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Insurance (Auto) - Repayments. Zabarain v. Coseco Insurance Company
In Zabarain v. Coseco Insurance Company (Ont Div Ct, 2026) the Ontario Divisional Court considers 'wilful misrepresentation' as a ground to avoid a repayment limitation period under SABS s.52 ['Repayments to insurer']:Issue #4: Did the Adjudicator misstate and misapply the law on wilful misrepresentation under s. 52 of the SABS?
[51] Section 52 of the SABS states:52. (1) Subject to subsection (3), a person is liable to repay to the insurer,
(a) any benefit described in this Regulation that is paid to the person as a result of an error on the part of the insurer, the insured person or any other person, or as a result of wilful misrepresentation or fraud; …
(2) If a person is liable to repay an amount to an insurer under this section,
(a) the insurer shall give the person notice of the amount that is required to be repaid; and
(b) the insurer may, if the person is receiving an income replacement or caregiver benefit, give the person notice that the insurer intends to collect the amount by reducing each subsequent payment of the benefit by up to 20 per cent of the amount that would otherwise be the amount of the benefit
(3) If the notice required under subsection (2) is not given within 12 months after the payment of the amount that is to be repaid, the person to whom the notice would have been given ceases to be liable to repay the amount unless it was originally paid to the person as a result of wilful misrepresentation or fraud. .... [Emphasis added] ....
[53] In Michalowski[2], the Adjudicator held that “wilful misrepresentation” is a misrepresentation that results from “a deliberate or intentional action”. The Adjudicator further stated that a positive misstatement as well as a silence or concealment of facts may amount to wilful misrepresentation if the requisite intent is established. In that case, the Adjudicator found that “wilful misrepresentation” had not been established as there were other equally persuasive (and less culpable) explanations which might be assumed, such as the insured’s unfamiliarity with any responsibility to keep the insurer informed of his employment status.
[54] In Certas, the Adjudicator stated:Thus, I must determine if silence or a failure to report constitutes wilful misrepresentation, or more specifically, whether the respondent’s silence in November 2014 about his return to work constitutes a wilful misrepresentation. It is my opinion, similar to the opinion expressed in the Michalowski decision, that, in general it may, depending on the circumstances and the party’s course of conduct. Often, silence could very well have been an oversight or a simple delay but I do not find that to be the case before me. In this case, I find that the respondent’s silence was a wilful misrepresentation. [55] On his Request for Reconsideration, the Appellant submitted that the Adjudicator did not apply the correct test for determining whether there was a “wilful” misrepresentation. It states:[17] Adjudicator Norris erred in finding that silence or failure to report constitutes willful misrepresentation according to the cited case law. The test as set out by Adjudicator Norris is inconsistent with the case law that he cited. As set out in Michalowski cited by Adjudicator Norris:In this case the alleged misrepresentation consists not of a "positive misstatement of fact,"[2] but rather an omission, that is, the concealing of facts. Can silence amount to a misrepresentation? I find that it may, but only if supported by relevant and adequate evidence. The evidence must persuade the finder of fact that both the requisite intent and the requisite materiality have been established. [18] Neither intent nor materiality was explored by Adjudicator Norris as the legal test he set out merely required silence or failure to report. The evidence demonstrated that there was a temporary return to work as a lawyer, in a protective environment without comment on ability, and failed attempts to work in the back of restaurants, a known low paying job, which suggests there was no materiality. [Emphasis added] [56] The Reconsideration Decision appears to summarily dismiss this issue. The Adjudicator states:[16] The Applicant submits that I erred in law when weighing the evidence relating to the repayment claim. He further submits that I failed to explore the intent or materiality of his silence or failure to report things like his attempts to reemploy or his capacity as a corporate owner of the company that employed him. He submits that I failed to explore whether the Respondent advised him of his ability to return to work without impacting his claim. Lastly, the Applicant submits that I adopted a hostile approach towards him in light of the consumer protection mandate of the Schedule when I drew an adverse inference based on his failure to produce a notice of assessment or other income related documents, and that I failed to maintain the Respondent’s burden to demonstrate the amounts paid in order to claim a repayment.
[17] I find no error in law in my determination on the repayment and conclude that the Applicant is attempting to relitigate the issue while also raising a new argument on reconsideration.
[18] The issue of repayment was a live issue at the outset of the hearing. The Applicant had notice of it prior to the hearing and again during the opening statements of the hearing. He was permitted to tender evidence and make submission on the issue when presenting his case. At the hearing the Applicant’s submissions focused on the timing of the repayment request - suggesting that it was improper for being more than a year after the payment and that the Respondent was not entitled to a repayment without first seeking additional information to clarify the Applicant’s return-to-work status. The Applicant’s points were rejected at the hearing, as outlined in paragraphs 86 and 87 of the decision. There, I found that he had a positive obligation to disclose his work status, including his return-to-work efforts and his ownership of the company, in part or whole.
[19] I find no error in determining that the Applicant was on notice of the amount to be repaid. The Applicant suggests that the Respondent never established that it paid IRBs to him, and thus it cannot claim repayment because it has not satisfied that part of the test for entitlement. This is a new argument raised on reconsideration that was not raised at the hearing. Nevertheless, my determination on the amounts paid was based on the uncontroverted evidence before me. At paragraph 90 I found the letter dated October 12, 2021 to be compliant with section 52(2) of the Schedule and considered it to be proof that an overpayment was made and that the Applicant was advised of the request for repayment. I also note that in evidence before me is the letter from the Respondent to the Applicant, dated August 10, 2021, calculating the overpayment and imposing a repayment schedule. At no point did the Applicant challenge the veracity of the letters, except during reconsideration, which is not the venue to raise a new argument.
[20] Accordingly, I find no error of law or breach of procedural fairness in my determination that the Respondent is entitled to a repayment of IRBs. [57] The Insurer did not address the narrow point of whether the Adjudicator erred in law when he stated, uncategorically, that “silence or a failure to report constitutes wilful misrepresentation” whereas Michalowski and Certas stand for the view that silence or a failure to report may constitute wilful misrepresentation if the requisite intent is established.
[58] I find that the Adjudicator did not state the proper test for “wilful misrepresentation”.
[59] However, an error of law must be material to the result to warrant the court's intervention. Errors that are inconsequential or do not result in a substantial wrong or miscarriage of justice are insufficient to justify appellant intervention: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(6): Maple Leaf Acres Members' Association v. Ellig, 2023 ONSC 3940, at para. 23. In this case, the Adjudicator applied the correct test given that he examined the evidence and circumstances to come to the conclusion that the Appellant had withheld employment information because it would be detrimental to his IRBs claim. As a result, the misstatement of the law regarding the test for wilful misrepresentation did not result in a substantial wrong or miscarriage of justice that is sufficient to justify appellate intervention.
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