NOVA SCOTIA COURT OF APPEAL Citation: Federated Life Insurance Company v. Fleet, 2009 NSCA 76 Date: 20090703 Docket: C.A. 301717 Registry: Halifax Between: Federated Life Insurance Company of Canada Appellant v. David Richard K. Fleet and Paul Bellefontaine Respondents Docket: C.A 301951 Between: Paul Bellefontaine Appellant v. Federated Life Insurance Company of Canada, and David K. Fleet Respondents Judge: Appeal Heard: Subject: The Honourable Chief Justice Michael MacDonald April 8, 2009 Insurance law; duty to disclose; material misrepresentation; scope of pleadings Summary: The respondent Fleet’s wife died of a massive heart attack naming him as the beneficiary on her $150,000 life insurance policy that had been issued by the appellant Federated Life. Federated denied Fleet’s demand for the benefit asserting that both he and the deceased, when they applied for coverage, either misrepresented or failed to disclose material facts surrounding her heart condition. For his part, Fleet asserted that the appellant, Bellefontaine, the agent who brokered the policy, mishandled the application and that he alone is responsible for any misstatements. The Supreme Court ordered Federated to pay the full face amount to Fleet. At the same time, he allowed Federated’s cross-claim against Bellefontaine for the same amount. By two separate appeals that we heard together, both Federated and Bellefontaine seek to overturn the respective judgments against them. Issues: Did the judge err by finding: (a) no material misrepresentations on the part of either insured; (b) no breach of their duty to disclose; (c) that Federated’s cross-claim was broad enough to support the relief granted. Both appeals dismissed. In resolving the above-noted issues, the judge committed no palpable and overriding errors of fact; nor did he commit any errors of law. Result: This information sheet does not form part of the court’s judgment. Quotes must be from the judgment, not this cover sheet. The full court judgment consists of 24 pages. NOVA SCOTIA COURT OF APPEAL Citation: Federated Life Insurance Company v. Fleet, 2009 NSCA 76 Date: 20090703 Docket: C.A. 301717 Registry: Halifax Between: Federated Life Insurance Company of Canada Appellant v. David Richard K. Fleet and Paul Bellefontaine Respondents Docket: C.A 301951 Between: Paul Bellefontaine Appellant v. Federated Life Insurance Company of Canada, and David K. Fleet Respondents Judges: Appeal Heard: Held: MacDonald, C.J.N.S.; Saunders and Fichaud, JJ.A. April 8, 2009, in Halifax, Nova Scotia Both appeals are dismissed per reasons for judgment of MacDonald, C.J.N.S.; Saunders and Fichaud, JJ.A. concurring. Scott Norton, Q.C. and Amy Higgins, for Federated Life Peter Bryson, Q.C. and Jeff Aucoin, for Bellefontaine David Grant, for Fleet Counsel: Page: 2 Reasons for judgment: OVERVIEW  In July of 2004, Ms. Shirleen Lowe died of a massive heart attack. At the time, she was living with her common-law husband, the respondent, Mr. David Fleet. He was the named beneficiary on her $150,000 life insurance policy that had been issued by the appellant Federated Life.  Federated denied Fleet’s demand for the benefit asserting that both Lowe and Fleet, when they applied for coverage, either misrepresented or failed to disclose material facts surrounding Lowe’s heart condition. For his part, Fleet asserts that the appellant, Bellefontaine, the agent who brokered the policy, mishandled the application and that he alone is responsible for any misstatements.  Justice Gerald R. P. Moir of the Supreme Court ordered Federated to pay the full face amount to Fleet. At the same time, he allowed Federated’s cross-claim against Bellefontaine for the same amount.  By two separate appeals that we heard together, both Federated and Bellefontaine seek to overturn the respective judgments against them. For the reasons that follow, I would dismiss both appeals. BACKGROUND  The relevant events began back in 2003. Interestingly, neither Fleet nor Lowe at that time set out to obtain new life insurance coverage. They already had policies with another carrier - Zurich Life. Instead, it was Bellefontaine who solicited Fleet to replace his Zurich package with what Bellefontaine billed as a better deal from Federated. The trial judge described it this way: ¶8 In 1996, Mr. Fleet bought a policy from Zurich through Mr. Bellefontaine. Seven years later, Mr. Bellefontaine convinced him to replace the Zurich policy with better coverage from Federated. ¶9 The Zurich policy insured Mr. Fleet’s life for $100,000 and it contained a rider under which $50,000 would be paid to Mr. Fleet if Ms. Lowe died and $10,000 would be paid if their son died. In 2003, Mr. Bellefontaine recommended Page: 3 replacing this with two Federated Life policies, one on Mr. Fleet’s life and the other on Ms. Lowe’s. He recommended coverage of $150,000 each. ¶ 10 Mr. Bellefontaine was operating out of his home in Jacksontown, New Brunswick when these recommendations were made. He placed a call to Mr. Fleet, who said he was not interested in changing his insurance at that time. ¶ 11 Mr. Bellefontaine called again on May 15, 2003. The earlier rejection notwithstanding, Mr. Bellefontaine provided more information about the policies he was proposing. Mr. Fleet then understood there would be separate policies for $150,000 each.  So Bellefontaine convinced Fleet to switch to Federated. To complete the applications, Bellefontaine first spoke to Fleet over the phone. In the process, Bellefontaine asked him some questions about Lowe’s health. Specifically, he inquired as to whether there had been any change since the Zurich application. The judge interpreted the evidence this way: ¶ 12 When Mr. Fleet said he was interested, Mr. Bellefontaine asked him if his health was alright. Mr. Fleet said it was. Mr. Bellefontaine then asked about Ms. Lowe’s health. Mr. Fleet said it was alright “as far as I know”. Mr. Bellefontaine asked if Mr. Fleet smoked. Then he asked about Ms. Lowe. Mr. Fleet said Ms. Lowe had given up smoking about five years earlier. ¶ 13 On cross-examination by Mr. Beveridge, Mr. Fleet was confronted with an answer on discovery that he remembered Mr. Bellefontaine asking him if his health was basically the same. Mr. Fleet acknowledged having answered Mr. Bellefontaine’s question positively. Refreshed by that, Mr. Fleet was able to agree that he was similarly asked about Ms. Lowe’s health. Mr. Bellefontaine got upset with “as far as I know”; he required a yes or no answer to something along the lines of whether Ms. Lowe’s health was basically the same. Finally, Mr. Fleet said “yes”. ¶ 14 As far as Mr. Fleet is concerned, the information he conveyed was that his own health was the same as it had always been. Mr. Bellefontaine asked a similarly vague question about Ms. Lowe and Mr. Fleet says he gave a truthful answer with the qualification “as far as I know”. He acknowledges that Ms. Lowe sometimes had a bit of a blood pressure problem and she took some pills for that. He acknowledges that he did not communicate those details when he was asked the general question. Page: 4  Bellefontaine then telephoned Lowe directly and asked her some healthrelated questions. Her answers would be used to complete Federated’s questionnaire which Bellefontaine apparently filled in as they spoke. This is when things went amiss.  