Brissette Estate v. Westbury Life Insurance Co.; Brissette Estate v. Crown Life Insurance Co.

Brissette Estate v. Westbury Life Insurance Co.; Brissette Estate v. Crown Life Insurance Co.
Collection
Supreme Court Judgments
Date
1992-10-29
Report
[1992] 3 SCR 87
Case number
22125
Judges
La Forest, Gérard V.; L'Heureux-Dubé, Claire; Sopinka, John; Gonthier, Charles Doherty; Cory, Peter deCarteret; Stevenson, William; Iacobucci, Frank
On appeal from
Ontario
Subjects
Insurance
Notes
SCC Case Information: 22125
Decision Content
Brissette Estate v. Westbury Life Ins. Co.; Brissette Estate v. Crown, Life Insurance Co., [1992] 3 S.C.R. 87
Gerald M. Brissette and Bernard Bezaire
as Executor and Trustee of the Last Will
and Testament of Mary Cecile Brissette,
deceased Appellants
v.
Westbury Life Insurance Company,
formerly known as Pitts Life
Insurance Company Respondent
Indexed as: Brissette Estate v. Westbury Life Insurance Co.; Brissette Estate v. Crown Life Insurance Co.
File No.: 22125.
1992: February 27; 1992: October 29.
Present: La Forest, L'Heureux‑Dubé, Sopinka, Gonthier, Cory, Stevenson* and Iacobucci JJ.
on appeal from the court of appeal for ontario
Insurance ‑‑ Life insurance ‑‑ Beneficiaries ‑‑ Husband and wife jointly insured by policy with double indemnity clause in case of death by accident ‑‑ Survivor named as beneficiary ‑‑ Husband murdering wife ‑‑ Whether insurance company absolved of paying ‑‑ If not, whether double indemnity clause applicable.
A married couple bought a term life insurance policy which named the surviving spouse as the beneficiary. During the course of this policy, the husband murdered his wife and all avenues of appeal from conviction were exhausted. The husband, acting as a beneficiary and as executor, made a claim against the insurance company for the proceeds of the life insurance policy, including the accidental benefit. He later renounced his appointment as executor and trustee and surrendered any rights arising under the policy to the executor of his wife's estate. An order was then made that the claim initiated by him in 1986 against the insurance company be continued.
In March, 1989, the respondent insurance company brought a motion for summary judgment seeking the dismissal of the appellant's claim. The appellant brought a cross‑motion for a declaration that the estate was entitled to payment of the insurance proceeds including the accidental death benefits. The trial judge found the wife's estate was entitled to the insurance proceeds and the accidental benefits. The Court of Appeal allowed an appeal from that judgment. At issue here are: (1) whether the insurance company was absolved from paying anything under the policy in these circumstances; and (2) if not, whether the accidental benefit clause was applicable as a result of the murder.
Held (Gonthier and Cory JJ. dissenting): The appeal should be dismissed.
Per La Forest, L'Heureux‑Dubé, Sopinka and Iacobucci JJ.: The contract cannot be construed to require payment to the victim's estate; that was never the parties' intention. Moreover, the contract's wording was unambiguous: the money was to be paid to the survivor. Public policy prevents the money from being paid in accordance with the explicit terms of the contract to a survivor who has acceded to this status by killing the other party. These terms cannot be rewritten under the guise of interpretation and resort to a constructive trust is an acknowledgement that this is so. A constructive trust is ordinarily resorted to when the application of other accepted legal principles would produce an unjust result and that would not be countenanced by a court's applying the principles of equity.
The insurance policy at issue here could not be viewed as two separate contracts with each party insuring his or her own life with the other as beneficiary. The policy listed the two parties together as the "insured" and provided for payment to "the beneficiary" who was defined as "the survivor".
Irrespective of the ultimate payee of the insurance proceeds, denial of recovery is consistent with public policy because it prevents the insured from insuring against his or her own criminal act. There is nothing unjust, therefore, about the application of public policy in this case.
