2004 BCSC 1525 Lucow v. HSBC Canadian Direct Insurance

Before: The Honourable Mr. Justice Groberman

Reasons for Judgment

Counsel for the Plaintiff	Bruce G. Livingston
Counsel for Defendant	Neo J. Tuytel Krista L. Prockiw
Counsel for the Insurance Corporation of B.C.	C. Richard Fister
Date and Place of Hearing:	November 5, 2004
	Vancouver, B.C.

[1] Mr. Lucow was the driver of a vehicle involved in a serious accident on March 4, 2002. He was, at that time, under doctor’s instructions not to drive as a result of recent epileptic seizures. The defendant, which I will refer to as CDI, has refused insurance coverage for the accident. It has purported to void Mr. Lucow’s policy on the basis of his failure to advise it of his medical condition and doctor’s advice. The issue on this Rule 18A application is whether or not CDI has grounds for voiding the policy.

Factual Background

[2] Mr. Lucow is 51 years old. He has suffered from seizures since his late twenties, and was diagnosed with epilepsy in his late thirties. He has been able to control his seizures with the use of Tegretol, and by the year 2000, had not suffered seizures for several years.

[3] Until August 2000, Mr. Lucow purchased his motor vehicle insurance from the Insurance Corporation of British Columbia. In August 2000, he renewed his compulsory automobile insurance with ICBC, but purchased optional extended insurance (excess liability, collision, comprehensive and medical insurance coverage) from CDI, instead.

[4] Unbeknownst to Mr. Lucow, CDI has a policy against providing insurance to an individual who

… has a medical condition which could impair the operation of the automobile unless the operator has, for the past three years, been compensated by a … medication and no conditions added to the driver’s licence.

[5] When he initially purchased insurance from CDI, Mr. Lucow was not asked any questions about his health or medical history. If such questions had been asked, CDI would nonetheless have accepted Mr. Lucow as an insured, because his epilepsy had been controlled by medication for several years.

[6] On December 8, 2000, Mr. Lucow suffered a seizure at work. Dr. Varelas, a neurologist at Richmond Hospital, saw him on December 19, 2000, and advised him not to drive. The plan was to increase Mr. Lucow’s dosage of Tegretol, and monitor him for a period of two to three months. Dr. Varelas felt that if Mr. Lucow remained seizure-free over that time, he would be able to resume driving.

[7] Dr. Varelas also referred Mr. Lucow to Dr. Michael Jones, the director of the Epilepsy Program at Vancouver Hospital & Health Sciences Centre, for a second opinion. Dr. Jones’ report of January 10, 2001 states:

I would endorse your recommendation that he not drive and it is upsetting that he has continued to do so.

…

I don’t think we have any choice but to recommend that he go six months and not just two to three months. There is a new Guide put out by the Royal College of Physicians and Surgeons that says that patients don’t necessarily have to go a full year if the neurologist caring for them feels that there may be circumstances where they could return to driving at 6 months if the neurologist made that recommendation. That would be my recommendation for him.

On May 28, 2001, Dr. Varelas saw Mr. Lucow again, and felt able to allow him to drive again. At a follow-up appointment on October 1, 2001, Dr. Varelas noted, “He is now back to driving and I think at this point it is reasonable for him to carry on with driving any vehicle requiring a Class 5 licence.”

[8] Just over a month later, on November 2, 2001, Mr. Lucow suffered a second seizure at work. He was referred to Dr. Mackie, another neurologist. Dr. Mackie’s report of November 28, 2001 states:

He is aware that he is not to drive. I have told him that a driving limitation of a year is appropriate given his pattern of symptoms.

…

With regard to his activity limitation, clearly he must not drive, he must not operate heavy machinery. He should shower instead of bath, he should not work over water. All these items I understand limit his ability to work at his normal occupation [Mr. Lucow worked in a waste-water treatment facility]. I have told him that his work activities must be modified in a way that would not put him at risk or potentially put others at risk should he have an event of the type that he has had up to now ….

[9] On March 4, 2002, contrary to Dr. Mackie’s instructions, Mr. Lucow drove his automobile. Witnesses state that the car was speeding down No. 1 Road in Richmond, at approximately double the speed limit, with the engine revving at high throttle. The car rear-ended two vehicles in rapid succession at an intersection, then a third vehicle at the next intersection. It then came to a stop at the side of the road. According to counsel, all four vehicles were “essentially destroyed.”

[10] Mr. Lucow has no recollection of the accident or the circumstances surrounding it. They are, at the very least, consistent with him having had another seizure.

[11] ICBC has honoured its policy. CDI has not. Instead, it refunded Mr. Lucow’s premiums, purporting to void the policy.