Instead of forwarding the completed questionnaire to Lowe for her review and signature, Bellefontaine, it appears, forged Lowe’s signature and then forwarded the documentation directly to Federated. Federated assumed that Lowe signed the form but in reality Lowe died without ever seeing it. The form reported no heart-related problems.  When Federated denied coverage, Fleet took action not only against Federated but alternatively against Bellefontaine for his alleged negligence in processing Lowe’s application. Federated defended the main action and alternatively cross-claimed against Bellefontaine. As noted, the judge found for Fleet against Federated but, in turn, allowed Federated’s cross-claim against Bellefontaine. However, he dismissed Fleet’s claim against Bellefontaine. ISSUES  In its Notice, Federated lists the following grounds of appeal: 1. The Learned Trial Judge made a palpable and overriding error in fact and applied wrong principles of law in finding that there was a contract between the Appellant and Shirleen Lowe in light of his finding that Paul Bellefontaine signed the Application for insurance without her authorization or knowledge; The Learned Trial Judge made a palpable and overriding error in fact and applied wrong principles of law in finding that there were no misrepresentations or lack of disclosure of medical conditions which voided the policy; The Learned Trial Judge made a palpable and overriding error in fact and applied wrong principles of law in finding that Paul Bellefontaine was not in breach of any duty of care to Shirleen Lowe; and Such further and other grounds as may appear. 2. 3. 4.  In his Notice, Bellefontaine lists the following grounds of appeal: Page: 5 The Parties’ Use of Discovery Transcript of Opposing Party 1. The Learned Trial Judge erred in law in failing to find that an unqualified tendering of the discovery evidence of opposing party as part of its case is an adoption of that evidence and cannot therefore be attacked by the party having so tendered it. Inconsistent Findings of Fact on the Record 2. The Learned Trial judge erred in law egregiously in the finding on a clear admission in evidence that the Respondent David Richard K. Fleet was aware of the late Shirleen Lowe’s blood pressure problems and did not disclose them to the Appellant. Failure to Consider Relevant Evidence 3. The Learned Trial Judge erred in law in failing to consider evidence of past nondisclosures and misrepresentations of the late Shirleen Lowe on applications of insurance processed or taken by the Appellant, and further ignored or misconstrued the application of similar fact evidence rule. Inconsistent Findings on the Face of the Record and De Facto Findings of Unpleaded Fraud 4. The Learned Trial Judge erred in law in having found on the face of the Decision that there was a conversation between the Appellant and the late Shirleen Lowe concerning health-related issues surrounding the application for insurance but then rejected uncontradicted evidence of the Appellant that he was not informed of any health problems by the late Shirleen Lowe or alternatively that disclosure was made to him by Shirleen Lowe (unsupported by any evidence whatsoever) and finding that the Appellant deliberately concealed and made fraudulent concealments and representations to the Respondent Federated Life Insurance Company of Canada by submitting the application for insurance, none of which was alleged or pleaded by either the Respondents David Richard K. Fleet or Federated Life Insurance Company of Canada. Inappropriate Burden of Proof 5. The Learned Trial Judge erred in law in applying a test other than the balance of probabilities in finding it was more probable than not that the late Shirleen Lowe did not make full disclosure of her medical condition to Page: 6 the Appellant and that the Appellant fraudulently misrepresented the medical facts. Identification of Breach of Appellant’s Duties to the Respondent Federated Life Insurance Company of Canada and Issues of Causation 6. The Learned Trial Judge erred in law in failing to find and identify what acts or omissions the Appellant committed in breach of duties owed to the Respondent Federated Life Insurance Company of Canada which somehow caused the Respondent Federated Life Insurance Company of Canada, or put it in a position, to be unable to avoid the policy of Insurance or that such acts or omissions could reasonably foreseeably cause the harm as found by the Learned Trial Judge.  These grounds, for my purposes, may be distilled into three main headings as follows.  Firstly, both Federated and Bellefontaine emphasize one common submission. They assert that the judge committed reversible error by sustaining coverage in the face of what they say is overwhelming evidence that, at the time of the application, Ms. Lowe’s state of health was materially misrepresented and that both Fleet and Lowe failed to disclose facts material to the risk. I will refer to this as the “coverage” issue.  Secondly, Bellefontaine raises an issue concerning the breadth of Federated’s successful cross-claim which provides: ¶8 Federated repeats the foregoing paragraphs and cross claims against the Defendant Bellefontaine in the event that it is found vicariously liable for the [sic] any fault or liability of the Defendant Bellefontaine. Federated pleads and will rely upon the provisions of the Contributory Negligence Act and the Tortfeasor’s Act, R.S.N.S. 1989, c. 471.  