Disclosure of Surveillance - 2

Aherne v. Chang, 2011 ONSC 3846

This is an appeal from Master Short’s recent decision on the issue of ‘when is privilege waived?’.

The defendants argued that if they provided surveillance material to an IME doctor, the privilege was not waived until the doctor released the report. The plaintiff argued that the privilege was waived as soon as the surveillance was given to the IME doctor. The defendant seems to want to avoid having the plaintiff’s lawyer review the surveillance before the plaintiff goes to the IME to make sure that the plaintiff doesn’t embellish during the IME.

It seems that the defendant in this case could have avoided this entire problem if they simply held onto the surveillance materials and let the IME doctor assess the plaintiff and prepare the report. Then, after the report is released, the defendant can provide the IME doctor with the surveillance, and ask the IME doctor if the surveillance changes his/her opinion.

Thanks to M. Edward Key for bringing this appeal to our attention and for the comments.

Is it a good idea to mix insurance with investment?

As the debate between choosing pure protection and endowment plans continue, we look at whether it makes sense to select an insurance plan with the objective of savings.

The insurance sector in India is growing at a fast clip. However, policyholders often get confused between the concepts of ‘insurance’ and ‘investment’ and cannot differentiate between pure protection or endowment life insurance. Some insights into the different facets of both these instruments should be helpful.

Term insurance or pure protection plans: A term insurance policy offers protection for a pre-determined premium. Generally, the premium is low and quite affordable, but does not have a built-in savings component. It provides coverage for a specific time period. However, the most important benefit of a term policy is that it offers a guaranteed death benefit at a considerable low cost.

Term plans are beneficial when protection needs are high at certain phases in life. For instance, when your family is growing and may be you do not have sufficient funds to pay a large premium.

However, term insurance policy has no cash value, or savings component, and the premiums tend to increase through the years.

The policy provides benefit only upon the death of the insured. In the absence of an eventuality, the premium is not refunded.

Endowment plans: Endowment life insurance plans offer both protection and savings opportunity. Generally, this is chosen to avail of fixed and market-linked variable returns. Hence, the important benefit of a endowment life insurance policy is the cash value benefit. The Indian consumer prefers bundled products to pure protection plans due to a preference for returns from all financial instruments. As per ‘Life 2010’, a study

done by AC Nielsen, 67 per cent respondents bought life insurance to get good returns from it.

Most endowment policies are also eligible for dividends, which are not guaranteed, if and when they are declared by the insurance company. Many companies offer the option to apply current and accumulated dividend values towards payment of all or part of the premiums. If dividend values are sufficient, out-of-pocket premium payments may end or be reduced after several years, yet coverage can continue for life.

So while premiums must be paid under both the term and endowment plans, long-term out-of-pocket cost of permanent life insurance may be lower compared to the total cost for a term policy.

Additionally endowment policies can also eliminate the problem of future insurability.

Cash value life insurance does not expire after a certain period of time. For example, whole life policies which allow for increasing protection through paid up additions thus matching the lifestyle needs of the policyholder.

Also, some policies contain guaranteed purchase options, which allow you to buy additional coverage at specified times and thus it builds cash value.

This amount, part of which is guaranteed under many policies, can be used in the future for any purpose you wish. If you like, you can borrow cash value for a down payment on a home, to help pay for your children’s education or to provide income for your retirement.

Most often, life insurance policy inculcates systematic and disciplined savings behaviour among the consumers to achieve their long term goals unlike any other financial instrument.

To conclude, be it a term or endowment insurance plan, choose a policy according to your objective and which accommodates the premiums and benefits to suit your budget.

Appeals Court holds that advance payments from insurer to insured must be returned if there is no coverage

In my last post I discussed French King Realty Inc. v. Interstate Fire & Cas. Co., 79 Mass. App. Ct. 653 (2011), in which the Massachusetts Appeals Court held that coverage for a fire loss was excluded because the insured knew that its fire suppression system was suspended or impaired and because the system was not maintained in complete working order.

Interstate, the insurer, had made an advance payment to the insured, French King. French King argued that it was not required to return the advance payment because Interstate did not reserve it rights and defenses in connection with the payment.

The court disagreed. It followed other jurisdictions that have reasoned that an insurer is entitled to reimbursement for an erroneous payment when coverage does not exist under the policy and the insured was unjustly enriched and did not change position to its detriment in reliance on the payment.

Appeals Court holds that word maintain in coverage means keep in place, not keep in working order

French King Restaurant, insured by Interstate, had in place had a dry chemical fire suppression system.

The insurance policy contained a "protective safeguards endorsement," or PSE, which required French King "to maintain" the fire suppression system. The policy excluded coverage for loss or damage caused by by or resulting from fire if French King "knew of any suspension or impairment" in the system or failed to maintain the system "in complete working order."

In 2002 Kidde, the manufacturer of the fire suppression system, issued a bulletin advising that it would no longer support dry chemical systems. Kidde had previously recommended that dry chemical systems be upgraded to wet chemical systems. As of 2002, the dry system could no longer be inspected, serviced, recharged, or repaired.

In 2003, the company French King hired to inspect its fire protection system warned it that the system was not in accordance with current requirements.

In 2004 the Executive Office for Public Safety announced that dry systems needed to be upgraded to wet systems.

After the subject insurance policy was issued in 2005, the private fire inspector again informed French King that to be in compliance with current standards a wet fire suppression system was required. That same month, the city's building inspector informed French King that he could not issue a certificate of inspection until the system had been fixed.

In October, 2005 there was a fire at the restaurant. The fire suppression system failed to function. Interstate declined to pay the loss on the grounds that French King had failed to "maintain" the fire suppression system and that exclusions relating to the fire suppression system applied.

In French King Realty Inc. v. Interstate Fire & Cas. Co., 79 Mass. App. Ct. 653 (2011), the Massachusetts Appeals Court held that the word "maintain" was ambiguous and must be interpreted in a manner favorable to French King as meaning merely having a fire suppression system in place.

The court ruled that coverage was excluded by the exclusion for loss or damage if the insured knew of any suspension or impairment in the fire protection system. It held that the record showed clearly that French King knew that the fire suppression system was impaired. It ruled that coverage was also excluded because French King failed to maintain the system "in complete working order."