[12] At least one occupant of a vehicle that was hit suffered extensive injuries. That person has underinsured motorist protection (commonly known as UMP) provided by ICBC. ICBC anticipates that Mr. Lucow’s basic insurance will be insufficient to cover the damages from the accident, and it, accordingly, has a financial stake in the outcome of this case. For that reason, this court granted it status to adduce evidence and present argument.

Provisions of the Policy

[13] CDI relies on clause 1.4 of its insurance policy, which states:

1.4 Your Responsibilities

If you fail to meet your responsibilities, claims under this policy may be denied.

By accepting this contract you agree to the following conditions:

1.4.1 You will notify us promptly in writing of any significant change of which you are aware in your status as a driver, owner, or lessee of a Described Automobile. You will also promptly inform us of any change that might increase the risk of an accident or affect our willingness to insure you at current rates. You will promptly inform us of any change in information supplied in your original application for insurance, such as additional drivers, or a change in the way a Described Automobile is used.

It also relies on the Statutory Condition 1(1), prescribed under section 138 the Insurance Act, R.S.B.C. 1996, c. 226. That condition, which is reproduced in the contract of insurance, states:

Material change in risk

1.(1) The insured named in this contract must promptly notify the insurer or its local agent in writing of any change in the risk material to the contract and within the insured's knowledge.

[14] CDI contends that Mr. Lucow’s medical condition amounted to a material change in the risk he posed as a driver; that is, that it increased the risk of him having an accident. It says that it was entitled to be notified by Mr. Lucow that he had had epileptic seizures, and that he was given medical advice not to drive. If it had been given such advice, CDI would have cancelled Mr. Lucow’s insurance.

Was there a Material Change of Risk?

[15] CDI is entitled to void the policy if Mr. Lucow failed to advise it of a change material to the insured risk. I accept that the appropriate test of materiality is that adopted by Low J., as he then was, in Panajim Developments Ltd. v. Laurentian Pacific Insurance Co. (1992), 12 C.C.L.I. (2d) 29 (B.C. S.C.) from Lewandowski v. The Waterloo Mutual Insurance Co. (1985), 12 C.C.L.I. 288 (Ont. S.C.):

Whether a change is material to the risk is a question of fact in each case. The question is: if the change had been disclosed would it have influenced a reasonable insurer to either decline to continue the insurance or to have stipulated for a higher premium?

The burden of demonstrating materiality is on the insurer.

[16] A number of factors might assist the court in determining materiality, including what information is sought by the insurer in deciding whether or not to offer insurance, the underwriting policies of the insurer, and general practice in the insurance industry.

[17] In the case at bar, the biggest difficulty for CDI is that it does not ask any questions about the applicant’s medical condition when dealing with an application for insurance. The relevance of such inquiries was considered by the Alberta Supreme Court in Fordorchuk v. Car & General Insurance Corp., [1931] 3 D.L.R. 387 (Alta. SC):

As Scrutton, L.J., remarked in Newsholme Bros. v. Rood Transport & Gen'l Ins. Co., [1929] 2 K.B. 356, at p. 363, "the insurance companies also run the risk of the contention that matters they do not ask questions about are not material, for, if they were, they would ask questions about them." In the case at bar the plaintiff having answered, as he thought correctly, the questions asked him concerning fires would naturally infer that this was all the information the company required on the subject of fires and that a previous fire at a far distant place was of no importance.

The failure of the insurer to seek out information in a particular area may lead to an inference that the information is not material. This said, the insurer’s failure to ask questions at the time the insurance was placed is only one factor to be considered. It is not determinative of the materiality of a subsequent change.

[18] ICBC points out that its own practice is not to require people insured under its policies to report changes in their medical conditions, nor does it use such conditions as a factor in setting premiums or accepting or rejecting risks.

[19] While the evidence from ICBC is of interest, it is not, in my view, of great probative value. ICBC operates under a different statutory regime than do other automobile insurers. Under the Insurance (Motor Vehicle) Act R.S.B.C. 1996, c. 231 and regulations, ICBC has limited flexibility in determining what risks to accept, and what risks will affect premiums. CDI, operating under the Insurance Act R.S.B.C. 1996, c. 226 has the traditional flexibility that is accorded private sector insurers.

[20] In my view, the materiality of the change in Mr. Lucow’s medical condition is patent. Mr. Lucow was told by his doctor not to drive, and he understood that the reason for that advice was that his medical condition made it unacceptably risky for him to do so. In the circumstances, I accept that the change in Mr. Lucow’s medical condition did materially affect the risk.

[21] The application must be decided in favour of CDI. Mr. Lucow’s action is dismissed. If the parties are unable to reach agreement on costs, they may schedule a brief appearance before me to address that issue.

“D.I. Brenner, C.J.S.C. for H.M. Groberman, J.”
The Honourable Chief Justice D.I. Brenner
for The Honourable Mr. Justice H.M. Groberman

Citation:	*Lucow v. HSBC Canadian Direct Insurance,*
	2004 BCSC 1525