Specifically, Bellefontaine questions how he could be found liable to Federated when in fact he was not found liable to Fleet. In other words, Bellefontaine says that Federated’s cross-claim was premised on Bellefontaine being found liable to Fleet. Without that, says Bellefontaine, Federated’s crossclaim must fail. I will refer to this as the “pleadings” issue. Page: 7  Finally, as detailed in the grounds of appeal set out above, both appellants have raised subsidiary issues which were not forcefully argued during oral submissions. I will deal with them briefly under the heading “ancillary issues”. ANALYSIS  At the outset, let me consider the appropriate standard upon which we should review the judge’s decision. Standard of Review  Both appellants assert that the judge committed errors of fact as well as errors of law. Understandably, a trial judge’s findings of fact are entitled to considerable deference. They will be disturbed only when they reflect palpable and overriding error. Furthermore, inferences drawn from such facts are to be treated with equal deference. On the other hand, when stating the law, a trial judge must be correct. That said, a major portion of a trial judge’s work involves applying the facts to the law. This exercise of mixed fact and law is also to be accorded deference, unless a clear question of law can be extracted. See Housen v. Nikolaisen,  2 S.C.R. 235, 2002 SCC 33 esp. ¶ 10-37; also McPhee v. Gwynne-Timothy, 2005 NSCA 80 at ¶ 31-33; Go Travel Direct.Com Inc. v. Maritime Travel Inc., 2009 NSCA 42 at ¶ 14. The Coverage Issue  Let me try to succinctly capture Federated and Bellefontaine’s combined submission on this issue. They say that regardless of how Bellefontaine may have (mis)handled the file, Fleet and Lowe or either of them misrepresented and or failed to disclose medical information that was material to the risk. This, they say, is amply supported by the record. In fact they say that the judge effectively reached this same conclusion. For example, they highlight this passage where the judge stated that disclosure of this information was required: ¶ 60 In this case, there is evidence of medical conditions that require disclosure. However, the evidence does not establish misrepresentation or failure to make disclosure. Page: 8  Furthermore, Federated and Bellefontaine highlight the judge’s factual conclusion that Fleet “downplayed” his knowledge about his wife’s blood pressure problem. By this, they assert the judge effectively acknowledged that Fleet failed to disclose material information. Here are the material references from the judgment: ¶5 Generally, I accept Mr. Fleet’s evidence, although I believe he downplayed the knowledge he had, at the time he testified, of his wife’s problem with blood pressure. ... ¶ 15 When Mr. Fleet spoke to Mr. Bellefontaine about his proposed Federated Life policies, Ms. Lowe had a history of elevated blood pressure of sufficient severity that medication was prescribed. I cannot say whether the full extent of her history and problem were known by her husband. It appeared to me that Mr. Fleet probably diminished his knowledge, as of the time he testified, of Ms. Lowe’s problems with blood pressure. However, the problem extended back before the Zurich application. I am not satisfied that Mr. Fleet made any misrepresentation when he answered positively, but with a qualification, to Mr. Bellefontaine’s general question of whether Ms. Lowe’s health was the same. [Emphasis added.]  Thus Federated and Bellefontaine assert, by sustaining coverage in these circumstances, the judge committed either palpable and overriding errors of fact and or errors of law.  Before addressing these submissions, it would be helpful to review generally an insured’s duty to disclose and specifically how the nature of the insurer’s healthrelated questions and the context in which they are asked may limit the scope of this duty. The Insured’s Duty to Disclose  The basic duty upon the potential insured to disclose material facts exists independently of any questions asked by the insurer. This duty was first recognized as a common law rule. For example, in Ontario Metal Products Co. v. Mutual Life Insurance Co. of New York,  S.C.R. 35 at page 53, Mignault, J. observed: Page: 9 Dealing now with the duty of disclosure incumbent on the insured under a contract of life insurance at common law, I may refer to the often quoted dictum of Lord Blackburn in Brownlie v. Campbell [5 App. Cas. 925, at p. 954]. In policies of insurance, whether marine insurance or life insurance, there is an understanding that the contract is uberrima fides (sic.), that if you know of any circumstance at all that may influence the underwriters' opinion as to the risk he is incurring, and consequently as to whether he will take it, or what premium he will charge if he does take it, you will state what you know. There is an obligation there to disclose what you know; and the concealment of a material circumstance known to you, whether you thought it material or not, avoids the policy.  In Nova Scotia, this duty is now codified in our Insurance Act, R.S.N.S. 1989, c. 231, s. 185: Duty to disclose 185 (1) An applicant for insurance and a person whose life is to be insured shall each disclose to the insurer in the application, on a medical examination, if any, and in any written statements or answers furnished as evidence of insurability, every fact within his knowledge that is material to the insurance and is not so disclosed by the other. (2) Subject to Section 186, a failure to disclose, or a misrepresentation of, such a fact renders the contract voidable by the insurer. R.S., c. 231, s. 185. The Nature and the Context of the Insurer’s Questions  However, the nature and context of an insurer’s questions can have a direct impact on the scope of an insured’s duty to disclose. Again, in Ontario Metal Products Co., supra, like here, the question which confronted the court was whether the deceased had failed to disclose certain treatment he had received from a physician. Prior to taking out the policy, the deceased had, over a period of three years, occasionally received injections because he was feeling run down. The insurance policy listed four questions which the court considered relevant: 17. What illnesses, diseases, injuries or surgical operations have you had since childhood? State every physician or practitioner who has prescribed for or treated you, or whom you have consulted, in the past five years. 18. Page: 10 19. Have you stated in answer to question 17 all illnesses, diseases, injuries or surgical operations which you have had since childhood? (Answer yes or no.) Have you stated in answer to question 18 every physician and practitioner consulted during the past five years, and dates of consultations? (Answer yes or no.) 20.  