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Deny With Care: Insurers need solid evidence in order to prove there has been a “material change in risk"

Written by Michael Colwell, Associate

A new court decision is required reading for insurers determining whether any “material change in risk” has occurred in their policies.


The Plaintiff insureds, Mr. and Mrs. Smith (the “Smiths”), owned a commercial building in Estevan, Saskatchewan insured with Wynward Insurance Group (“Wynward”).  The insureds had leased their premises to an entity which in turn subleased a portion of the building to a motorcycle club.  This occurred in 2012 and there was no formal sublease agreement.

In April 2016, a fire damaged the building.  The fire was determined to be the result of arson when a plastic jerrycan containing an accelerant was found near a smashed window.  The Smiths submitted a claim to Wynward for their losses arising from the fire.

Ronald Henderson, Wynward’s senior claims examiner, concluded that the club was affiliated with the Hells Angels Motorcycle Club.  Mr. Henderson’s knowledge in this regard came from an internet search he had conducted that led him to a weblog and two newspaper articles.  Because of this investigation, he determined that tenancy of “a motorcycle club related to the outlaw biker club ‘Hells Angels’” was a material change in risk.  Because of this, Wynward denied coverage for the fire losses.  The Smiths subsequently commenced litigation arising from Wynward’s coverage denial.  The resulting trial and appellate decision Wynward Insurance Group v Smith Building and Development Ltd., 2023 SKCA 57 is useful for insurers where there has been a material change in risk pertaining to the underlying insurance contract.

Under cross-examination at trial, Mr. Henderson conceded that he had only read a handful of newspaper articles (of which, none were produced at trial) and had relied upon that information as being truthful and accurate. 

In addition to Mr. Henderson’s review, Wynward also sought to rely on the testimony of Cst. Shewchuk, a member of the Estevan Police Service involved in monitoring both the club and the Hells Angels.  Wynward sought to have Cst. Shewchuk testify as to observations he had made about the club as part of his work as a member of the Drug Intelligence Unit as well as to express an opinion about the club.  But Wynward had failed to provide appropriate expert notice of Cst. Shewchuk’s evidence which testimony was further limited following a so-called participant voire dire application.

Nevertheless, Shewchuk testified that the club hosted three social events per year attended by the public as well as by a few members of the Hells Angels.  Hells Angels merchandise was sold at these events.  According to the trial judge, however, neither the presence of members of the Hells Angels nor the sale of Hells Angels merchandise indicated criminality.   And even if the Hells Angels were notorious for such criminality, the lack of connection does not permit the sub-tenant club to be “tarred with that same brush.”

In allowing the Smith’s action, the Court found that Wynward had failed to prove that there had been a material change in risk.

On appeal, the Court of Appeal reviewed the doctrine of uberrima fides which describes the relationship of mutual vulnerability and utmost good faith existing between insurer and an insured.  This relationship imposes a duty on the insured to be forthcoming in disclosing information to their insurer that may be relevant to the risk.  This duty extends only to facts which the insured has actual or constructive knowledge of and which are material to the risk being insured.

What constitutes a fact material to the risk is one that “if the facts had been truly represented they would have caused a reasonable insurer to decline the risk or required a higher premium”. Specifically regarding materiality, materiality requires an objective assessment of what a reasonable insurer would have decided if they were in possession of the relevant facts at the time the parties entered into the policy.  Even though Wynward considered there was increasing criminality in relation to the club, this was not determinative of materiality in objective terms.  Nor did the Smiths have actual or constructive knowledge of such criminality.

The appellate court upheld the conclusion that Wynward had tendered too little evidence to discharge its burden of establishing there being a connection between the club and the Hells Angels so as to raise the level of risk that was material to the insurance contract.

Accordingly, the Court of Appeal upheld the trial court’s conclusion that the evidence led by Wynward did not establish a connection between the club and the Hells Angels resulting in a change of risk that was material to the insurance contract.


In this case, the evidence tendered to support the existence, and knowledge of the insured, of the alleged criminal affiliation was inadequate.  Proof that a particular change is material to the risk is borne by the insurer.  The insurer must also discharge its burden on a balance of probabilities.  The alleged criminal affiliation of the sub-tenant failed to satisfy there being any material change to the risk.  Because of this case, insurers should carefully examine their bases for any material change to the risk; they should also consider how such bases may be proved.


If you have any questions with respect to this bulletin, please contact Michael Colwell at or 604.754.9446.

Even though Wynward considered there was increasing criminality in relation to the club, this was not determinative of materiality in objective terms.


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