancellation. The policy was cancelled October 22, 2004 and was not capable of re-instatement when the next premium would ordinarily have come due on November 1, 2004. Once a policy is cancelled, as in this case, Transamerica's practice is not to re-instate the policy. Re-instatement of a life insurance policy is only possible for lapsed policies: s.47 of the Insurance Act.
[113] Transamerica accepted Mr. Gish's clear notice of cancellation and cancelled the Policies. Cancellation of the Policies crystallized when Mr. Gish's faxed letter of October 22, 2004 was received by Transamerica and Transamerica accepted the cancellation. This it did and confirmed by letter on October 23, 2004.
[114] The plaintiff argues in the alternative that Mr. Gish's handwritten faxed letter cancelling the Policies was ineffective because the Policies were, in equity, joint policies and as such required the written consent of the plaintiff to cancel the Policies.
[115] The plaintiff relies upon Kulvi v. Canada Life Assurance Co., [1998] B.C.J. No. 3161 (S.C.) at paras. 11 and 13 as authority for the proposition that where a spouse is a beneficiary on a life insurance policy, the policy cannot be cancelled without the spouse's consent.
[116] The circumstances in Kulvi however, are distinguishable. There the court was dealing with cancellation of a joint mortgage life insurance policy by one of the co-applicants. In Kulvi the husband and wife jointly applied for mortgage life insurance, with the husband as the applicant and the wife the co-applicant. They completed one application form, only one premium payment was made by the insureds and it was described as a "joint coverage" premium. The husband later requested cancellation of the mortgage life insurance but the consent of the wife was not obtained. Madam Justice Dillon concluded that based on the words of the certificate of insurance, the mortgage life insurance issued to the Kulvis covered them as joint insureds and as such cancellation of the policy was not effective without the consent of both: Kulvi at para. 13.
[117] A similar conclusion was reached in Harnden v. Farmers Mutual Fire Insurance Co., [1997] O.J. No. 4412 (Gen. Div.) where a fire insurance policy had both the husband and wife as insureds on the contract. The husband requested that the policy be cancelled but the wife, also an insured, did not request the cancellation. The insurer cancelled the policy on the strength of the cancellation request of the husband and said it did not require the consent of the second insured. In declaring the policy valid, Kitely J. held that statutory condition for cancellation of the fire insurance had not been complied with where only one insured requested cancellation. To constitute a valid cancellation all insureds had to sign the cancellation form: Harnden at paras. 19-20.
[118] In the case at bar however, Mr. and Mrs. Gish were not joint insureds on the Policies. Mr. Gish was the owner and insured of the Policies and the plaintiff was the named beneficiary. They were not co-applicants on each other's policies they were separate owners and separate insureds with separate policies as is clear from the face of the certificates of the Policies in issue that contain the following details under the heading "POLICY DATA":
INSURED: ROBERT GISH JR.
OWNER: ROBERT GISH JR.
BENEFICIARY: MARGARET GISH
[119] The terms of the Policies make it equally clear that before the insured's death, only the owner of the policy is entitled to the rights granted by the policy. The plaintiff was not the owner of these Policies nor was she an insured under the Policies.
[120] The plaintiff was simply a beneficiary but she was not designated an irrevocable beneficiary. In that respect, s. 55 of the Insurance Act provides the following:
Insured dealing with contract
55. If a beneficiary
(a) is not designated irrevocably ...
the insured may assign, exercise rights under or in respect of, surrender or otherwise deal with the contract as provided in it or in this Part, or as may be agreed on with the insurer.
[121] Under the terms of the Policies, Mr. Gish was the owner of the Policies. Under s. 29 of the Insurance Act the term "insured" is defined as the person who makes the contract with the insurer. In this case Mr. Gish was the person who made the contract with the insurer and thus was the insured. The combined effect of s. 55 of the Insurance Act and the terms of the Policies in issue make it clear that only the owner of the policy or the insured of the policy have rights in respect of the policy and only the owner or the insured can exercise surrender rights or otherwise deal with the policy.
[122] Only where the beneficiary is designated as an irrevocable beneficiary is consent of the beneficiary required for surrender of the policy to be effective: Norwood at 203.