In assessing whether there were undisclosed facts material to the risk, Anglin, J., at page 39, applied the contra proferentem rule, by finding that any ambiguities with the questions favoured the insured: The group of questions—17 to 20 inclusive—must be read together and effect given to them in the sense in which a layman so reading them would understand them. It is well established law that the preparation of the form of policy and application being in the hands of the insurers, it is but equitable that the questions to which they demand answers should, if their scope and purview be at all dubious, either in themselves or by reason of context, be construed in favour of the insured, especially after his death when we are deprived of the advantage of his version of what occurred upon the medical examination and of any explanation by him of his understanding of the questions and of his reasons for giving the answers to them recorded by the medical examiner. The insurers put such questions and in such form as they please, but they “are bound so to express them as to leave no room for ambiguity.” To such a case the rule contra proferentem is eminently applicable. Thomson v. Weems [9 App. Cas. 671, 687]; Life Association of Scotland v. Foster [ 11 C.S.C. (3rd series) 351, 358, 364]; Fowkes v. Manchester and London Life Assurance Association [ 32 L.J. Q.B. 153, 157]; Joel v. Law Union and Crown Ins. Co. [ 2 K.B. 863, 886. 159, 160]; In re Etherington and The Lancashire, etc., Ins. Co. [ 1 K.B. 591, 596]; Condogianis v. Guardian Assurance Co. [ 2 A.C. 125, 130]. [pages 41-42]  Then after construing the ambiguous terms against the insurer, Anglin, J. found that the nature of the insurer’s questions directly impacted the extent of the insured’s duty: What a reasonable man would regard as material is not necessarily what the assured so regarded, Joel v. Law Union and Crown Ins. Co., [ 2 K.B. 863, 884] See also Pickersgill, etc. v. London and Provincial, etc. Ins. Co., [ 3 K.B. 614, 619]; Traill v. Baring, [4 DeG., J. & S., 318, 330]. In the view I have taken, however, that by its requisitions for information the company elected to relieve the insured from any duty to disclose matters in regard to his past health which its questions did not cover (having by an express provision of its policy agreed that only the statements contained in the written application should avail it as matter of Page: 11 defence; Joel v. Union and Crown Ins. Co.[supra]; Ayrey v. British Legal and United Provident Ass. Co.,  1 K.B. 136, 141), and that there was in fact no misrepresentation or concealment of anything required to be disclosed by questions nos. 17, 18, 19 and 20 it would seem to be unnecessary to pass upon the question of materiality. [page 49]  This approach has also been applied by other Canadian courts. For example, in Caverhill Estate v. Bank of Montreal (1994), 153 N.B.R. (2d) 195, 392 A.P.R. 195, (sub nom. Caverhill v. Bank of Montreal)  I.L.R. 1-3135 aff’d 161 N.B.R. (2d) 78, 1995 CarswellNB 385, 414 A.P.R. 78,  N.B.J. No. 185 (N.B. C.A. Mar 29, 1995), Stevenson, J. not only applied the contra proferentem rule but also added that the nature of an insured’s questions may amount to a form of waiver. ¶ 25 An applicant's duty to disclose facts within his knowledge may be waived by an insurer or may be limited or restricted by the questions the insurer asks the applicant on an application form. When, as here, the insurer requires answers to only two short questions the applicant is not required to disclose matters which the questions do not cover. See Taylor v. National Life Assurance Co. of Canada (1990), 7 C.C.L.I. (2d) 146 at 151-152 (B.C.C.A.).  See also: Taylor v. National Life Assurance Co of Canada (1990), 7 C.C.L.I. (2d) 146;  I.L.R. 10362; 21 A.C.W.S. (3d) 1051 (B.C.C.A.); Kong v. Manulife Financial Services Inc., 2008 BCSC 65 aff’d 2009 BCCA 90; Stewart v. Canada Life Assurance Co. (1999), 14 C.C.L.I. (3d) 178;  I.L.R. I-3792 (ON SCJ) aff’d,  O.J. No. 2970 (O.N.C.A)). Application of these Principles  With this backdrop, I will now consider the appellant’s submissions on the coverage issue.  I will deal first with the assertion that Lowe misrepresented material facts or breached her duty to disclose. Here the context is very important. For example, the only evidence we have about what questions were asked and answered came from Bellefontaine. Furthermore, Bellefontaine did not testify at trial, leaving the judge to rely only upon his discovery transcript which Fleet tendered. Nor can we rely on the health questionnaire since it was signed by Bellefontaine without Lowe ever seeing it. It was in this context that the judge completely rejected Bellefontaine’s evidence on what Lowe may or may not have disclosed: Page: 12 ¶ 51 ... In any event, I reject his evidence on the subject of representations by Ms. Lowe.  In fact, the judge concluded that Lowe may have indeed disclosed her heart problems: ¶ 52 I do not have enough confidence in Mr. Bellefontaine's evidence even to find that Ms. Lowe did not mention her problems with blood pressure or dyspepsia. ¶ 53 There is no proof of a misrepresentation by Ms. Lowe and no proof she failed to disclose material information about blood pressure or dyspepsia to the agent. ... ¶ 58 Ms. Lowe is dead. Mr. Bellefontaine is not credible. There is no credible evidence about whatever disclosure or presentations were made by Ms. Lowe when the Federated policy was contracted in 2003.  Furthermore, it must be remembered that it was not up to Fleet to prove Lowe’s compliance with her duty to disclose. Instead, Federated bears this burden. Therefore, the judge, having no faith in Bellefontaine’s evidence, had no knowledge of what Lowe may have reported. On these facts, the judge was correct to conclude that Federated failed to meet its onus.  