IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20121122

Docket: 45308

Registry:
Vernon

Between:

Kenneth Roy Kulak

Plaintiff

And

Reliable Life
Insurance Company

Defendant

Before:
The Honourable Mr. Justice Rogers

Reasons for Judgment

Introduction

[1]            
In the fall of 2008 Mr. Kulak went on
vacation to Arizona. Before leaving B.C., he applied for and believed that he
had purchased travel insurance from Reliable. The insurance was intended to
indemnify him for medical expenses while he was away. In November 2008, Mr. Kulak
was injured when the bicycle he was riding collided with a car. He was
hospitalized and incurred medical expenses totaling $167,140 for treatment of
his injuries. That sum includes the $18,000 USD cost of his medi‑vac
flight from Arizona to B.C. Those expenses are properly within the scope of
indemnity offered by Reliable’s policy. Reliable has refused to honor the
insurance policy, citing an error in Mr. Kulak’s application. That error,
Reliable says, was Mr. Kulak’s misrepresentation of a fact that was
material to the risk insured by the policy. Reliable says that the
misrepresentation rendered the insurance policy voidable.

[2]            
The central issue in this summary trial is
whether the travel insurance application forms that Reliable supplied to Mr. Kulak
were so confusing that the court should excuse the error he made while completing
the application, thus affording him coverage.

The Facts

[3]            
The events leading to this proceeding began in
August, 2008. Mr. Kulak was planning his annual winter trip to Arizona. In
the mail he received a brochure from Reliable. The brochure promoted Reliable’s
medical travel insurance plans.

[4]            
Mr. Kulak was then in his 70s. Because he
had been to see his doctor about health issues, and because he had undergone
certain medical tests, he knew that there were issues with his heart. For the
purposes of this proceeding, it was an admitted fact that in August 2008 he
knew that he had a heart condition.

[5]            
The travel insurance brochure comprised two
important documents. The first was a screening and policy selection exercise.
That first document was several pages long. The second document was an
application form that the customer, after completing the screening and policy
selection exercise, was to complete and mail in to Reliable.

[6]            
The screening and policy selection document
required the customer to complete two steps. Each step was clearly identified
on the document and was typed out in bold letters. The document’s language was
uncompromising: the customer had go through both steps in order to determine
whether he qualified for Reliable’s policy, and if he did, what premium he would
have to pay for travel insurance.

[7]            
The first step was a screening test. If the
customer answered yes to any of the health-related questions on that test, the
document told him that he simply could not qualify for the travel insurance on
offer. For the purposes of this proceeding, the material question in this
screening exercise was whether Mr. Kulak had “any heart condition” and at
least one other health issue. As noted, Mr. Kulak knew that he had a heart
condition but he felt that he did not have any of the other health problems
that were listed in the screening test. After completing the test, Mr. Kulak
felt that he had passed the screening test, and he was right: even with his
heart condition, provided that he subsequently selected and paid for the correct
plan and premium level, Reliable had a policy that could insure him for his
travel to Arizona.

[8]            
Step Two of this document required Mr. Kulak
to select which policy he was qualified to buy and what premium he would have
to pay. The instructions for step two were written in plain English and were
set out in an easy to read font.

[9]            
The instructions for Step Two required Mr. Kulak
to give himself a “health score” based upon his answers to several medical
questions. The question relevant to this proceeding is whether he had any heart
condition. The selection exercise required him to give himself a health score
of 3 if he did have a heart condition. Instead of giving himself a 3, Mr. Kulak
gave himself a health score of 0. According to the policy selection criteria, a
person who has a health score of 0 is a person who does not have a heart
condition. Using this inaccurate score, Mr. Kulak carried on with the
policy selection exercise. He selected Policy Zero (a number correlating with
his putative health score) and, employing his own age and the length of time
that he expected to be out of the country, Mr. Kulak used a table of
premiums for Policy Zero to come up with a premium price of $903 for travel
insurance.

[10]        
Had Mr. Kulak employed those same data and
his correct health score, he would have used the tables for Policy Three and he
would have arrived at a premium of $2,038.

