Life insurance, like many other types of insurance, can be one of those things that people don’t really spend much time thinking about until they need it. Unfortunately, people often wind up in insurance coverage disputes after turning to their insurance only to find themselves denied coverage. In a recent case before the Court of Appeal for British Columbia, the court was asked to determine whether a known drug dealer’s death was excluded under his life insurance policy due to his involvement in criminal activity.
The insured was a described by the court as a mid-level drug dealer with an organized crime group. In 2011 he acquired a mortgage and mortgage life insurance from the insurer. The policy included a clause stating the life insurance benefit would not be paid out if his “death is a result of or while (he was) committing a criminal offence.”
On January 7, 2013, the insured was driving in his car with his girlfriend when he received a call from two known lower-level drug dealers. He drove to a house associated with the lower-level dealers and went inside, leaving his girlfriend in the car, which was still running.
The insured did not return from the car, and he has not been seen or heard from since. Although some of his blood was found in the house, his body was never found.
The application for life insurance payout
The insured’s mother petitioned the Supreme Court of British Columbia for a declaration that he son was a missing person. This application was granted. An affidavit provided by a private investigator was provided to the court by the insured’s mother. The report stated that the insured was involved in the drug trade, was trying to grow his territory, was affiliated (though not a member of) gangs, and that he was likely the victim of foul play. In May 2014, the insured’s mother petitioned the same court for a declaration that her son was dead. This application was also granted. Following this, the insured’s mother applied for a payout of her son’s life insurance policy. When making the application she did not rely on the affidavits from the private investigator or the police. She did however make a number of concessions, including that her son was a drug dealer who “died as a result of a criminal lifestyle.” However she did not concede that he died as a result of or while committing an offence at the time of his murder. The insurer denied the payout, taking the position that the insured’s death fell within the exclusion clause.
The original trial
The insured’s mother argued that the insurer would have to prove that her son was actually committing a criminal offence at the time of his death. Without any evidence of this, she submitted it was speculative to find he was dealing drugs at this time. However, the trial judge agreed with the insurer that the only rational conclusion after considering all of the evidence is that the insured was murdered as a result of his involvement in the drug trade.
The mother appealed, arguing the trial judge erred in finding the exclusion cause applied to her son’s death, and in admitting into evidence and relying upon certain paragraphs of the police officer’s affidavit.
The clause was not totally clear and could have two interpretations. Again, it reads that a life insurance policy will not be paid out if “ your death is a result of or while you were committing, a criminal offence (emphasis added by the court).” The first interpretation is fairly straight forward and implies that the clause applies if the deceased died committing a criminal offence. However, it could also be read as to mean it applies if the deceased dies while committing a criminal offence or while someone else is committing one. However, this second reading could mean that someone who dies because they are the victim of crime would find themselves excluded. The court found that the intent of the clause was that it should apply to people committing criminal offences.
The court then turned to the facts of the insured’s death and found “taking into account the evidence that was not contested and the admissions made, the inescapable inference is that (the insured) died while committing the criminal offence of possession, trafficking or possession for the purpose of trafficking illicit drugs, all of which are indictable offences. He was a known drug dealer, he went to a known drug reload house, he was affiliated with a criminal gang, and his intention was to go into the house and quickly return. The only logical inference from this circumstantial evidence is that he bought or sold drugs at that location, was murdered, and therefore died while committing a criminal offence, invoking the exclusion clause.”
As a result the appeal was dismissed.
The insurance team at HMC Lawyers has decades of collective experience litigating insurance matters on behalf of our clients. We believe the best approach to advocacy includes forward-thinking and a focus on avoiding risk through thoughtful and strategic representation at every stage. To discuss an insurance coverage matter or related dispute, call 1-800-480-3534 or contact us online.