Let me now turn to the purported breach by Fleet. Again, Federated and Bellefontaine assert both misrepresentation and a failure to disclose. I will deal first with the purported misrepresentation. The judge acknowledged the fact that Fleet knew Lowe was taking “sample” blood pressure medication. Yet again, placing things in context, including the nature of Bellefontaine’s questions, the judge ruled out misrepresentation. ¶ 17 I find Mr. Fleet was asked whether Ms. Lowe's health had changed, implicitly whether it had changed since the Zurich application in 1996. I find Mr. Fleet said that it had not changed as far as he knew. That answer would limit both the extent to which Ms. Lowe confided in her husband and the extent to which Mr. Fleet recalled her health in 1996 and developments since. The subsequent, unqualified, "yes" has to be understood in light of the facts that Federated Life's agent had heard the qualification and, given the very general question and Ms. Lowe's health in 1996, the answer appears to have been truthful. Page: 13  Yet, as noted above, Federated and Bellefontaine assert that the judge’s attempt to rule out misrepresentation is incongruous with his expressed findings that Fleet appeared to “downplay” the extent of his knowledge on this issue. Here again are the impugned passages: ¶5 Generally, I accept Mr. Fleet’s evidence, although I believe he downplayed the knowledge he had, at the time he testified, of his wife’s problem with blood pressure. ... ¶ 15 When Mr. Fleet spoke to Mr. Bellefontaine about his proposed Federated Life policies, Ms. Lowe had a history of elevated blood pressure of sufficient severity that medication was prescribed. I cannot say whether the full extent of her history and problem were known by her husband. It appeared to me that Mr. Fleet probably diminished his knowledge, as of the time he testified, of Ms. Lowe’s problems with blood pressure. However, the problem extended back before the Zurich application. I am not satisfied that Mr. Fleet made any misrepresentation when he answered positively, but with a qualification, to Mr. Bellefontaine’s general question of whether Ms. Lowe’s health was the same. [Emphasis added.]  However, it is important to read these passages carefully. In them, the judge is commenting on Fleet’s statements, not at the time of the application but at the time of trial. What the judge thought of Fleet’s evidence at trial is not material to this issue. Instead the key statements are the ones he gave to Bellefontaine at the time of the application. It is on this crucial point that the judge ruled out misrepresentation. Considered in this context, his conclusion does not reflect palpable and overriding error.  Turning to Fleet’s alleged breach of his duty to disclose, Federated and Bellefontaine suggest that the judge erred in law. This error, they say, is reflected in the following passage from the judge’s decision: ¶ 16 I am satisfied that Mr. Fleet did not deliberately conceal information from Mr. Bellefontaine. I find the general question posed by Mr. Bellefontaine to Mr. Fleet about changes in Ms. Lowe's health did not bring Ms. Lowe's blood pressure problems to mind.  Specifically Federated and Bellefontaine assert that this passage reflects a misunderstanding of an insured’s statutory duty to disclose. The test, they say, is not whether Fleet deliberately concealed or even may have forgotten something. Instead Page: 14 the duty involves more than this. It involves a responsibility to be completely forthcoming. Federated explains it this way in its factum: ¶ 62 In life insurance policies, a failure to disclose a known material fact, even innocently or through inadvertence, entitles the insurer to avoid the contract. This was confirmed by this Court in Cameron v. Coopérants Mutual Life Insurance Society, 1992 CarswellNS 121. In that case, a husband and wife applied for life insurance to cover the outstanding balance of their mortgage. In the application, they incorrectly answered that they had not been denied life insurance in the previous five years. The husband stated in an accompanying letter that he could not remember if any application for insurance had been denied. The insurer later denied liability on the policy based upon a material misrepresentation in the application. This Court overturned the trial decision in favour of the insured and held that forgetfulness on the part of an insured puts the insurer in a position to avoid the contract. The Court stated at para. 26: 26. The law relating to misrepresentations which is analogous to the situation we have under consideration is clear. In Life Insurance Law in Canada (1977) by David Norwood the author states at p. 247 in dealing with innocent misrepresentations: The misrepresentation of the known fact may have been due to negligence on the part of the insured or life insured, where he meant to disclose it, but did not actually do so. It may have been due to forgetfulness on his part, where the material fact genuinely escaped his memory. It may have been due to mistake on his part, where he believed that he had disclosed it to the insurer on a previous occasion, or where he believed that the insurer was already in possession of the fact of its own knowledge. It may have been due to misjudgment on his part, where he felt that the fact was not really significant and he did not therefore consider it important to relate it to the insurer. Regardless of the good faith of the insured or life insured, all such misrepresentations, however innocently made and regardless of the genuine lack of appreciation of materiality, will entitle the insurer to avoid the contract as long as the misrepresentation is of a fact known to the insured or life insured which would be regarded by a reasonable insurer as material to the risk. [Emphasis added] Page: 15 Cameron v. Coopérants Mutual Life Insurance Society, supra at para. 26 (Tab 8).  In other words, Federated continues, it is not enough for Fleet to simply answer the questions asked: ¶ 66 Simply answering questions posed by an agent does not necessarily amount to full disclosure by an applicant: As a general rule the fact that particular questions relating to the risk are put to the proposer does not per se relieve him of his independent obligation to disclose all material facts. MacGillivray and Parkington, Insurance Law, 8th ed. (Agincourt: Carswell, 1988) at p. 259 (Tab 13).  Respectfully, I disagree with these submissions. Granted, I accept that simply answering the questions asked may not guarantee compliance with the duty to disclose. However, as I have noted above, the nature of the questions asked in any given case may very well delineate the scope of an insured’s corresponding duty. For example, Federated’s reference to MacGillivary and Parkinson in the above excerpt does not end the matter. Several paragraphs later, the authors added this important qualification: 646. It is more likely, however, that the questions asked will limit the duty of disclosure, in that, if questions are asked on particular subjects and the answers to them are warranted, it may be inferred that the insurer has waived his right to information, either on the same matters but outside the scope of the questions, or on matters kindred to the subject matter of the questions. ...  