In Insurance Law, there is a principle by which the conclusion of a contract of insurance is based upon the utmost good faith of the parties. Therefore, under this principle, the insured must, when he applies for insurance coverage, fully disclose all material information to the insurer so that the latter is in a position to correctly assess the risk and establish an adequate insurance premium. In the province of Québec, this duty is covered under article 2408 and following of the Civil Code of Québec. This obligation of the insured is continuous, meaning that the insured must, even when the contract has been entered into, continue to disclose to the insurer any information that could influence the insurer in its appreciation of the risk. The conduct of both the insured and the insurer is assessed objectively. Therefore, the insurer must be in a position to demonstrate that the information he requires is objectively material for his appreciation of the risk, while the insured must be in a position to demonstrate that he fulfilled his duty to disclose as any other insured would have done.
However, this duty is not an absolute obligation. In this regard, the Québec Court of Appeal recently rendered two significant decisions attenuating the duty of an insured who must, when applying for insurance, answer a questionnaire prepared by an insurer or specific questions asked by the insurer’s representative. In the matter of Compagnie mutuelle d’assurances Wawanesa v. GMAC Location ltée, [2005] R.R.A 25, the Court of Appeal concluded that the insured's duty to disclose was limited to the information specifically asked by the insurer via questionnaire. In this case, Compagnie mutuelle d’assurances Wawanesa ("Wawanesa") insured the vehicle belonging to Serge Rouette and Rita Rouette. Prior to the conclusion of an insurance contract, the Wawanesa representatives asked Serge Rouette a series of questions relating to his criminal record with respect to the use of a motor vehicle.
Following an accident where the insured car was a total loss, Wawanesa denied Serge Rouette’s claim due to his failure to inform Wawanesa that he had been found guilty of criminal offences further to being charged with theft, fraud and possession of drugs. The Court of Appeal dismissed the position taken by Wawanesa and concluded that Serge Rouette, by omitting to inform Wawanesa of his criminal record, had nevertheless fulfilled his duty to disclose provided for under article 2409 C.C.Q., since a reasonable person, in the same circumstances, would not have considered it relevant to disclose the same criminal offences. The Court of Appeal adds that the specific questions asked to the insured only confirm the fact that a "normally provident insured" would not have thought that these offences could have been of interest to the insurer in the appreciation of the risk.
The Court of Appeal adopted the same reasoning in Bergeron v. Lloyd’s Non-Marine Underwriters, [2005] R.R.A. 20, which challenged similar facts. The Court of Appeal concluded as follows:
[translation] "With such a specific question as to the nature of the offences and the period during which they were committed, a reasonable person may come to the conclusion that only these offences interested the insurer and constituted circumstances likely to influence his decision as to establishing the premium, appreciating the risk or the decision to accept it."
We must therefore conclude that the Québec courts have recognized that an insured's duty to disclose is not absolute and can be attenuated by the insurer's conduct, in particular by the nature and scope of the questions asked to the insured when applying. However, we must keep in mind that in spite of these two rulings, the insured will always have the duty to disclose any material information that may influence the insurer's risk assessment.
It is sometimes difficult to determine which information is material, this concept being itself subject to variations according to the specific circumstances of each case. The insured should consult a lawyer who specializes in insurance law if he questions the scope of his duty, since failure to properly fulfill this duty may have significant consequences, including declaring the insurance contract invalid.
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