In Wong v. Aviva Insurance Company of Canada, 2024 ONCA 874, the Ontario Court of Appeal upheld an auto insurer’s decision to deny coverage to their insured after they were deceived for over two years about the identity of the person who was operating the insured vehicle. 

Background

Ms. Wong was involved in a motor vehicle collision while operating her mother’s vehicle (with her consent), but with an expired driver’s licence. Due to a fear of facing criminal charges for having an expired licence, Ms. Wong convinced her mother to attend the scene of the collision and later report to the police she was the operator of the vehicle. Somewhat surprisingly, Ms. Wong was also able to convince the other driver to play along with the charade, advising the person they may not be entitled to her mother’s insurance coverage if the police learned of her expired licence. 

Ms. Wong and her mother subsequently reported the collision to the police and their insurer, Aviva. Ms. Wong coached her mother throughout the claims process. The other driver also commenced litigation against Ms. Wong’s mother, and Aviva defended her, appointing defence counsel as though it was a standard motor vehicle collision claim. It was only after two years of litigation that Aviva was able to learn of Ms. Wong’s deception.

Ms. Wong and her mother continued this charade throughout the discovery process of the lawsuit with Ms. Wong even standing offscreen during a virtual questioning of her mother providing her answers. It was only upon the other driver providing evidence at their questioning (stating it was a young woman driving the other vehicle) that Aviva was able to learn of the fraud. 

Aviva subsequently denied coverage to Ms. Wong and her mother. They brought an application against Aviva for a declaration of coverage. 

Lower Court Decision

Aviva argued Ms. Wong committed civil fraud and denied indemnification pursuant to section 233 of Ontario’s Insurance Act (Alberta has similar legislation found at section 554 of its Insurance Act). Section 233 permits an automobile insurer to deny indemnification for a claim when an insured contravenes a term of the contract, commits a fraud or willfully makes a false statement under the contract.

The Lower Court agreed with Aviva finding Ms. Wong committed a civil fraud. It was further found that she was not entitled to relief from forfeiture. 

Fraud

The Lower Court went through the four factors required for a finding of fraud (based in common law) which are as follows:

1. A false representation was made by the defendant (Ms. Wong and her mother);
2. There was some level of knowledge of the falsehood of the representation on the part of the defendant (Ms. Wong and her mother); 
3. The false representation caused the plaintiff (Aviva) to act; and
4. The plaintiff’s (Aviva) actions resulted in a loss.

There was little discussion or dispute over the first three elements as Ms. Wong and her mother admitted to actively participating in the false representations to Aviva (including lying under oath). Further, it was self-evident these representations caused Aviva to act by defending and indemnifying Ms. Wong’s mother.

Regarding the fourth element, Ms. Wong argued Aviva did not sustain a loss as their representations had no impact on the actual lawsuit and the other driver’s damages. However, the Lower Court rejected this argument finding Aviva relied on their insured’s evidence to challenge the damages claim by providing evidence about the other driver’s appearance and conduct at the scene. Further, Ms. Wong’s mother was examined extensively about her driving and involvement but this questioning was useless now as well as the entire proceedings.

Ms. Wong suggested she compensate Aviva for the costs of the lawsuit to-date to return Aviva to its original position but the Lower Court rejected this argument finding Ms. Wong and her mother’s credibility had been irreparably damaged prejudicing Aviva’s ability to rely on their evidence to challenge the other driver’s damages in the lawsuit.

Relief from Forfeiture 

Lastly, Ms. Wong argued she was owed relief from forfeiture for the fraud pursuant to the Insurance Act. The Lower Court summarized this principle as: “Relief from forfeiture seeks to prevent hardship to insured persons when they have failed to comply with a condition of their insurance contract, and where leniency in requiring strict compliance with the condition will not result in prejudice to the insurer.” 

The common law test states the Court must consider and balance three factors: i) the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity between the value of the property forfeited and the damage caused by the breach. The Court is granted wide discretion in awarding relief.

The Lower Court found Ms. Wong’s conduct was serious and the gravity of the breach was on the “very high end of the spectrum” noting their deception spanned over the course of two years into the civil action including perjury.

Regarding the third factor, the Lower Court was cognizant that a significant disparity existed as Ms. Wong and her mother would now be uninsured in the face of a civil action with potentially significant cost consequences. However, after balancing all the factors, the Lower Court was unwilling to grant relief from forfeiture given the serious misconduct of Ms. Wong and the gravity of the breach.

Court of Appeal

Ms. Wong unsuccessfully appealed to the Ontario Court of Appeal on the basis Aviva did not suffer a quantifiable loss as a result of her breach (thereby failing to establish the fourth factor for fraud). 

The Appellant Court provided minimal reasons for upholding the Lower Court’s decision simply quoting the Lower Court and finding there was no error. The Appellant Court did further emphasize that Aviva “sustained a loss in terms of the manner in which it can defend that action” as their insured’s credibility had been irreparably harmed.

Conclusion

It appears the crucial fact for the Court was the length of Ms. Wong’s deception as it spanned over the course of two years of litigation and included perjury. In addition to the two years of wasted litigation costs, Aviva was unable to rely on its insureds’ evidence to contest the other driver’s damages claim as their credibility was irreversibly damaged. It is unclear if a different decision would have been reached had Ms. Wong been honest before the litigation commenced or much earlier into the proceedings. 

While this decision is correct and serves as a good reminder for insureds to be honest with their insurers, it is interesting the Court placed as much emphasis as it did on the prejudice Aviva faced by their insured’s credibility being damaged. It is not entirely clear from the written reasons but it did not appear liability was at issue for the collision. This also appeared to be a relatively minor collision as the police were not required at the scene.

Practically speaking, when liability is not at issue, it is common for plaintiff counsel to simply reserve their right to question the defendant at a later date (in the event a settlement cannot be reached) which many insurers prefer as it saves legal costs. The insured’s credibility usually has little role to play in determining a plaintiff’s damages unless liability for the collision is at issue. 

Further, it is quite common in minor motor vehicle collision for defendants/insureds to say the plaintiff driver looked fine afterwards. However, this evidence typically holds little value by trial (unless the plaintiff is making claims they were unable to walk after the collision for example) as usually the insured/defendant does not have a medical background. The plaintiff also likely would have retained a medical expert in the course of litigation (such as a physiatrist or chronic pain specialist) to provide evidence that a low impact collision can cause complicated injuries such as chronic pain which may not be noticed immediately by the injured person. 

With that all said, it is crucial that insureds be honest and forthright with their insurer. The duty of good faith is reciprocal and should be taken seriously by insureds or they risk losing their coverage.