Here, the trial judge found Bellefontaine’s questions to be “vague” (at ¶ 14) and “general” (at ¶ 15, 16, 17). Furthermore, as the judge explains below, these questions were asked in the context of whether Lowe’s health had changed from the time of the Zurich application. In this context, Fleet’s qualified response “as far as I know” did not, for the judge, amount to a breach of Fleet’s duty to disclose. Again, here is his conclusion: ¶ 16 I am satisfied that Mr. Fleet did not deliberately conceal information from Mr. Bellefontaine. I find the general question posed by Mr. Bellefontaine to Mr. Fleet about changes in Ms. Lowe's health did not bring Ms. Lowe's blood pressure problems to mind. Page: 16 ¶ 17 I find Mr. Fleet was asked whether Ms. Lowe's health had changed, implicitly whether it had changed since the Zurich application in 1996. I find Mr. Fleet said that it had not changed as far as he knew. That answer would limit both the extent to which Ms. Lowe confided in her husband and the extent to which Mr. Fleet recalled her health in 1996 and developments since. The subsequent, unqualified, "yes" has to be understood in light of the facts that Federated Life's agent had heard the qualification and, given the very general question and Ms. Lowe's health in 1996, the answer appears to have been truthful. ... ¶ 60 In this case, there is evidence of medical conditions that require disclosure. However, the evidence does not establish misrepresentation or failure to make disclosure.  In my view the nature of these questions and the context in which they were asked again are very important in this case. It must be recalled that neither Lowe nor Fleet set out to apply for insurance with Federated. They were approached by Bellefontaine. The information was gathered by way of two brief phone calls generated by Bellefontaine with a view to selling a policy. As noted, the questions were “very general” and “vague”.  To this Bellefontaine’s misdeeds must be superimposed. They too add significantly to the context. Let me elaborate.  Bellefontaine signed the forms without the insured’s knowledge or authorization. In other words, any misstatements in Lowe’s questionnaire were neither Lowe’s nor Fleet’s. They were Bellefontaine’s. This is significant. For example, in Legh-Jones et al., MacGillivray on Insurance Law, 9th ed. (London: Sweet and Maxwell, 1997), the authors consider this very situation and conclude that the insurer could not rely on an agent’s misstatements: It is a general rule in the law of contract that fraud, misrepresentation, or nondisclosure by persons who are not parties to a contract or agents for those parties does not affect the validity of the contract though it may be a ground for proceeding against those persons for damages in deceit or negligence, or for breach of collateral warranty. This rule applies to contracts of insurance as to other contracts, and prima facie it is no defence for the insurers to allege that some person other than the assured or his agent made false or inaccurate statements to them or did not disclose some material fact within his knowledge. Thus, where a proposal form was completed and signed in the name of the assured but was in fact signed by some other person without the assured’s authority or knowledge, it was held that the Page: 17 company could not rely on misstatements contained therein as a defence to the assured’s claim on the policy. [at page 431] [Emphasis added, citations omitted.]  This approach was also followed by the Supreme Court of Canada in Blanchette v. C.I.S. Ltd.,  S.C.R. 833. In that case, the insured had taken out fire insurance on his granary as well as public liability insurance. Subsequently, tractor insurance was added by the insured; this addition was done over the phone and the insured had no opportunity to review the completed form. As it happened, the insurance form was not completed correctly. Under those circumstances, the majority held: ... in the present case, the signed form was already in the hands of the agent when he told the appellant that the additional coverage could be obtained by his making the necessary additions on the basis of the information given him by telephone. When Blanchette agreed not to insist on Raiche returning to his home for the purpose of adding the tractor coverage on the insurance application, he had no means of verifying the correctness of the form as completed. In my view, it is unfair to hold that he should suffer the consequences of Raiche’s failure to complete the form properly. [at page 840]  In conclusion, therefore, when I assemble all these important contextual factors against the judge’s reasons as a whole, I am not persuaded that he misunderstood the nature of Fleet’s duty to disclose; nor do I see any palpable and overriding errors of fact.  For all these reasons, I would dismiss this ground of appeal. The Pleadings Issue  As noted, by finding Bellefontaine liable to Federated, Bellefontaine asserts that the judge granted relief which was not plead. In his factum, Bellefontaine explains: ¶ 61 It is respectfully submitted that it is abundantly clear that the judgment granted by the Trial Judge against the Appellant in favour of Federated Life was unpleaded, both in the sense of no pleaded cause of action for negligence or breach of fiduciary duty and indeed no pleaded allegations of fact in support of such a cause of action, nor did the Trial Judge invite any argument on the subject matter of his finding, nor is this a case of minor amendments to existing pleadings curing the injustice to the Appellant caused by the present Decision. Page: 18 ¶ 62 It is respectfully submitted that the Trial Judge erred in law in granting judgment on a Cross-claim, when the only claim pleaded and claimed was one for indemnity should the Plaintiff succeed at trial against the Appellant (which the Plaintiff clearly did not), and if Federated Life were found vicariously liable in turn for that liability. In circumstances where a trial judge makes such an error of law it justifies the setting aside of the judgment; Scott Brothers Gravel Co. v. N.W. Hullah Corp.(1967), 59 W.W.R. 173, paras. 9-11; Hess Development Ltd. v. Kapeluck (2000), S.K.Q.B. 528, paras. 