Even if denial of recovery to the estate were inconsistent with public policy, it would be contrary to established principles of equity to employ a constructive trust in this case. A constructive trust will ordinarily be imposed on property in the hands of a wrongdoer to prevent him or her from being unjustly enriched by profiting from his or her own wrongful conduct. No claim of unjust enrichment, which is fundamental to the use of a constructive trust, was made out here. The wrongdoer did not benefit from his own wrong and the insurer, in complying with the terms of the contract, was not in breach of its duty to the other insured. Moreover, the wrongdoer held no property to which a trust could be fastened because of the operation of public policy. The effect of a constructive trust would be to first require payment to the wrongdoer and then impress the money with a trust in favour of the estate. A constructive trust, however, cannot be used to bring property into existence by determining the liability of the insurer to pay.
Per Gonthier and Cory JJ. (dissenting): The reasonable intention of the parties must be taken into account in interpreting the policy. The court should: (1) look at the words of the entire contract to promote the true and reasonable intention of the parties at the time of entering the contract; (2) look at the words of the contract to determine if there is an ambiguity; and (3) construe any ambiguity in favour of the insured. The doctrine of public policy should apply to insurance contracts to ensure that a wrongdoer will not profit from his or her wrongdoing. The rule should be narrowly construed and should not ordinarily be used by an insurance company to avoid payment of its obligations.
The use of the constructive trust to prevent the unjust enrichment of the wrongdoer reduces or eliminates the element of confusion involved in deciding who is entitled to the proceeds of the policy. The beneficiary of the constructive trust is the person who, in the eyes of equity, has the best right to the proceeds. Where there are circumstances showing that a particular person has a better equity than anybody else the property should be given to that person but otherwise it should be given to the estate of the victim for lack of "any other suitable recipient," and in all cases the wrongdoer or anyone claiming through him or her should be excluded. Where the wrongdoer is beneficiary under the victim's life insurance the proceeds of the policy will in the normal case be held for the estate of the victim but if there is an alternative beneficiary then he or she should gain the proceeds and similarly if there is evidence that the victim would have changed the beneficiary then that second person should benefit and gain the proceeds.
The reasonable intention of the parties, gleaned from the contract as a whole, was that the sum insured should be paid to the husband in the event that the wife should predecease him. Ambiguity exists, however, because the policy does not cover the situation of one spouse's murdering the other. The absence of such a provision is particularly significant in light of the care the insurer has taken in other portions of the policy to stipulate the suicide exemption clause and the other specific exemption provisions pertaining to accidental death.
Ambiguities should be interpreted in favour of the insured. Although public policy prevents the monies being paid to the murdering spouse, there is no reason for the insurance company to benefit from that public policy doctrine. The insurance company should therefore pay the proceeds to the survivor who, in order to comply with the principles of public policy, must hold those funds as trustee for the administrator of the estate of the murdered spouse.
The meaning of the contract would be distorted and s. 171 of the Insurance Act (which provides for payment to an estate for want of a surviving beneficiary) would be given a perverse meaning if the survivor were deemed to have predeceased the murder victim. Where a party to the contract, as opposed to a third party, deliberately murders the insured, the death cannot be said to be by "accidental means" and therefore cannot bring the double indemnity clause into play.
Cases Cited
By Sopinka J.
Applied: Demeter v. Dominion Life Assurance Co. (1982), 35 O.R. (2d) 560; distinguished: Cleaver v. Mutual Reserve Fund Life Association, [1892] 1 Q.B. 147; referred to: Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; Spicer v. New York Life Ins. Co., 268 F. 500 (1920), certiorari denied, 255 U.S. 572 (1921); Schobelt v. Barber, [1967] 1 O.R. 349; Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574; Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426; Pettkus v. Becker, [1980] 2 S.C.R. 834.