[123] The plaintiff, not being the owner or the insured under the Policies and not being designated as an irrevocable beneficiary, had no contractual rights under the Policies before the death of Mr. Gish. Consequently, her consent to cancellation of the Policies was not necessary to validate the cancellation of the Policies. Mr. Gish's handwritten letter faxed to Transamerica was sufficient and effective to cancel the Policies.
[124] The fact that the plaintiff statutorily had an "insurable interest" in the life of her spouse, as provided by s.37(b) of the Insurance Act does not mean she had an insurable interest in the life insurance policies owned by Mr. Gish.
[125] Sections 36 and 37 of the Insurance Act provide as follows:
Insurable interest
36(1) Subject to subsection (2), if at the time a contract would otherwise take effect the insured has no insurable interest, the contract is void.
(2) A contract is not void for lack of insurable interest
(a) if it is a contract of group insurance, or
(b) if the person whose life is insured has consented in writing to the insurance being placed on his or her life.
(3) If the person whose life is insured is under the age of 16 years, consent to insurance being placed on his or her life may be given by one of his or her parents or by a person standing in the place of a parent.
Insurable interest defined
37. Without restricting the meaning of the expression "insurable interest", a person has an insurable interest in his or her own life and in the life of the following:
(a) his or her child or grandchild;
(b) his or her spouse;
(c) any person on whom he or she is wholly or in part dependent for, or from whom he or she is receiving, support or education;
(d) his or her employee;
(e) any person in the duration of whose life he or she has a pecuniary interest.
[126] These provisions reflect the long standing and universally accepted rule that in order to insure the life of another person, the owner of the policy, i.e. the person who makes the contract with the insurer and for whose benefit the insurance is placed, must have an insurable interest in the life of the insured person. Otherwise, the insurance has been traditionally treated as tantamount to a wager on human life and void ab initio as against public policy: Chantiam v. Packall Packaging Inc., [1998] O.J. No. 1458 (C.A.) at para. 8.
[127] The combined operation of ss. 36 and 37 of the Insurance Act simply requires that when a life insurance contract takes effect the person who takes out the contract has an insurable interest in the object of the contract at the commencement of the policy. Section 37 statutorily grants a person an "insurable interest" in the life of their spouse and thus gives them the ability to take out a life insurance policy on the life of their spouse. Section 37 does not go so far as to grant a beneficiary spouse contractual rights under the separate policy already taken out by their spouse. Thus, s. 37 would grant the plaintiff the right to take out a life insurance policy on her husband as she has an insurable interest in her spouse's life. Section 37, however, does not grant her rights under a separate policy taken out by her husband as the sole owner and insured of the policy.
[128] In this case, Mr. Gish's Policies were "first-party contracts" as he was both the "insured" (policyholder or owner), that is the person who made the contract with the insurer, and the "life insured", that is the person whose life was the object of the insurance contract. As the insured, Mr. Gish is a party to the contract with the insurer and therefore has contractual rights. But the life insured, like a beneficiary, is not a party to the contract and has no contractual rights: Norwood at 74.
[129] Section 37 of the Insurance Act simply grants a statutory right to a spouse to be an insured (policyholder or owner) and the person who takes out the contract of life insurance with the insurer on the life insured. It does not, however, automatically transform the plaintiff into an insured (policyholder or owner) on Mr. Gish's first party contract such that she has contractual rights and becomes a party to the contract between Mr. Gish and the insurer, Transamerica. Having an insurable interest in the life of one's spouse does not transform one into an insured or policyholder owner on a contract of insurance already taken out by the other spouse as the sole insured policyholder or owner: Norwood at 74-83. Having an insurable interest under s. 37 of the Insurance Act simply means that the plaintiff is able to take out a contract of insurance on the life of her husband and can sue the insurer for payment of the policy benefit upon the death of her husband. Section 37 does not grant the plaintiff contractual rights as an insured/policyholder owner under an insurance contract where Mr. Gish is the sole insured/policyholder owner.
[130] For the reasons outlined above, I find that Mr. Gish's faxed letter of October 22, 2004 directing Transamerica to cancel his two life insurance policies immediately to constitute a valid cancellation at law as the letter was a clear, unequivocal and unconditional notice of cancellation.
[131] Having found that the cancellation of the Policies in issue was valid at law, it is not necessary to determine the issue of whether the grace period became operational by Transamerica's allowing coverage to continue to the end of the paid to dates of November 15 and 22, 2004.