14-15.  For ease of reference, here again is Federated’s cross-claim: ¶8 Federated repeats the foregoing paragraphs and cross claims against the Defendant Bellefontaine in the event that it is found vicariously liable for the any fault or liability of the Defendant Bellefontaine. Federated pleads and will rely upon the provisions of the Contributory Negligence Act and the Tortfeasor’s Act, R.S.N.S. 1989, c. 471.  In short, therefore, Bellefontaine asserts that Federated’s cross-claim was dependant upon Fleet being successful against Bellefontaine. For the following reasons, I cannot accept this submission.  It is helpful to begin with the judge’s reasons for dismissing this aspect of Fleet’s claim: ¶ 66 Mr. Grant refers me to authorities under which an agent for an insurer is held to a duty of care towards the insured. He refers specifically to duties arising in some circumstances to warn an insured against cancelling a policy when a replacement is not assured and more generally to provide advice. ¶ 67 These duties do not arise on the findings in this case. Ms. Lowe received better coverage under the Federated Life policy than she had under the Zurich policy. Other than litigation expenses and the loss of use of money, Mr. Bellefontaine's failures cause loss exclusively to Federated Life. ¶ 68 I will dismiss this claim.  Note that the judge dismissed this claim not on its merits but solely because Fleet would be recovering fully from Federated and, as a result, Bellefontaine’s “failures” triggered no loss to Fleet. In short, he found that “Bellefontaine’s failures cause loss exclusively to Federated Life”. Page: 19  In my view this is precisely what the cross-claim targets - indemnity should Federated be found liable for Bellefontaine’s failures. On this basis, the success of the cross-claim is not dependant on Bellefontaine being declared “liable” to Fleet. Indeed the express language of the cross-claim targets recovery not just as a result of “liability”, but also as a result of his simple “fault”.  Nor can Bellefontaine claim surprise in my view. In fact, in his defence to this cross-claim, Bellefontaine appears to anticipate this very issue. Specifically, Bellefontaine refutes any liability not just to Fleet but also to Federated: Defence to Crossclaim 1. The Defendant by Crossclaim, Paul Bellefontaine (hereinafter referred to as the “Defendant by Crossclaim”), denies the Crossclaim and every allegation therein contained and incorporated by reference as if the same were set out at length herein and traversed seriatim, save and so far as any part thereof is hereinafter expressly admitted. 2. The Defendant by Crossclaim repeats and pleads his defence to the Statement of Claim herein, and denies that he has committed any act or omission attracting any liability by way of breach of contract or tort in favour of either the Plaintiff or the crossclaiming Defendant, Federated Life Insurance Company of Canada. [Emphasis added.]  Furthermore, in his closing submissions, Federated’s counsel (although agreeing with Bellefontaine on the main disclosure issue) made his case against Bellefontaine equally clear: We submit that if Your Lordship concludes that there was negligence on the part of Mr. Bellefontaine, although we don't submit that there was any, that that would have to have been an act clearly beyond his authority as set forth in the Agent Agreement that was produced in evidence, which made it very clear that he had no authority from the insurer to waive any of their requirements, including answering the questions and having the insured sign the document. And finally, that, were you to find Federated vicariously liable, we would seek the Order of Indemnity in the Crossclaim because surely any finding against Mr. Bellefontaine would certainly be a breach of his duty to Federated, both in tort and under that contract. Page: 20  The judge then made the requisite factual findings against Bellefontaine: ¶ 71 The application contained all the necessary negative answers but only because of the defalcation of the agent. In my assessment, the submission of the application breached both the duty of care and the fiduciary duties owed by Mr. Bellefontaine to Federated Life. I accept the evidence of Ms. McMillan and find that, without the breach, the policy would not have been issued.  Further, this result appears justified because in his “agent agreement”, Bellefontaine promises to indemnify Federated in the event of a breach: 5) Breach of Agreement The Agent to indemnity the Company and hold it harmless from any losses, expenses or damages that result from any breach of any terms of this Agreement.  Finally, let me add this. There is no magic in Federated’s use of the word “vicariously” in describing the type of liability from which it would seek recovery. While vicarious liability is often discussed in the context of one party being held responsible for another party’s liability, its legal application is not so limiting. There does not have to be an actual finding of liability against the ultimate wrongdoer to trigger vicarious liability. As was the case here, a simple finding of fault will suffice. In fact, the ultimate wrongdoer does not even have to be sued to trigger “vicarious” liability. For example, Fridman in The Law of Torts in Canada, 2nd ed. (Carswell, 2002) at page 276, describes “vicarious” liability this way: ... It arises and exists solely because the law holds one party responsible for what has been done by another, albeit that the one so held responsible is totally “innocent,” in a personal sense, of any wrongdoing. The latter is liable because of the tort committed by the former. Hence, even if the one who actually committed the tort cannot be sued by the injured party, for example, because she was the plaintiff’s wife, this will not prevent the imposition of vicarious liability upon the defendant, as long as the tortfeasor and the defendant were connected in the appropriate way. ... [Emphasis added.]  