By Cory J. (dissenting)
Demeter v. Dominion Life Assurance Co. (1981), 33 O.R. (2d) 839 (H.C.), aff'd (1982), 35 O.R. (2d) 560 (C.A.); Cleaver v. Mutual Reserve Fund Life Association, [1892] 1 Q.B. 147; Horwitz v. Loyal Protective Insurance Co., [1932] O.R. 467; National Union Fire Insurance Co. v. Reno's Executive Air, Inc., 682 P.2d 1380 (1984); Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; Wigle v. Allstate Insurance Co. of Canada (1984), 49 O.R. (2d) 101, leave to appeal to S.C.C. refused, [1985] 1 S.C.R. v; Standard Life Assur. Co. v. Trudeau (1900), 31 S.C.R. 376; Equitable Life Assur. Soc. of United States v. Weightman, 160 P. 629 (1916); Supreme Lodge Knights & Ladies of Honor v. Menkhausen, 70 N.E. 567 (1904); Spicer v. New York Life Ins. Co., 268 F. 500 (1920); Mutual of Omaha Insurance Co. v. Stats, [1978] 2 S.C.R. 1153.
Statutes and Regulations Cited
Insurance Act, R.S.O. 1980, c. 218, s. 171.
Married Women's Property Act, 1882 (U.K.), 45 & 46 Vict., c. 75, s. 11.
Authors Cited
Holz, Shannon G. "Insurance Law: The Doctrine of Reasonable Expectations" (1988), 37 Drake L. Rev. 741.
Keeton, Robert. "Insurance Law Rights at Variance with Policy Provisions" (1970), 83 Harv. L. Rev. 961
Leitner, David L. "Enforcing the Consumer's `Reasonable Expectations' in Interpreting Insurance Contracts: A Doctrine in Search of Coherent Definition" (1988), 38 F.I.C.C. Quarterly 379.
Scott, Austin Wakeman. The Law of Trusts, Vol. 5, 4th ed. By Austin Wakeman Scott and William Franklin Fratcher. Boston: Little, Brown & Co., 1989.
Youdan, T. G. "Acquisition of Property by Killing" (1973), 89 L.Q. Rev. 235.
APPEAL from a judgment of the Ontario Court of Appeal (1990), 74 O.R. (2d) 1, 72 D.L.R. (4th) 138, [1990] I.L.R. {PP} 1-2631, 39 E.T.R. 86, 49 C.C.L.I. 282, allowing an appeal from a judgment of Chilcott J. (1989), 69 O.R. (2d) 215, 60 D.L.R. (4th) 78, [1989] I.L.R. {PP} 1‑2483, [1989] I.L.R. {PP} 1‑2503, 33 E.T.R. 153, 41 C.C.L.I. 1. Appeal dismissed, Gonthier and Cory JJ. dissenting.
Robert E. Barnes, Q.C., for the appellants.
John S. McNeil, Q.C., for the respondent.
The judgment of La Forest, L'Heureux-Dubé, Sopinka and Iacobucci JJ. was delivered by
//Sopinka J.//
Sopinka J. -- I have read the reasons prepared by my colleague Justice Cory and find that I cannot agree with the conclusion that he has reached. I would dismiss the appeal essentially for the reasons expressed by Finlayson J.A. in the Court of Appeal for Ontario (1990), 74 O.R. (2d) 1. Inasmuch as the reasons of my colleague take issue with some aspects of those reasons, some amplification is required of the reasons of Finlayson J.A.
In order to decide this appeal two issues must be resolved:
(1) can the insurance contract be interpreted so as to require payment of the insurance proceeds to the estate of Mary Brissette; and,
(2) if the contract of insurance cannot be so interpreted, can the Court achieve the same result by resort to the device of a constructive trust.
Since I would resolve both these issues against the appellant, it is not necessary for me to deal with the issue of double indemnity.