[132] For completeness however, I will simply note that the grace period provided in the policy and s. 40(2) of the Insurance Act comes into effect to protect against unintentional lapses in a policy due to failure to pay a premium at the required time when a premium is due. In this case, there being a clear direction to cancel the Policies by Mr. Gish's written instructions of October 22, 2004 and acceptance of that direction and request by Transamerica on that date and confirmed by letter dated October 23, 2004, no further premiums were due for the next premium payment of November 1, 2004. Accordingly, the grace period provided both by the Insurance Act and the terms of the Policies was not triggered in these circumstances.
[133] The plaintiff relied upon the case of Bains v. National Life Assurance Co. of Canada, [1991] B.C.J. No. 2538 (S.C.) aff'd [1992] B.C.J. No. 1108 (C.A.) to support her argument that the grace period was still in operation and applied to Mr. Gish's Policies and that because of that the plaintiff was eligible to take over payment of the premiums by virtue of s. 40(1) of the Insurance Act. However, the decision in Bains is distinguishable as in that case the insured simply stopped payment of his premiums and then died during the grace period. No express direction to cancel the policies had been received and thus the grace period was found to be in place at the time of the deceased's death.
[134] Where a policyholder cancels a life insurance contract by means of a clear written notification of that intention, and the insurer accepts the cancellation, as occurred in this case, then the contract between the insurer and the insured is at an end, with no rights or obligations upon either party after the cancellation is completed. Accordingly, the grace period provided both by the terms of the Policies and under s. 40 of the Insurance Act was not triggered in this case and there would be no right of reinstatement as there would be if the policy had lapsed: Norwood at 206.
[135] Before turning to the defendants' Rule 18A applications, I must address a second evidentiary issue raised in the context of the defendants' applications. After addressing the evidentiary issue I will then turn to the issue of whether the defendants' applications are suitable for determination under Rule 18A.
[136] David Staines, an underwriting consultant with Associated Underwriting Services, was retained by the plaintiff to prepare and provide an expert opinion and report as to accepted industry standards and whether or not the conduct of the defendants in this case followed those standards. His expert report is contained in a letter to plaintiff's counsel dated January 21, 2010.
[137] The defendants argue this report is inadmissible as the author improperly weighs evidence, provides interpretations of the Policies and provides legal conclusions on the merits of the case.
[138] The plaintiff argues the report is admissible for these proceedings and simply tendered at this juncture to demonstrate there is a triable issue with respect to the plainitff's claims that the defendants were negligent in their dealings with the plaintiff and her husband and that the issue of whether a duty of care arose and fiduciary duties were breached in this case is not suitable for determination by means of a summary trial under the Rule 18A procedure.
[139] Before dealing with the specifics of the report in issue, it is useful to briefly review the principles governing the admissibility of expert opinion evidence. In R. v. Abbey, [1982] 2 S.C.R. 24 at 42, the Supreme Court of Canada stated that the function of an expert witness is "to provide the judge and jury with a ready-made inference which the judge and jury, due to the technical nature of the facts, are unable to formulate." The expert's opinion is usually based on assumed facts and its value depends on the extent to which those facts are proved through other evidence.
[140] In R. v. Mohan, [1994] 2 S.C.R. 9 at 20, the Court set out four essential criteria for the admissibility of expert opinion:
(a) relevance;
(b) necessity in assisting the trier of fact;
(c) the absence of any exclusionary rule;
(d) a properly qualified expert.
[141] There is no dispute that those threshold criteria are met in this case. The question of what the industry standard and the scope of the duty of care owed by insurers and insurance agents/brokers to insured clients is very much at issue and is one on which the trier of fact may be required to make a finding of fact. It is clearly a technical or specialized question on which the court is unable to reach a conclusion without expert assistance. There is no suggestion of a general exclusionary rule and when his curriculum vitae is considered there can be little issue about Mr. Staines' qualifications.
[142] However, the fact that the Mohan criteria are met does not end the matter. The question here is not whether the Court should be receiving expert evidence, but whether the specific opinions accord with the proper role and function of an expert.