[11]        
Mr. Kulak then completed the second
important document contained in Reliable’s promotional brochure. That document
comprised his application for insurance coverage. In that application, Mr. Kulak
stated that the health score he had arrived at upon completing Step Two of the
policy selection process was 0. He copied into the application the $903 premium
he had triangulated from of the Policy Zero premium table, and as required in
Step Two’s instructions he applied a 10 percent increase to that premium to
account for his high blood pressure. Mr. Kulak signed the application form
and sent it in the mail to Reliable along with a $50 deposit. He sent the
deposit because, according to the brochure, if he paid his deposit within a
certain time frame Reliable would waive any deductible on the policy he
intended to purchase.

[12]        
Had Mr. Kulak accurately calculated and
reported his health score, the premium he would have had to pay for Reliable’s
travel insurance would have been $2,260.

[13]        
As noted earlier, Mr. Kulak was injured in
an accident while he was in Arizona. The accident happened on November 24,
2008. Mr. Kulak received treatment at the Yuma Regional Medical Center and
at the Banner Good Samaritan Medical Center. Then, on December 11, 2008, he was
transferred by air ambulance from Arizona to his home in Vernon B.C. The price of
that flight was $18,000 USD. Reliable paid the invoice for the flight, but
before making the payment, Reliable obtained Mr. Kulak’s agreement that he
would reimburse Reliable in the event that his coverage was no good.

[14]        
Reliable subsequently investigated Mr. Kulak’s
medical history, discovered that he did have a heart condition at the time that
he applied for insurance, and denied coverage to Mr. Kulak. In the result,
Mr. Kulak started this proceeding claiming $167,140 USD less the $18,000
USD for the medi‑vac flight, and Reliable counter-claimed for the $18,000
USD.

Discussion

[15]        
The premium for Reliable’s medical travel
insurance was geared directly to the applicant’s self‑determined and self‑reported
health score. Mr. Kulak and Reliable agree that for the purposes of his
application for travel insurance, Mr. Kulak’s health score was fact
material to the underwriting risk. Mr. Kulak’s failure to accurately
report his health score was, therefore, a material misrepresentation. Absent
some legal or equitable intervention to save the policy, Mr. Kulak’s claim
must be dismissed and Reliable’s claim must be allowed.

[16]        
Mr. Kulak says that Reliable should honor
the policy because the screening and policy selection exercise was confusing
and easy to get wrong. He says that he had a reasonable expectation of coverage
because he qualified for at least one of Reliable’s policies and it was
difficult for him to determine which one applied to him.

[17]        
The concept of reasonable expectation in the
context of insurance was discussed in Chilton v. Co-Operators General
Insurance Company, (1997) 32 O.R. (3d) 161 (C.A.). In that case the
court considered the meaning of “inadequately insured motorist” in an auto
policy. The Court of Appeal noted that the principle of reasonable expectation
is usually applied when the court is required to resolve ambiguity in the
policy. The Court went on to say that even where the policy is both explicit
and unambiguous, the principle of reasonable expectation may still work to
afford coverage. At page 7 of the report, the Court wrote:

 In Canada no appellate court has
yet embraced the broader application of the principle. In Wigle [Wigle v.
Allstate Insurance Co. of Canada, (1984) 49 O.R. (2d) 101 (C.A.)], Cory
J.A. did not extend the principle beyond a rule for resolving ambiguity. In his
dissenting judgment in Brissette Estate v. Westbury Life Insurance Co., [1992]
3 S.C.R. 87 … Cory J.A. stopped short of endorsing a broader application. In
Reid Crowther [Reid Crowther & Partners Ltd. v. Simcoe & Erie
General Insurance Co., [1993] 1 S.C.R. 252] at p. 271 S.C.R., …McLachlin
J., speaking for the court, affirmed Wigle but expressly declined to pronounce
on the reach of the reasonable expectations principle. I need not decide the
reach of the principle either, because of the view I take of this appeal.