Interpretation of the Contract
In interpreting an insurance contract the rules of construction relating to contracts are to be applied as follows:
(1) The court must search for an interpretation from the whole of the contract which promotes the true intent of the parties at the time of entry into the contract.
(2) Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected.
(3) Ambiguities will be construed against the insurer.
(4) An interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided. See Consolidated‑Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888.
The contract in this case is not reasonably capable of the interpretation contended for by the appellant. It cannot be construed to require payment to the estate of Mary Brissette. That was never the intention of the parties. As stated by the Fifth Circuit Court of Appeals in Spicer v. New York Life Ins. Co., 268 F. 500 (1920), at p. 501, certiorari denied, 255 U.S. 572 (1921):
There is no promise to pay anything to the estate, or to the personal representative, of that one of the two insured whose death first occurs during the continuance of the contract.
Moreover, there is nothing ambiguous about the wording of the contract. The money is to be paid to the survivor. The problem is that something has occurred that the parties neither contemplated nor provided for. The survivor acceded to this status by killing the other party. Public policy prevents the money from being paid in accordance with the explicit terms of the contract. These terms cannot simply be rewritten under the guise of interpretation. The resort to a constructive trust to achieve the result contended for by the appellant is an acknowledgement that this is so. A constructive trust is ordinarily resorted to when the application of other accepted legal principles would produce a result that is unjust and that would not be countenanced by a court applying the principles of equity. The question, therefore, is not one of interpretation but whether the result of the application of the rules of interpretation are unjust so as to require the court to employ a constructive trust and whether it can do so in accordance with the applicable principles of equity.
Constructive Trust
In order to determine whether, as a matter of public policy, the Court should resort to the device of a constructive trust, it is appropriate to consider whether the application of public policy which denies payment to the felonious beneficiary would work an injustice if recovery is denied to the appellants. After all, it is this policy that prevents the contract from taking effect in accordance with its terms. If denial of recovery by the estate is not inconsistent with this policy, then there is no misuse of public policy which would warrant a conclusion that its application is unjust.
The results reached in Demeter v. Dominion Life Assurance Co. (1982), 35 O.R. (2d) 560, and Cleaver v. Mutual Reserve Fund Life Association, [1892] 1 Q.B. 147, define the parameters of the application of this public policy. In Demeter the assured took out an insurance policy on his wife's life naming himself as beneficiary. He then arranged for her murder. Although the claim for the proceeds of insurance was made by the daughter of the deceased wife, the court made it clear that it would have been equally consistent with public policy to deny recovery to the wife's estate. MacKinnon A.C.J.O. concluded as follows (at p. 562):
We are in agreement with the Motions Court judge that the life insured had no interest in the policy, legal or equitable, which vested in her estate. In our view it could be stretching equitable principles beyond recognizable limits to grant either the infant plaintiff or her mother's estate an equitable interest in the policies and the proceeds of those policies.
The rationale of the policy which denies recovery to the felonious beneficiary is that a person should not profit from his or her own criminal act. It is consistent with this policy that a person should not be allowed to insure against his or her own criminal act irrespective of the ultimate payee of the proceeds. Denial of recovery in Demeter to either the daughter or the wife's estate would have been consistent with public policy. There was nothing unjust about such a result calling for the special assistance of equitable principles.
On the other hand, in Cleaver the insured took out an insurance policy on his own life with his wife as beneficiary. The wife-beneficiary who murdered the insured-husband was not a party to the contract of insurance. By virtue of the Married Women's Property Act, 1882 (U.K.), 45 & 46 Vict., c. 75, the moneys were payable to the estate of the insured to be held in trust for the beneficiary. Public policy stepped in to deny payment to the wife-beneficiary leaving the insurance moneys in the estate. Public policy was not allowed to abrogate a right that the estate had by virtue of the statute. The principles of equity were not resorted to in order to remedy a perceived injustice.