[143] There are many cases in which this Court has stated what experts can and cannot do in terms of their reports and opinions and how they are expressed. The leading decisions include Emil Andersen Construction v. B.C. Railway Co. (1987), 15 B.C.L.R. (2d) 28 (S.C.) [Emil Anderson No. 1]; Emil Andersen Construction v. B.C. Railway Co. (1987), 17 B.C.L.R. (2d) 357 (S.C.) [Emil Anderson No. 2]; Quintette Coal Ltd. v. Bow Valley Resource Services Ltd. (1988), 29 B.C.L.R. (2d) 127 (S.C.); and Surrey Credit Union v. Wilson et al. (1990), 45 B.C.L.R. (2d) 310 at 315 (S.C.), aff'd (1990), 47 B.C.L.R. (2d) 242 (C.A.).
[144] In Quintette, Spencer J. provided guidelines addressing the admissibility of an expert's report. Restated in terms relevant to this case, those guidelines are:
i. An expert may give evidence on matters of industry practice relating to the proper methods and steps required of insurers and insurance agents or insurance brokers when dealing with insured clients in the context of the issuing, assessing, and cancellation of life insurance policies.
ii. He may give both opinion evidence and factual evidence based on his knowledge and experience as to the proper techniques and practices of insurers and insurance agents and insurance brokers when dealing with insured clients insofar as the sale, variation, and cancellation of life insurance policies is concerned and servicing of insured clients and requests for information about their policies.
iii. He may interpret, in the form of an opinion, the requirements of insurers and insurance agents and insurance brokers in advising and dealing with insured clients on the issues of seeking information about and cancellation of an insurance policy but he may not give an opinion which amounts to a legal interpretation of the policies or a legal opinion as to the circumstances in issue in this case.
iv. Where rival experts have presented or are expected to present differing opinions, he may descend to argument to show why his opinion should be accepted in preference to the others', but the argument should be restricted to the technical reasons why he says his opinion is preferable.
v. He may not make conclusive findings of fact on issues disputed between the parties, but he may state certain facts as the hypothesis upon which he reaches an opinion or refer to matters which are already put in evidence. In each case, he should make clear which hypotheses or evidence he relies upon. It will be for the court to decide eventually whether that hypothesis is made out or whether the appropriate facts are found from that evidence.
vi. He may not assess the value or justifiability of the plaintiff's claim.
vii. He may not assign blame to any party, but he may give his opinion as to cause and effect.
[145] In Quintette, the court rejected an expert report, saying at 128:
A great deal of the report records findings of fact, allocations of blame and conclusions of law made by the witness. In some cases the findings and conclusions are overt, but in others they are implied. In all of that, the witness trespasses upon the task which the parties have assigned to this court.
[146] Similar findings were made in two separate decisions in the case of Emil Anderson. In the first decision, Macdonald J. rejected an engineering report, saying at 32:
It is a document such as an engineer might provide to an owner faced with a claim by a contractor for extra work or damages. It is an "assessment" of the claims of W.T.C. in this action. In the course of that assessment, opinions are expressed. However, those opinions are so mixed with evidence which is inadmissible that they are themselves not admissible in their present form.
[147] In the second decision at 363, MacDonald J. rejected two more reports on similar grounds:
In summary, I regard the opinions of both Codville and Dixon as not "scientific" or "technical" but directed in substance to the legal or general merits of the case. Viewed in their totality they are more appropriate as argument than they are as evidence.
[148] In Surrey Credit Union, McColl J., at 314, stressed the need for expert testimony to be given in "an objective and impartial manner so the court can place some reliance upon it." He added at 315:
Expert opinions will be rendered inadmissible when they are nothing more than the reworking of the argument of counsel participating in the case. Where an argument clothed in the guise of an expert's opinion is tendered it will be rejected for what it is.
[149] These principles are often encapsulated by the statement that an expert should not be an advocate. However, that statement is sometimes misunderstood. There is a difference between an expert who advocates for a party and one who advocates for his or her opinion. An expert opinion should be confined to the expert's field of expertise and to the question within that field that is at issue. It should be the result of careful and objective consideration of all relevant facts and principles and not based on extraneous considerations: Keefer Laundry Ltd. v. Pellerin Milnor Corp., 2007 BCSC 899 at para. 15.
[150] The court should be able to approach an expert's opinion with some confidence that the expert would have rendered the same opinion if he or she had been consulted by the opposite party. However, once an expert has formed an opinion through that process, he or she may be firm, emphatic, or even strident in the way he or she expresses the opinion or defends it against contrary opinions: Keefer Laundry at para. 16.
