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IRB Denials Due to Material Misrepresentation

woman explaining to client

If you are in a car accident, your no-fault accident benefits insurer may be obligated to pay you income replacement benefits if you sustain injuries as a result of that accident that causes you to suffer a substantial inability to perform the essential tasks of your employment.

There are, however, a number of reasons that an Insurer may deny you income replacement benefits. One of those reasons is related to section 31(1)(b) of the Statutory Accident Benefits Schedule, O Reg 34/1 (“SABS”), which states that an insurer is not required to pay income replacement benefits if the insured has made or knows of a “material misrepresentation” that induced the insured to enter into the insurance contract, or if the insured “intentionally failed to notify the insurer of a change in a risk material to the contract.”

This section of the SABS was considered in a recent Divisional Court decision: Akinyimide v. Economical Mutual Insurance Company (2023), ONSC 5272. In this case, Bukola Akinyimeda was in a car accident in October of 2017 on her way to work in Toronto. When Bukola obtained her auto insurance policy in February of 2016, she informed her insurer that she resided in Windsor but commuted to work in Toronto. After the car accident, she admitted that she lived in Toronto, which would have increased her premiums. Once they were notified of the change in address, Bukola’s auto insurer increased her premium as well as charged her retroactively.

When Bukola made a claim for income replacement benefits to her insurer, they denied her on the basis that she made a “material misrepresentation” in failing to disclose her correct address at the time she purchased the policy.

Bukola disputed the denial at the License Appeal Tribunal and argued that pursuant to S.131 of the Insurance Act, the insurer was estopped from denying income replacement benefits.

Section 131 of the Insurance Act is the section regarding Waiver and Estoppel, and states that an insured’s obligation to comply with a requirement under a policy is excused to the extent that the insurer’s conduct reasonably causes the insured to believe that compliance is excused, and the insured acts on that belief to their own detriment.

Bukola argued that because the auto insurer increased her premiums after she notified them of her address change, Bukola’s non-compliance with the insurance contract was rectified, and section 31(1)(b) no longer applies. The insurer is estopped from denying benefits on the basis of material misrepresentation.

Initially, the License Appeal Tribunal disagreed with Bukola and favoured the insurer, deciding that the insurer’s denial of income replacement benefits was valid. However, the case was appealed further to the Divisional Court, where it was affirmed that section 131 of the Insurance Act applies, and the equitable remedy of waiver and estoppel should have been considered.

Navigating income replacement benefits and accident benefits can be difficult, time-consuming, and costly. If you or someone you know has been involved in a car accident, you may be entitled to compensation. Please contact our team at JEWELL RADIMISIS JORGE LL.P for a free consultation.

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