Does ruling on late ex-terrorist’s insurance set unsettling precedent?

by Leo Almazora12 Feb 2020

An Ontario Court of Appeal ruling that effectively denied a death benefit to the widow of a deceased former Palestinian terrorist could give insurance companies wider license to deny claims, according to a lawyer practicing in Toronto.

In Mohammad v. Manufacturers Life Insurance Co., the widow of Mahmoud Mohammad, a former Palestinian terrorist who succumbed to cancer in 2015, sought to compel Manulife to award her the death benefit to her late husband’s life insurance policy.

The insurer had denied her claim, arguing that Mohammad had failed to divulge details about his unsavoury past when he applied for the insurance in 1987. It also contended that Mohammad was aware that his past criminal activity had a material impact on his life expectancy, referring to a past affidavit he had filed in 2013 with Canadian immigration authorities saying his “life would be in danger” if he were to be deported.

But the widow, Fadia Khalil Mohammad, contended that Manulife’s application form did not ask about her husband’s history, or the fact that he had also kept it secret when he got his social insurance number earlier that year.

When the case was first brought before the Ontario Superior Court, Justice Shaun O’Brien ruled that “providing a SIN did not constitute fraudulent misrepresentation about Mohammad’s immigration status,” reported The Lawyer’s Daily. “The insurer, by way of its own application form, set out the information it deemed necessary … to determine whether to insure the risk presented,” O’Brien added in her ruling.

But that decision was overturned in the Ontario Court of Appeal, where Justices Janet Simmons, Peter Lauwers and Ian Nordheimer, ruled that the deceased had an obligation to disclose his criminal past under s. 183(1) of Ontario’s insurance Act. That section says “every fact within the person’s knowledge that is material to the insurance” should be disclosed.

The law allows contracts to be upheld when the policyholder does not reveal “a fact required to be disclosed by s. 183” when the contract has been in effect for two years and there’s an absence of fraud. However, the Appeal Court found that the late Mohammad had committed fraud by “intentionally” withholding information.

“I think the lower court got it right … [the deceased] probably didn’t realize he had an obligation to go above and beyond those questions [in the application],” Darryl Singer of Toronto-based Diamond and Diamond Lawyers LLP told The Lawyer’s Daily.

However, the personal injury lawyer opined that the lower court ruling was “fundamentally flawed”: while the deceased had technically not committed fraud on the application, there was “an element of fraud” in how he got into the country and obtained a SIN. “I think the [Appeal] Court may have been swayed by that,” Singer said.

Sharing a view that insurance companies often “deny first and look for the reason after” when faced with a death benefit claim, he argued that the Court of Appeal’s ruling effectively “imposes almost ridiculous amounts of disclosure on the applicant such that it opens the door in future cases for insurers to continue to deny and then look for any little thing to rely upon.”