Précis: The Ontario Court of Appeal overturned a trial judgement holding that a misrepresentation by an insured voided the policy of insurance and was a defence to a direct action pursuant to s. 132(1) of the Insurance Act of Ontario.
Facts: The appellant, a freight forwarder, retained the services of a motor carrier, KLM, to transport a shipment of food products. The contract between the freight forwarder and KLM provided that KLM would be liable for the value of any shipments tendered to it and also required KLM to maintain insurance coverage. KLM applied for and obtained coverage from the respondent insurer. The insurance application contained a question as to whether there were any contracts with shippers that stipulated higher limits of liability than were contained in the KLM’s standard bill of lading. KLM answered this question in the negative. During the course of transit, the truck was involved in an accident and the food products were destroyed. The freight forwarder commenced proceedings against KLM and provided the insurer with notice of the claim. Default judgment was subsequently obtained against KLM. The freight forwarder then brought this proceeding against the insurer pursuant to s. 132(1) of the Insurance Act of Ontario, which provides for direct action against insurers. The insurer defended arguing that the policy was void for misrepresentation.
At first instance (2015 ONSC 232) the motions Judge held that the contract between KLM and the freight forwarder expanded the liability of KLM beyond the $4.41 per kilogram maximum liability provided for under the Uniform Conditions of Carriage and ought to have been disclosed by KLM to the insurer. The failure to disclose rendered the insurance contract void. The freight forwarder appealed.
Decision: Appeal allowed and judgment is granted against the respondent insurer.
Held: An insurer has the onus of proving a material misrepresentation. This onus has not been met in this case. The question asked by the insurer was “Does the applicant have any contracts with shippers that stipulate limits of liability that are required to supercede the applicant’s standard Bill of Lading?”. This question references KLM’s standard bill of lading, not the Uniform Conditions of Carriage. KLM’s standard bill of lading, if one exists, is not part of the evidence and, accordingly, it cannot be said that answering the question in the negative was a misrepresentation.
Comment: Although not a maritime law matter, this case raises the possibility that provincial insurance statutes providing direct action against insurers might apply in maritime matters. Such was the holding in Langlois v. Great American Insurance Company, 2015 QCCS 791.