[151] As the foregoing authorities establish, when an objection is raised to the admissibility of an expert opinion, the opinion must be considered in its entirety. The experts who provide opinions to the courts come from many fields, but they are not expected to be experts in the law of evidence. It is almost always possible to isolate passages or phrases in a report that can be said to violate one or other of the rules that have been set out. In many cases, those passages can be excised or, in a case without a jury, simply ignored. Conversely, a report may be so permeated by improper considerations that excision of the most blatantly offending passages cannot save it: Keefer Laundry at para. 17.
[152] In each case, the question is whether the report, taken as a whole, is capable of providing the court with the assistance that is required. Of course, objections or criticisms that are not sufficient to render a report inadmissible may still be the subject of cross-examination and argument going to the weight the court should ultimately give to the opinion: Keefer Laundry at para 18.
[153] With those general principles in mind, I now turn to the specific report in issue. Mr. Staines prepared a 16 page report dated January 21, 2010, produced well after this action was commenced in April 2007 and just before the matter was originally scheduled for trial by jury.
[154] Mr. Staines outlines in his report the facts and assumptions on which his opinion is based. However, as was the case in Quintette, aspects of Mr. Staines' report, as presently tendered, would not be admissible at a trial as the author does, at times, appear to weigh evidence in his report, and on some occasions offers legal opinions, relies on legal texts to inform his opinions, interprets aspects of the Policies in issue and includes irrelevant considerations such as the pricing of premiums. In some areas of the report, Mr. Staines' opinion appears to be directed more to the legal merits of the case and in some parts appears more to be argument clothed in the guise of an expert opinion.
[155] However, what can be discerned from those portions of the report that were not challenged by the defendants is that the Hooper Defendants as the insurance agent/broker for the Gishs owed both of them a duty of care in their dealings with them. The extent of that duty of care owed and whether the Hooper Defendants' conduct actually satisfied the requirements insofar as the dealings with the Gishs were concerned raise both issues of accepted industry standards, which Mr. Staines is able to comment upon, and issues of credibility insofar as the dealings between the Gishs and the Hooper Defendants are concerned.
[156] It can also be discerned from the report that the usual industry practice insofar as an insurer is concerned is that when a request is made for cancellation, an insurer generally informs the insured on the proper route to cancel including advising that the insured should allow the policy to lapse on the payment of premiums. The report also indicates that where an insurer elects to continue coverage through the retention of the premium, past an effective cancellation date, and not advising the insured that this was done, denies an insured the opportunity to retain the policy in accordance with their original intention. The report also refers to a generalized duty of care owed by an insurer to an insured in its dealings with an insured in respect of insurance policies.
[157] The extent of that duty of care owed and whether Transamerica's conduct actually satisfied the requirements insofar as the dealings with the Gishs were concerned raise both issues of accepted industry standards, which Mr. Staines is able to comment upon, and issues of credibility insofar as the dealings between the Gishs and Transamerica is concerned.
[158] While there are some difficulties with the way Mr. Staines report is currently drafted such that aspects of it are inadmissible as currently tendered, the more general considerations outlining the duty of care owed by both defendants assists in assessing the suitability of the defendants Rule 18A applications to have the plaintiff's statement of claim dismissed.
[159] The defendants both contend that their applications to have the plaintiff's claim dismissed are appropriate for determination by way of Rule 18A arguing there is no evidence to support the plaintiff's claim that they were negligent in their dealings with the plaintiff and her husband and that there was no breach of contractual duties, fiduciary duties, and no duty of care owed by the defendants to the Gishs.
[160] The plaintiff's submission is that the defendants' applications under Rule 18A are not suitable for determination under the summary trial procedure, arguing the totality of the materials filed on these applications demonstrate there are significant issues of fact involving issues of credibility that can only be properly canvassed through a full trial with the opportunity to cross examine witnesses.
[161] Rule 18A(11) sets out the applicable test, which is that the court may grant judgment in favour of any party, either on an issue or generally, unless the court is unable to find the facts necessary to decide the issues of fact or law, or it would be unjust to decide the issues on the application.
