Insured’s Onus to Prove Coverage

By Clarence Lui

It has been the law in Ontario for almost thirty years that the burden of proof rests on the insured to establish a right to recover under the terms of the policy, even if the insurer alleged that the insured was fraudulent in putting forward the insurance claim.  In the recent decision of Demetriou v. AIG Insurance Company of Canada, 2019 ONCA 855, the Ontario Court of Appeal reversed summary judgment granted in favour of the insured and affirmed this principle.

The facts of the case are straight forward.  The insured had a ring, which was appraised at over $500,000, insured with AIG.  He took that ring to a resort in the Dominican Republic, wore it on a gold chain around his neck on the beach, where he claimed it was stolen from him by someone who approached him and demanded his jewellery. 

The insurer denied the claim on the basis that the insured had not proved a loss under the policy.  During its investigation, there was evidence of “suspicious circumstances” that apparently raises the possibility that a previous claim the insured made against Chubb Insurance was fraudulent. 

The motion judge granted summary judgment and awarded punitive damages in the amount of $50,000 on the basis that the insurer attempted to “surreptitiously put forward a case of fraud” even though it had disclaimed reliance on fraud.  It is of note that the insurer asked for an amendment to plead fraud, but its request was denied at the hearing of the motion.

On appeal, the court affirmed the law established in its 1990 decision of Shakur v Pilot Insurance and held that the motion judge reversed the burden of proof by ignoring the “suspicious circumstances” in relation to whether the insured had proved his claim.  It held that the issue was not whether the insured had established fraud, but whether the insured had proved on a balance of probabilities that the theft occurred for coverage under the policy.

As it is clear that the credibility of the claim and of the insured was in issue, the case was ordered to proceed to trial.

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