An Ontario appeal court upheld a lower court’s ruling that an insurer was wrong to deny a $500,000 life insurance payout to the son of a murdered man on the basis that the man had lied about his criminal history on his insurance application.
The Court of Appeal for Ontario rejected an appeal from Desjardins Financial Security Life Assurance Co. seeking to overturn a Superior Court of Justice decision from January 2022, which ruled that a life policy taken out by Dean Costanza in 2012 was valid, despite his failure to properly disclose a past criminal conviction.
Costanza was found murdered outside his home in 2017. The company declined to pay out on his life insurance policy, stating that the client’s failure to disclose a 2009 conviction for assault constituted a material and fraudulent misrepresentation. The insurance application required him to disclose any convictions in the previous three years.
However, the lower court found that the insurer failed to prove that Costanza lied on the application, taking the position that while he could have been sentenced within the three-year window, that didn’t mean the conviction fell within that time frame.
The judge said the insurers’ evidence of a misrepresentation fell “woefully” short of adequate proof of fraud, and that it’s possible he made a mistake on the dates or was negligent in filling out the application.
It also rejected the allegation that Costanza failed to disclose a criminal background that would have been material to the application for life insurance.
On appeal, the insurer sought to introduce new evidence that Costanza’s assault conviction did occur within the three-year window before he applied for life insurance and that the insurance application contained a misrepresentation.
The appeal court rejected the insurer’s bid to introduce new evidence to establish the date of Costanza’s conviction.
“Although the fresh evidence could affect the issue of whether there was a material misrepresentation, it could not reasonably be expected to affect the result of the application, because it could not reasonably be expected to affect the application judge’s finding that the insurer had failed to establish the intent required for civil fraud,” Justice Jill Copeland wrote for the appeal court in its decision released on Thursday.
The appeal court concluded that Superior Court judge Erika Chozik did not err in applying the standard of intent required to prove fraud.
As a result, the appeal court rejected the insurers’ effort to introduce new evidence, and dismissed its appeal.