[162] Under the principles set down by Chief Justice McEachern in Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. (1989), 36 B.C.L.R. (2d) 202 at 214-15 (C.A.), a chambers judge is obliged to rule if he or she can find the facts as a judge would at trial, unless to do so would be unjust.
[163] In deciding whether a matter is appropriate for determination under Rule 18A, or whether it would be unjust to give judgment under Rule 18A, the court should consider the amount involved; the complexity of the matter; the cost of a conventional trial in relation to the amount involved; the course of the proceedings; whether credibility is a crucial factor; and, whether the application is an effective use of the court's time and will result in the efficient resolution of the proceedings: Inspiration Management; Dahl v. Royal Bank (2005) 46 B.C.L.R. (4th) 342, 2005 BCSC 1263, at paras 11-12, aff'd 2006 BCCA 369.
[164] I will now proceed to determine whether it is appropriate to hear the defendants' applications such that they are suitable for disposition under Rule 18A application. The law is clear that where there are significant, unresolved issues of credibility or conflicting evidence the matter should not be determined by way of a summary trial. I note that in this case there are significant unresolved issues of credibility as between the plaintiff and the Hooper Defendants and also conflicting evidence as between the plaintiff's case and the defendants' case insofar as industry standards and generally accepted practices are concerned.
[165] The monetary claim presented in this case is not in substantial from the perspective of any of the parties involved. Additionally, one must not overlook the fact that what is involved here is a denial to the plaintiff of her right to a trial before a judge with a jury. This factor was considered by Mr. Justice Clancy in Marshall v. Payne, [1995] B.C.J. No. 2981 (S.C.), where, after referring to the decision in Inspiration Management, he stated, at para. 14 of his reasons:
I note, also, that it was apparently the case before the Court of Appeal that the Chief Justice was contrasting the summary judgment procedure with a full trial before a judge of this court. He was not considering the impact of a chambers judge taking away the right of the defendant to a jury trial.
[166] Of course, subrule (16) of Rule 18A expressly provides that summary trial proceedings are not precluded by the fact that a party has filed a notice requiring a jury.
[167] In Hung v. Gardiner, 2003 BCCA 257 Madam Justice Levine reviewed the jurisprudence on the issue of the suitability of determining proceedings under Rule 18A when a jury trial notice has been filed. Although Hung was a defamation case, the decision reviews the broader jurisprudence on the issue.
[168] The effect of Rule 18A(16) and the jurisprudence that has developed since its inception, as reviewed in Hung, establishes that the filing of a jury notice is one of the factors to consider in assessing whether a matter is appropriate or suitable for determination under the summary trial procedure of Rule 18A. Thus the fact that the plaintiff would be deprived of a trial by jury is a factor that must be given consideration in this case. However, the rule contemplates that this may occur in appropriate cases. While the denial of a jury trial is a factor the court can consider, it is far from determinative and should be viewed in the light of other factors bearing on the test of comparative prejudice.
[169] Significantly, important credibility issues arise as between Mr. Hooper and Mrs. Gish as disclosed from their affidavits as to the extent of their dealings, the requests for information and the expectations of the Gishs in endeavouring to understand the full scope of their coverage, how their expenses could be reduced, and what coverage could be varied through non-payment of premiums that would not result in the loss of the policies altogether.
[170] Moreover, it is clear that insurance agents and insurance brokers owe their clients some measure of a duty of care but that the scope of the duty varies depending on the nature of the relationship. The majority decision in Fine's Flowers Ltd v. General Accident Assurance Company of Canada (1977), 17 O.R. (2d) 529 (C.A.) and the numerous decisions that have reinforced its principles establish that there is a fairly broad professional scope to the duties owed by an insurance agent or insurance brokers to their insured clients. As a result, insurance agents and insurance brokers are often held to a level of professionalism similar to that required of lawyers, accountants and other professionals. As such, the requirement for providing the necessary information to allow a client to make an informed decision is very much an aspect and issue of the scope of the duty of care owed by an insurance agent or an insurance broker to their clients.
[171] Counsel for the Hooper Defendants relies upon the comments of Madam Justice Southin, as she then was, in Girardet v. Crease & Co. (1987), 11 B.C.L.R. (2d) 361 at 371 (S.C.) to argue that the Hooper Defendants did not breach their duty of reasonable care and skill in this case when they simply advised the Gishs on one occasion to retain the two Policies and in so doing the Hooper Defendants were not required to do anything more.
