Executive Summary: Key Legal and Evidentiary Issues

• The core issue is whether an insurer's ability to rely on section 180(1)(c) of the Ontario Insurance Act to deny a life insurance claim for a change in insurability is subject to any time limit.
   
• A separate question is whether the two-year contestability limitation found in section 184(2), which applies to non-disclosures under section 183, can be imported into section 180(1)(c) by analogy.
   
• Mr. Trebell advanced a "prospective interpretation" arguing that section 180(1)(c) could only be invoked before policy delivery and payment of the first premium, not afterward.
   
• Another disputed point was which party bears the burden of proving whether a change in insurability occurred between application and policy delivery.
   
• Whether the Policy's incontestability clause displaced the operation of section 180(1)(c) by contract was also contested.
   
• Finally, the court had to determine the applicable standard of review for the motion judge's statutory and contractual interpretation, which the panel found to be correctness.
   

Facts of the case

Elizabeth Trebell was required under a separation agreement with her former husband, Scott Robert Wesley Trebell, to maintain a life insurance policy for their daughters' benefit. She switched insurers to Canada Life to secure a better rate, applying for a $500,000 policy on July 8, 2014, and cancelling her existing coverage. The Policy was issued on August 6, 2014. While awaiting delivery, Ms. Trebell developed symptoms related to a prior history of hemorrhoids and anal fissures, and on September 18, 2014 underwent a sigmoidoscopy; the examining physician recommended a full colonoscopy to screen for colorectal cancer. The Policy was delivered on September 24, 2014, at which point Canada Life was unaware of these developments, and Ms. Trebell signed a delivery receipt declaring no change in her insurability since the application. The colonoscopy, performed on December 2, 2014, revealed a malignant lesion. Ms. Trebell died of the cancer on March 24, 2018. Canada Life denied the resulting claim, relying on section 180(1)(c) of the Insurance Act on the basis that a change in insurability had occurred between application and delivery.

Policy and legislative provisions at issue

Section 180(1)(c) provides that a life insurance contract does not take effect unless no change has taken place in the insurability of the life to be insured between application and policy delivery. Section 184(2) separately provides a two-year incontestability period, but only for failures to disclose or misrepresentations of fact required to be disclosed under section 183. The motion judge had concluded that section 180(1)(c) was implicitly limited to the same two-year period found in section 184(2), reasoning that a time-unlimited reading would produce absurd results and leave beneficiaries in perpetual uncertainty. Also at issue was the Policy's incontestability clause, which stated that Canada Life would not contest the Policy's validity after it had been "in force" continuously for two years from specified triggering dates. Mr. Trebell argued this clause independently barred Canada Life's reliance on section 180(1)(c), regardless of the statutory analysis.

Reasoning and analysis

Writing for the Court of Appeal, Paciocco J.A. held that section 184(2) cannot apply directly to section 180(1)(c), since section 184(2) is expressly tied to non-disclosures under section 183 and addresses communications of known facts, whereas section 180(1)(c) concerns an objective change in the state of insurability itself, irrespective of anyone's knowledge. The Court also rejected importing the two-year limitation by analogy, holding that the text of section 180(1)(c) contains no such limitation and that the legislature's deliberate, narrower drafting of section 184(2) indicated no intention to extend a similar limit elsewhere. Reviewing the legislative history dating to the 1927 and 1962 amendments, the Court found that the purpose of section 180(1)(c) is to preserve a genuine meeting of the minds on the risk assumed by the insurer, not to provide the insured with subjective certainty as to when coverage begins. The Court further held that the burden of proving a change in insurability rests on the insurer, not the beneficiary, which answered the motion judge's concern about beneficiaries having to prove a negative. Turning to the prospective interpretation, the Court found no textual support for confining section 180(1)(c) to the pre-delivery period, noting that the three requirements in section 180(1) are cumulative and that no separate voiding mechanism is needed once a contract simply never takes effect. Finally, examining the Policy's incontestability clause and its "Definitions" section, which ties the Policy's coming into force to compliance with "all statutory requirements," the Court concluded that the clause incorporates, rather than ousts, section 180(1)(c).

Ruling and overall outcome

The Court of Appeal allowed Canada Life's appeal, holding that section 180(1)(c) is a condition precedent to formation of a life insurance contract that may be invoked by an insurer at any time, without a two-year contestability limit, and that the Policy's incontestability clause did not displace this statutory requirement. The summary judgment previously granted in favour of Mr. Trebell — Ms. Trebell's former husband and the Policy's designated beneficiary — was set aside, leaving the parties to litigate the underlying question of whether Ms. Trebell's insurability changed between application and delivery. The Court declined to substitute a dismissal of the summary judgment motion, since the record did not clearly establish that the insurability issue required a trial rather than further proceedings. No costs were ordered on the appeal, and the motion judge's costs award below was left undisturbed.