Introduction
Media West Zny Inc. v Insurance Corporation of British Columbia, 2024 BCSC 625, clarifies the law on material misrepresentations in the context of insurance contracts. The decision highlights that, while a plaintiff’s lack of credibility or reliability alone may not justify dismissal of their claim for coverage, failure to present evidence substantiating the alleged misrepresentation as factually accurate can be fatal to their case.
Background
When applying to insure two newly leased pickup trucks (the “Trucks”), Mr. Zouaoui represented to ICBC that they would be used for his paper delivery business, Media West Zny Inc.(“Media West”). When not in use for deliveries, Mr. Zouaoui left the Trucks on a parking pad owned by an acquaintance, Mr. Rao. On March 28, 2022, while visiting his brother in Montreal, Mr. Zouaoui received a call from the police notifying him that one of the Trucks had been burned. Three days later, he received a second call from the police advising that the other Truck had also been set on fire. In his report to ICBC, in which he stated that the Trucks had been destroyed by fire, Mr. Zouaoui confirmed they were being used for paper delivery before they were incinerated. ICBC refused to cover Mr. Zouaoui’s claims on the basis that he had misrepresented that he was engaged in a legitimate paper delivery business when, as the evidence would show, no such business existed. Mr. Zouaoui sued for coverage, but the court held that ICBC was legally justified in denying coverage because of his material misrepresentation about Media West.
At Trial
Justice Branch of the British Columbia Supreme Court set out the two-part test for evaluating Mr. Zouaoui’s claim. First, Mr. Zouaoui had the burden of proving that the destruction of the Trucks was a covered loss under his insurance policy, as opposed to a deliberate act of arson on his part. If Mr. Zouaoui successfully discharged this burden, ICBC would then be required to show that Mr. Zouaoui made willfully false statements that negated his entitlement to insurance coverage.
The court found that Mr. Zouaoui was neither a reliable nor credible witness. He was defensive and attributed his inability to recall important details to having suffered a stroke the previous year at just 23 years old. Despite Mr. Zouaoui’s lack of credibility, however, the court relied on other evidence that either corroborated Mr. Zouaoui’s testimony or was not disputed by the parties. Justice Branch viewed the undisputed fact that Mr. Zouaoui was in Montreal when the Trucks were burned as especially indicative of his innocence regarding their destruction. The court concluded that Mr. Zouaoui satisfied the burden of proving that the Trucks were burned by a third party and that, consequently, his claim related to a covered loss.
The burden then shifted to ICBC to establish that Mr. Zouaoui made misrepresentations that disqualified his claim for coverage. Justice Branch reviewed legal principles relating to wilfully false statements and material misrepresentations in the context of an insurance contract. Put simply, a willfully false statement is one made intentionally, knowingly, and purposefully, and which is material to the claim at risk of forfeiture.[1] Whether a plaintiff made a wilfully false statement must be determined with regard to the circumstances that existed when the insurance policy was issued.[2] A plaintiff who is found to have made willfully false statements about their claim forfeits the right to indemnity.[3]
The court found that Mr. Zouaoui made a willful and material misrepresentation regarding the use of the Trucks when he signed the policy and throughout the claims adjustment process. He repeatedly portrayed Media West as engaged in a legitimate paper delivery business; however, according to Justice Branch, Mr. Zouaoui’s evidence about the company’s operations “left a great deal to be desired.”[4] Mr. Zouaoui was unable, or unwilling, to provide the names of any customers he served, the address of the warehouse where he stored inventory, or the names of any drivers he hired to deliver shipments from Vancouver to the Okanagan. The court described Mr. Zouaoui’s inability to produce “a single scrap of paper (pun intended)” demonstrating the operation of this business as “highly problematic.”[5] Though Justice Branch was not able to “declare precisely” what Mr. Zouaoui had been using the Trucks for, this did not prevent him from concluding that a material misrepresentation was made about their actual purpose.[6]
After reiterating that the burden of proof in civil cases is proof on a balance of probabilities,[7] Justice Branch concluded that the “more logical inference” arising from the evidence, or lack thereof, was that Mr. Zouaoui was engaged in a “less reputable business than paper delivery” — a fact that he intentionally sought to conceal from ICBC and the court.[8]
Takeaways
Justice Branch’s decision demonstrates that a material misrepresentation may be found to have been made, even where the truth remains unknown. In this case, Justice Branch did not need to determine the true nature of Mr. Zouaoui’s business or his real reason for leasing and using the Trucks. The “yawning void of evidence”[9] about Media West’s business operations was enough for the court to conclude that Mr. Zouaoui’s so-called paper delivery business was merely a “cover story…to hide something else.”[10]
[1] Media West Zny Inc. v Insurance Corporation of British Columbia, 2024 BCSC 625 at para 60 (“Media West”).
[2] Media West at para 63.
[3] Media West at para 64.
[4] Media West at para 3.
[5] Media West at para 78.
[6] Media West at para 77
[7] Media West at para 40.
[8] Media West at para 28.
[9] Media West at para 79
[10] Media West at para 82.