 In
considering whether to apply the reasonable expectations principle to cases in
which there is no ambiguity in the policy, first the court should consider
whether a reasonable insured could have expected coverage. An arguable case for
coverage may exist, for example, if the policy is difficult to read or
understand and if the insurer, either by its marketing practices or by giving
its policy a misleading name, created or contributed to a reasonable
expectation of coverage. Coverage may also be warranted where the insurer’s
interpretation of the relevant policy provision would virtually negate the
coverage the insured expected by paying a premium. In these circumstances the court
may be justified in looking beyond the words of the contract and holding the
insurer responsible for the insured’s reasonable expectation of coverage.

[18]        
In Turpin v. Manufacturers Life Insurance
Company, 2011 BCSC 1162, R.D. Wilson J. employed the reasonable expectation
principle to a policy of travel insurance. Turpin arose out of the
claimant’s purchase of a travel policy several days after she had suffered from
and had sought medical treatment for abdominal pain. She bought the travel
insurance at an insurance agency – she did not read the policy or its
limitations before she paid her premium. The court found that, strictly
applied, the exclusion clauses in the policy would excuse the insurer from
indemnifying the claimant for the cost of medical treatment of the abdominal
pain she subsequently experienced while on her trip a couple of weeks later.
The court went on to say that had the claimant actually read the policy:

[58]      … she
would have found it difficult to understand, with its myriad of excluding
conditions, variously applicable, or not applicable, to an infinite array of
possible risks.

[19]        
In those circumstances, the court held that the
parties reasonably expected that the claimant had purchased travel insurance
that did not exclude the condition that gave rise to her abdominal pain, and in
the result the claimant’s suit for indemnity succeeded.

[20]        
The difficulty Mr. Kulak faces when he
relies on the doctrine of reasonable expectation is that Reliable’s screening
and policy selection document is not obscure, ambiguous, difficult to
understand, or, having regard to his particular circumstances, applicable to an
infinite array of possible risks. The document contained clear instructions on
how to proceed. The customer must first screen himself to determine whether he
was eligible for coverage under any of the premium tables. That step is not
difficult to do. It required the customer to think about his medical history
and to answer a series of questions accurately. Mr. Kulak completed Step 1
answering “No” to each of its questions.

[21]        
Step 2 was equally clearly described. The
customer was to give himself a health score. If he had a heart condition, as Mr. Kulak
knew that he did, the customer was obliged to give himself a health score of 3.
With a health score of 3, the form clearly and unambiguously informed the
customer that he had to use the Policy Three table to determine the premium for
his coverage.

[22]        
I note that Mr. Kulak correctly
comprehended many other elements of the application process. For example: he
understood Reliable’s promotion of a free deductible waiver if he gave Reliable
a $50 deposit, and he actually sent Reliable the $50; by selecting a premium
from the Policy Zero table, he demonstrated that he understood that his health
score correlated directly to the premium he would be required to pay; he
understood the portion of Step Two that required him to increase his premium by
10 percent for his high blood pressure; and he accurately performed that
arithmetic.

[23]        
I find that the screening, policy selection, and
application process set out in Reliable’s materials were not confusing, unclear
or difficult to understand. I find that they did not, in fact, confuse Mr. Kulak.

[24]        
That said, for reasons unknown but probably
through inadvertence, Mr. Kulak gave himself a health score of 0. By
representing to Reliable on the application form that his health score was 0, Mr. Kulak
made a misrepresentation that was material to the underwriting risk. It makes
no difference whether his mistake was deliberate or inadvertent. In either case
Mr. Kulak’s error rendered his policy voidable at Reliable’s option. Reliable
has exercised that option.

[25]        
I am driven, then, to conclude that Mr. Kulak’s
claim for indemnity must be dismissed and that Reliable’s claim for $18,000 USD
must be allowed.

Conclusion

[26]        
Mr. Kulak’s claim is dismissed. Reliable is
entitled to judgment against Mr. Kulak for $18,000 USD. Because the
agreement between the parties concerning reimbursement of the $18,000 USD makes
no provision for interest, Reliable is entitled to court order interest on that
sum.

Costs

[27]        
Reliable has succeeded in this matter. It is
entitled to its costs on Scale B.

“P.J. Rogers J.”
The Honourable Mr. Justice Rogers