False or incomplete statements by insureds

As noted above when discussing good faith obligations in insurance contracts, when applying for insurance insureds are required to candidly disclose information relevant to the risk being insured against. Indeed, the Statutory Condition #1 specified in Part 2 of the Insurance Act, RSBC 2012, c. 1 states that an insurance contract is void if an insured makes a misrepresentation when applying for insurance:

 

If a person applying for insurance falsely describes the property to the prejudice of the insurer, or misrepresents or fraudulently omits to communicate any circumstance that is material to be made known to the insurer in order to enable it to judge the risk to be undertaken, the contract is void as to any property in relation to which the misrepresentation or omission is material.

(Insurance Act, RSBC 2012, c. 1, s. 29, condition #1).

 

The fact that a misrepresentation made when applying for insurance voids the policy has been confirmed by many cases, including the following:

 

An insured has the obligation to make full and accurate disclosure of all information which is relevant to the proposed insurance coverage.  The insurance underwriter must trust those representations in order to determine if it wishes to underwrite that risk, and if so, to accurately assess the risk.  If the insured fails to disclose information or keeps information back through intention or mistake, the policy is void.  In other words, the basis of an insurance policy is that the insurer understand the risk involved and intend to assume it; it therefore must know all the relevant information in order to assess the risk. 

(Lee et al v. Canadian Northern Shield Insurance Company et al, 2005 BCSC 866 at para. 42).

 

Similarly with respect to post loss dealings between the insured and the insurer, statutory condition #6 requires insureds to provide details regarding the loss when making a claim, and statutory condition #7 states that any false statement in relation to the claim invalidates the claim:

 

Any fraud or wilfully false statement in a statutory declaration in relation to the particulars required under Statutory Condition 6 invalidates the claim of the person who made the declaration.

(Insurance Act, RSBC 2012, c. 1, s. 29, condition #7).

 

The above confirms that insureds who are not truthful about matters relevant to the risk when applying for insurance, or are not truthful about the nature of the loss when making a claim, will lose the benefit of the insurance contract.

 

This part of the website provides just a general overview of insurance principles and so does not discuss the circumstances in which particular policies have been found void, or claims disallowed, based on false or incomplete statements by insureds, but suffice it to say that an insured making a false or incomplete statement seriously risks losing insurance coverage.