[172] While the Hooper Defendants may not have been required to repeatedly tell the plaintiff and her husband to retain the two policies, this is not necessarily dispositive of the issue in this case. An earlier step may well have been required in terms of providing information and advice about the ability of a beneficiary to assume premium payments, particularly where expenses and reducing expenses were an evident concern, so that any decision to cancel was a fully informed decision. The evidence is unsatisfactory on this point such that on the whole of the evidence the court is unable to find the facts necessary to decide the issues of fact and law raised by the application.
[173] Counsel for Transamerica argues that Transamerica breached no duties to the plaintiff as beneficiary of the Policies in issue as all dealings on the Policies occurred when the owner and insured on the policies, Mr. Gish, was still alive. As such, argues Transamerica, the plaintiff had no rights in relation to Mr. Gish's policies either in contract or in a fiduciary or duty of care capacity citing Cooper v. Hobart, 2001 SCC 79 at paras. 28-37 as support for its argument that no duty of care was owed to the plaintiff.
[174] While the plaintiff as beneficiary may not have any contractual rights under the Policies while the policy owner and insured was still alive and thus able to change the beneficiary, it is not entirely clear on the state of the evidence and law that there is absolutely no duty of care or fiduciary duties owed, particularly in circumstances where the provisions of s. 40 of the Insurance Act permit beneficiaries to assume payment of policy premiums and s. 37 of the Insurance Act creates an insurable interest in a spouse's life. Where these two provisions arise and there is expert evidence of a general industry standard and accepted practice about advice, notification, and cancellation issues, it is at least arguable that under the traditional Anns test (from Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.) adopted by the Court in Kamloops (City) v. Nielsen, [1984] 2 S.C.R. 2) a prima facie duty of care arises in the circumstances presented by this case. The scope of the duty of care and whether it has been met or breached is something that requires significantly more developed evidence to provide the proper context for making any findings of fact on such issues.
[175] The expert report prepared by Mr. Staines, while largely inadmissible as currently tendered, nevertheless discloses that there are significant issues as to the scope of the duty of care and fiduciary duties owed by both defendants to the plaintiff and her husband in this case when measured against the generally accepted standards and practices of the industry. Mr. Staines' report also directly conflicts with the evidence tendered by the defendants as to their understanding of the usual and accepted practice of cancellation of life insurance policies insofar as the insurer Transamerica is concerned.
[176] Both the conflict in the evidence which raises issues of credibility that cannot be resolved in these applications, coupled with the existence of expert opinion evidence that suggests the conduct of the defendants in the circumstances of this case may well have fallen below generally accepted standards and practices of the industry renders the defendants' applications for judgment in a summary trial not suitable for disposition under this rule.
[177] Moreover on the whole of the evidence, the Court is unable to find the facts necessary to decide the issues of fact or law as to the scope of the duty of care and the fiduciary duties the defendants each owed the plaintiff or whether they were negligent in the manner in which they dealt with the plaintiff and her husband in respect of the cancellation of the two insurance policies.
[178] Finally, I have concluded that in the circumstances of this case it would be unjust to decide the issues in this format, particularly where there are credibility issues that ought to be properly canvassed through viva voce evidence and cross-examination, and the existence of an expert evidence that appears to contradict the defendants' affidavit evidence as to the generally accepted standards and practices of the industry.
[179] For the reasons set out above, I am not satisfied that the issues of the scope of duty of care or the fiduciary duties owed by the defendants to the plaintiff and whether they were, in fact, negligent and in breach of their duties in their dealings with the plaintiff are suitable for disposition under Rule 18A. Accordingly the defendants' summary trial applications seeking to have the plaintiff's statement of claim dismissed are dismissed.
[180] For the reasons set out above, the plaintiff's application for a declaration that the October 22, 2004 letter of cancellation sent by Mr. Gish to Transamerica is invalid at law is dismissed. Mr. Gish's October 22, 2004 faxed letter of cancellation to Transamerica was a valid cancellation of the Policies accepted by Transamerica.
[181] The applications of all defendants to have the plaintiff's statement of claim dismissed under Rule 18A are not suitable for determination under the summary trial procedure and are therefore dismissed.
[182] As none of the parties were successful in their applications, they will each bear their own costs of the applications.
"Ker J."