In yet another lesson in what you need to reveal when obtaining life insurance, the Ontario Court of Appeal has wasted little time in telling your beneficiary they’re out of luck when you fail to reveal information that your life expectancy might be affected by your prior terrorist activities. In Mohammad v. The Manufacturers Life Insurance Company, the Court of Appeal held because Fadia Khalil Mohammad’s husband had failed to reveal a material fact on the application for life insurance, the contract was voidable and therefore Manulife was entitled not to pay her the proceeds of the policy. The material fact: his activities as a terrorist 20 years prior to obtaining the insurance in 1987 and 47 years before his death in 2015.
Ms Mohammad had been successful in bringing a motion for summary judgment with regard to her insurance claim. A hint of the motion judge’s perspective can be found in the first sentence of her decision: “The issue on this motion is whether an insurer is entitled to information that it did not seek from an Applicant for life insurance during the underwriting process.” The Court of Appeal, on the other hand, concluded, while no specific questions elicited the relevant information, the person applying for insurance ought to know that there are some things about their life that the insurance company should know and failure to reveal them constitutes fraud.
As described by the motion judge, Mohammed had been involved in a terrorist attack on an El-Al airplane in Greece, in which at least one person was killed (the Court of Appeal added the detail that this was an attack by the Popular Front for the Liberation of Palestine [Mohammad, CA, para. 3]). He was convicted of manslaughter but was subsequently part of a prisoner swap and was pardoned (the deal also involved release hostages on a plane held by the PFLP) in 1970. He came to Canada in 1987, omitting mention of his past in seeking admission to the country, was granted landed status and obtained a SIN and obtained insurance (from another company, athough Manulife took it over) because he and his wife wanted to purchase a home. In 1988, he was found have materially misrepresented himself in his application to enter Canada and deportation proceedings began, finally ending when he was deported to Lebanon in 2013. He died there of lung cancer in 2015. His wife claimed the $75,000 insurance.
Manulife refused to pay the proceeds of the policy, “on the basis that Mohammad ‘fraudulently misrepresented his status as a legal citizen or legal permanent resident in Canada’ by providing a SIN on the form. Manulife said the SIN ‘represented Mr. Mohammad’s status as a legal citizen or legal permanent resident in Canada.'” (Mohammad, motion judgment, para. 5)
If one ignores Mohammed’s omission in applying to Canada of his previous activities, as explained by the motion judge, his immigration occurred in the normal course, through the Canadian Embassy in Spain, where the couple were living, and he obtained his SIN in the usual way. (However, the Court of Appeal noted he had given a false name in applying for entry to Canada [Mohammad, CA, para. 4].) The motion judge listed all the questions on the insurance application form, which Mohammed answered accurately; he also listed his SIN as required. There were no questions about immigration status, nor any questions that would have elicited information about his terrorist activities.
Section 183(1) of the Insurance Act contains the following provision:
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 the person’s knowledge that is material to the insurance and is not so disclosed by the other.
Failure to satisfy section 183(1) requirement “renders the contract voidable by the insurer”.
The motion judge found Mohammad simply provided the SIN because he was required to do so and in doing so, did not make or intend to make any representation about his immigration status. She noted SINs are used for many different purposes unrelated to immigration status. Furthermore, “long after the Government of Canada had started proceedings to deport him, Mohammad continued to receive Canada Pension Plan contributions referencing his SIN”. When he applied for the insurance, his “permanent residency status was considered legal at the time” (Mohammad, motion judge, para. 23).
Only after it initially denied the claim on the basis of the SIN argument did Manulife raise Mohammad’s failure to recount his criminal past to the underwriter when he obtained the insurance, given there was nothing on the form to elicit information of this kind. It maintained Mohammad knew he might have a reduced life expectancy because he fought deportation on the basis his life would be in danger. This had been rejected and he was deported, dying of a cause unrelated to his concern. The motion judge held that his failure to provide the information was not fraudulent because for it to be fraudulent, Mohammad would have had to have known he needed to provide it. In her view, this was not the case.
A unanimous Court of Appeal took a quite different view of the matter. They explained Mohammad had entered Canada by using an alias and that was why he was able to obtain a SIN. They found Mohammad’s previous activities were relevant to the insurer’s decision to provide life insurance and he knew they were because, during deportion proceedings, which occurred not long after he had applied for the life insurance, he had argued his life was at risk if he was deported to Israel (he was deported to Lebanon, although it is not clear why that would have made much of a difference, not that this is relevant to the life insurance). (Mohammad, CA, para. 11)
He had the information, which the insurer did not (and presumably it didn’t occur to the insurance agent to ask), it was relevant to the longevity of his life (maybe), he knew he faced a problem in this regard (perhaps), yet failed to mention it. His failure to mention it was deliberate and therefore constituted fraud.
It is worth noting perhaps that Mohammad had been released from prison not long after his conviction and was still alive when he came to Canada some twenty years or so later and when he applied for the insurance, he was not actually facing deportation to a country where his life might be at risk. Section 180(1)(c) of the Insurance Act provides a contract does not take effect unless “no change has taken place in the insurability of the life to be insured between the time the application was completed and the time the policy was delivered.” The possibility of deportation, with concomitant risk to life, appears to have been outside this period. I cannot enter the mind of a terrorist and whether the time ever comes when living a normal life displaces the fear that follows on terrorist activities, but it is not unreasonable that after twenty years or so, it had receded into the background and Mohammad would not connect it with the questions he was asked to answer.
Unfortunately for Fahid Mohammad, her husband’s justification for challenging deportation, risk of death, became a significant reason the insurer was able to deny her the proceeds of the insurance. (For the Court of Appeal, the fraudulent basis of entry into Canada also seems to be a subtext, since it made the SIN fraudulent.)
There is one point that neither the motion judge nor the Court of Appeal addressed. The insurance form Mohammad completed did ask, “Whether the Applicant within the last two years engaged in sports or other activities which could result in physical injury, such as motor vehicle racing, scuba or sky diving, hang gliding, parachuting, mountain climbing, rodeos, etc.” (Mohammad, motion judge, para. 17). This appears to be the only question even remotely relevant or from which one could extrapolate. Would terrorist activities or other illicit activities (drug dealing, gang membership) that might affect the likelihood of death be analogous? And therefore must be revealed? To the extent one might think one’s past terrorist activities might still have the potential for retribution, Mohammad had not engaged in them in the previous two years.
Obviously, no one would disclose they were involved in illicit activities, and perhaps they would never want to obtain insurance. But would one ever contemplate a (former) terrorist would, either? There probably won’t be too many applicants for insurance to whom the facts of this case would apply (maybe not quite a one off, but close to it?) Manulife won this one, but it was a bit of a close call and domestic wrongdoers who consider themselves impervious to deathly results of their work might make a different case: I do wonder whether insurance companies are reconsidering what kind of questions they will ask in the future.