I would therefore dismiss this ground of appeal Ancillary Issues Page: 21  Alternatively, Federated relies on basic contract law to assert that if Lowe did not sign off on the application, she had no contract with Federated. Thus, in its factum, Federated explains: ¶ 46 Bellefontaine was not an employee of Federated Life. He signed an agency agreement with Federated Life which authorized him to solicit applications for life insurance on Federated Life’s behalf. Bellefontaine was not authorized to contract on Federated Life’s behalf. ¶ 47 The evidence at trial was that Bellefontaine was not authorized to contract on Lowe’s behalf. The Trial Judge stated: There is no evidence that Ms. Lowe authorized Mr. Bellefontaine to sign her name to the application. Mr. Fleet’s evidence makes it clear that such a thing was never discussed by Mr. Bellefontaine with him. Ms. McMillan’s evidence makes it clear that Mr. Bellefontaine was not permitted to do so. And, I have no explanation from Mr. Bellefontaine of why he went to this measure. I find he signed Ms. Lowe’s name without her knowing it or ever seeing the form. Decision of Moir, J., Appeal Book, Vol. 1, Tab 7, p. 40 ¶ 48 Federated Life was unaware that Lowe did not review the application in its entirety, validate the answers were correct or sign and date the application. ¶ 49 It is respectfully submitted that, because of the actions of Bellefontaine, the parties did not have the opportunity to confirm that they were both in agreement with the terms and conditions of the Policy. Without this meeting of the minds between Lowe and Federated Life, they could not have entered into a legally enforceable agreement and, therefore, the Policy is not valid. ¶ 50 Having found that there was no misrepresentation or non-disclosure because Lowe never saw the application, never answered the questions and never authorized Bellefontaine to do so, it is completely illogical and incongruous to find the insurer liable for breach of contract.  Respectfully, this submission ignores the fact that the policy was issued and it was based upon an offer and acceptance between Federated and Lowe. The relevance of Bellefontaine forging Lowe’s signature was limited to the disclosure issue. It did not abort the contract of insurance. In fact in its own factum, Federated acknowledges as much: Page: 22 ¶ 63 Based upon the false representations of Lowe in the application, Federated Life was induced to enter into an insurance contract with Lowe.  I would dismiss this ground of appeal.  Bellefontaine takes issue with the judge’s use of his (Bellefontaine’s) discovery transcript which was tendered by Fleet in his case proper. Essentially Bellefontaine argues that because Fleet tendered this evidence, Bellefontaine became Fleet’s witness and was therefore bound by Bellefontaine’s evidence. Thus, in his factum, Bellefontaine asserts: ¶ 30 The learned Trial Judge ruled that the use to which Fleet's counsel, Mr. Grant, put the discovery evidence of the Appellant did not constitute an adoption of all of that evidence, which could not be contradicted, as part of his case. In doing so, the Trial Judge relied on the judgment of the Court in Burton v. Howlett 2001 N.S.J. No. 65 (C.A.), which in turn relied on a passage of the late Grant, J.'s decision in Matheson v. Johnson's Estate (1984), 66 N.S.R.(2d) 19 (S.C.T.D.). His Lordship, Saunders, J., is saying of discovery of an adverse party: counsel is allowed to file the entire discovery transcript … for whatever purpose counsel intends and that counsel "might well" reserve revelation of counsel's purpose until final argument". ¶ 31 It is respectfully submitted that those decisions are distinguishable from the facts in this case. In those cases, the transcript of discovery evidence was "filed" and was used to demonstrate contradictions in opposing party's testimony given at trial. Grant, J. in Matheson v. Johnson's Estate [supra] indicated that counsel need not put discovery transcript to the witness who was testifying but could save that later to present an argument. ¶ 32 That is quite different than the facts and the mode in which Plaintiff's counsel used and introduced the discovery examination evidence of the Appellant. While it is trite that the discovery evidence may be used "for any purpose", the purpose for which it was used and the manner in which it was used by Plaintiff counsel in the present proceeding is quite something than using it for impeachment. ¶ 33. Fleet's counsel, Mr. Grant, at the close of his case, tendered interrogatories as evidence as part of this case and also "tendered" the full discovery of the Appellant. Reference: Appeal Book, Vol. II, p. 190 ¶ 34 It is respectfully submitted that it is clear that the evidence was tendered on an unqualified basis as part of the Plaintiff's case and was not merely "filed" for the Page: 23 purpose of contradicting some other evidence to be given at trial – see counsel's exchange with the Court. Reference: Appeal Book, Vol. II, p. 190 ¶ 35 It is respectfully submitted that the repeated use of the word "tender" taken in conjunction with evidence and the nature of the lumping together of interrogatories discovery evidence is an adaptation of that evidence as part of making the deponents to that type of evidence the Plaintiff's own witness.  I see no merit to this submission and would dismiss this ground of appeal. In doing so, I simply adopt the judge’s conclusion: ¶ 25 Under Rule 18.14(1)(b), which allows a discovery transcript to be used "for any purpose by an adverse party", Mr. Fleet appears to be entitled to introduce Mr. Bellefontaine's entire transcript without making him Mr. Fleet's witness. However, any doubt about that is resolved by Rule 18.14(5)(b): the introduction in evidence of the deposition or any part thereof for any purpose, other than under clauses (a) and (b) of paragraph (1) hereof, makes the deponent the witness of the party introducing the deposition. The specific exclusion of 18.14(1)(b) indicates that introduction for any purpose by an adverse party does not make the deponent the witness of the party introducing the transcript. ¶ 26 I am not bound by uncontradicted discovery evidence given by Mr. Bellefontaine. I must find the facts by assessing his evidence at discovery as a whole and in the context of the whole of the evidence.  The remaining grounds of appeal primarily involve attacks on the judge’s factual findings. On my review of the record, none of these factual findings reflect palpable and overriding error. Thus, I see no merit to these remaining grounds of appeal. CONCLUSION  I would dismiss both appeals with Federated and Bellefontaine to each pay to Fleet appeal costs of $2,500., together with reasonable disbursements (as agreed upon or taxed) to be shared equally by Federated and Bellefontaine. I order no costs as between Federated and Bellefontaine. Page: 24 MacDonald, C.J.N.S. Concurred in: Saunders, J.A. Fichaud, J.A.
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