In January 2019, I blogged about the summary judgment decision of Demetriou v. AIG Insurance Co. of Canada, which arose as a result of an alleged theft of an expensive ring. At that time, I noted that the motions judge focused on fraud and the decision was silent on whether or not, on a balance of probabilities, the plaintiff was able to prove that the theft occurred. This raised concerns that the judge may have conflated the distinct issues of fraud and the plaintiff's burden to prove that the loss actually occurred.
As expected, this matter was appealed. AIG argued on appeal that the motion judge erred for two reasons: 1) he failed to allow AIG to amend its pleadings to rely on policy exclusions for deliberate acts or fraud; and 2) having disallowed the amendment, he granted summary judgment on the claim without giving any consideration to the suspicious circumstances raised by AIG.
AIG was completely successful on this appeal and the summary judgment decision, including the punitive damages award, was overturned.
The Court of Appeal reiterated its earlier decision of Shakur v. Pilot in which it stated that it is fundamental insurance law that the burden of proof rests on the insured to establish a right to recover under the terms of the policy. Given that Shakur was binding on the motions judge, he erred by not recognizing that the primary issue was not whether the insurer had established fraud, but whether the insured had proved on a balance of probabilities that a theft of the ring had occurred.
The Court of Appeal also found that the judge erred in not allowing an amendment of AIG's pleadings, in light of Rule 26.01 of the Rules of Civil Procedure, which allows pleadings to be amended at any stage of an action with leave unless there is prejudice that cannot be compensated by costs or an adjournment.
The Court of Appeal determined that, based on the records, it was clear that the credibility of the claim and of the claimant was squarely in issue and required a trial.
This decision confirms that the onus is always on an insured to prove their claim and an insurer is entitled to deny a claim on the basis of a failure to satisfy this onus, absent any allegations of fraud. However, if an insurer believes that a fraudulent claim is being advanced, it is always worthwhile conducting detailed investigations to confirm whether a fraud has occurred. This will allow an insurer to prepare thorough pleadings and advance the necessary arguments in order to defend a claim on the basis of fraud.
See Demetriou v. AIG Insurance Company of Canada, 2019 ONCA 855 (CanLII)
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