Introduction:
In Peters v Great-West Life Assurance Company, 2024 NSCA 21, the Nova Scotia Court of Appeal (NSCA) held against the insured on an application brought to settle the pre-judgment interest amount for a claim arising from the death of the insured's husband. At contention was the determination of when the cause of action arose respecting claims for accidental death benefits as this informed when the insurer's obligation to pay pre-judgment interest began. The NSCA rejected the insured's argument that the cause of action arose upon the denial of coverage following the insured's initial demand for payment. Instead, the NSCA upheld the hearing judge's determination that the cause of action arose when the insurer received evidence of accidental death and as, by law, a thirty-day grace period applied, the insurer's obligation to pay pre-judgment interest began once the grace period expired.
Facts:
David Peters had two life insurance policies: a group life insurance policy through Great-West Life as well as an individual life insurance policy issued by London Life. The Great-West Life policy provided a death benefit of $350,000 as well as an additional $350,000 for accidental death whereas the London Life policy provided a life and accidental death policy of $25,000. Mr. Peters' wife, Susan Peters, was the beneficiary of both policies.
On November 22, 2015, while unloading a commercial truck at his auto dealership, Mr. Peters was struck in the head by a rear door of the commercial truck. After driving home, Mr. Peters complained of a headache and nausea whereafter he was taken to a hospital. On the way to the hospital, Mr. Peters lost consciousness and passed away the following day. Ms. Peters made accidental death claims on both policies in December 2015 and January 2016.
A postmortem report dated November 24, 2015 (the "November 2015 Postmortem"), attributed the cause of death to Mr. Peters' hypertension, a pre-existing condition. On this basis, both London Life and Great-West Life rejected Ms. Peters' accidental death claims in August 2016 and September 2016 respectively. The insurers stated that their respective policies excluded accidental death claims caused by pre-existing conditions. In June 2016, Ms. Peters informed the insurers that she intended to contest their denial of coverage and demanded payment of the accidental death benefits.
On November 22, 2016, Ms. Peters filed a statement of claim suing the insurers for the payment of the accidental death benefits.
Following the commencement of her claim, Ms. Peters received various medical opinions that differed from the November 2015 Postmortem. This included a report dated November 8, 2019 (the "King Report"), where neurologist Dr. David King stated that the cause of death was more likely due to a traumatic brain hemorrhage rather than hypertension. This report was disclosed to the insurers on July 9, 2020. Further, the November 2015 postmortem report was amended to describe the death as an accident.
Both insurers paid Ms. Peters the full amounts of accidental death benefits on December 7, 2021. The parties could not agree as to the calculation of pre-judgment interest.
Cause of Action Arose on Insurer's Receipt of Evidence
The matter was heard in the NSSC on June 16, 2022, by Justice Rosinski.1 Ms. Peters argued that the cause of action arose upon denial of coverage following her initial demand for payment. The insurers argued that Ms. Peters was only entitled to be paid once the preconditions for payment, namely an accidental death, have been met (i.e., upon the submission of medical evidence proving the death was not caused by a pre-existing condition or any other excluded cause).
In his ruling, Justice Rosinski held that at the time of Ms. Peters' commencement of her claim for accidental death benefits and pre-judgment interest, the only expert opinion evidence available was the November 2015 Postmortem.
Further, in determining whether a breach of contract had occurred, the judge referenced the specific language contained within the two life insurance policies. Justice Rosinski noted that the London Life policy required "due proof" whereas the Great-West Life policy required "satisfactory proof". In rejecting Ms. Peters' argument, the judge held that when coverage was initially denied, Ms. Peters had not provided either "due proof" or "satisfactory proof" of accidental death.
The judge concluded that both "due proof" and "satisfactory proof" were provided following the disclosure of the King Report to the insurers on July 9, 2020. It was that report which indicated the death was caused by an "accident", not a pre-existing condition. Ms. Peters' entitlement to pre-judgment interest would be calculated thirty days thereafter due to a thirty-day grace period provided in section 206 of the Insurance Act.
On appeal, Ms. Peters submitted that the cause of action arose when coverage was denied and argued that the payment of pre-judgment interest should not turn on the insurer's subjective assessment of evidence provided to it.
Writing for a unanimous court, Justice Bryson held that the decision of an insurer to accept or reject a claim requires evidentiary foundation and that this test cannot be characterized as subjective. Because the judge relied on the contractual language in the respective insurance policies for his determination, Justice Bryson held that the judge did not err when concluding that pre-judgment interest should be calculated thirty days after the insurers received the King Report.
Conclusion:
This decision reiterates that where an insurance policy requires the insured to provide specific evidence before the insurer's payment obligations can be triggered, there is no entitlement to pre-judgment interest until that evidence is submitted. Peters underscores the importance of expedient marshalling and disclosure of all relevant evidence to insurers. Experienced coverage counsel can assist with this. In Peters, four years passed before evidence supporting the payment of accidental death benefits was disclosed to the insurers. During that four-year period, no pre-judgment interest was recoverable.
Footnote
1 The Estate of David Peters v Great-West Life Assurance Company, 2022 NSSC 193
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