Failure to Disclose Information to an Insurer: When Claims May Be Rejected

A rejected insurance claim can be frustrating, particularly where the insurer relies on alleged non-disclosure when the policy was taken out.

The issue

The Short-Term Insurance Act provides that a policy cannot simply be invalidated because of non-disclosure or misrepresentation unless the information would have materially affected the insurer’s assessment of the risk.

Why materiality matters

In practical terms, the question is whether a reasonable person would have considered the information important enough to disclose. Not every omission will justify rejection of a claim.

Burden of proof

Our courts have held that the insurer must prove that the missing information was material. The insurer must show that the non-disclosure really mattered to the risk and the policy decision.

Practical point

Policyholders should answer insurance questions carefully. Insurers, in turn, must be able to justify a rejection based on material non-disclosure.