The contract of insurance in this case is not identical to the contract in either Demeter or Cleaver. It is necessary, therefore, to examine the whole of the contract in order to determine whether in its essential features it more closely resembles one or other of the contracts in those cases so as to attract the policy underlying that decision. After review of the contract of insurance in this case, I am of the opinion that it cannot be viewed as two separate contracts with each of Gerald and Mary insuring their own lives with the other as beneficiary so as to resemble the policy in Cleaver. The contract lists the two of them together as the "insured" and provides for payment to "the beneficiary" who is defined as "the survivor". I agree, therefore, with the following characterization of the policy by Finlayson J.A. in his reasons at p. 9:
I think the approach of counsel for Westbury reflects a sounder construction of the policy and thus the contract of insurance. He submits that Mary and Gerald insured their joint lives in favour of the survivor, or the survivor's designated beneficiary.
On this basis, the result reached in Demeter is appropriate in this case. There is nothing unjust in refusing to pay the proceeds of insurance to a beneficiary not designated by the insurance contract when to do so would allow the insured to insure against his own criminal act. Moreover, even if the contract of insurance can be characterized as two separate contracts, as submitted by the appellants, so as to resemble the contract in Cleaver, the result in Cleaver cannot be achieved in the absence of a provision, statutory or in the contract, providing for payment to the estate of the wife. Such a result can only be attained by invoking the equitable principle of a constructive trust. Those principles should only be invoked to cure an unjust application of public policy. There is nothing unjust about the application of that public policy in this case.
But, even if I had concluded that the denial of recovery to the estate was inconsistent with public policy, in my opinion it would be contrary to established principles of equity to employ a constructive trust in this case. A constructive trust will ordinarily be imposed on property in the hands of a wrongdoer to prevent him or her from being unjustly enriched by profiting from his or her own wrongful conduct. For example, in Schobelt v. Barber, [1967] 1 O.R. 349 (H.C.), the court imposed a constructive trust on property which passed to a joint tenant who had murdered his co-tenant. By virtue of the instrument creating the joint tenancy the surviving tenant acceded to the whole property. In order to prevent the wrongdoer from being unjustly enriched, the whole property was impressed with a constructive trust with the estate of the deceased joint tenant as beneficiary of one-half of the property.
The requirement of unjust enrichment is fundamental to the use of a constructive trust. In Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, Justice La Forest referred to Dickson C.J.'s review of the development of the constructive trust in Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426. At pages 673-74, La Forest J. stated:
This Court has recently had occasion to address the circumstances in which a constructive trust will be imposed in Hunter Engineering Co. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426. There, the Chief Justice discussed the development of the constructive trust over 200 years from its original use in the context of fiduciary relationships, through to Pettkus v. Becker, supra, where the Court moved to the modern approach with the constructive trust as a remedy for unjust enrichment. He identified that Pettkus v. Becker, supra, set out a two-step approach. First, the Court determines whether a claim for unjust enrichment is established, and then, secondly, examines whether in the circumstances a constructive trust is the appropriate remedy to redress that unjust enrichment. In Hunter Engineering Co. v. Syncrude Canada Ltd., a constructive trust was refused, not on the basis that it would not have been available between the parties (though in my view it may not have been appropriate), but rather on the basis that the claim for unjust enrichment had not been made out, so no remedial question arose.
In Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 847, Dickson J. (as he then was) stressed that "[t]he principle of unjust enrichment lies at the heart of the constructive trust".
In this case, no claim of unjust enrichment has been made out. It cannot be said that but for Gerald's act, Mary's estate would have recovered the money. The wrongdoer does not benefit from his own wrong, nor is the insurer in breach of its duty to Mary. It is simply complying with the express terms of the contract. Moreover, there is no property in the hands of the wrongdoer upon which a trust can be fastened. By virtue of public policy the provision for payment in the insurance policy is unenforceable and no money is payable to the wrongdoer. The effect of a constructive trust would be to first require payment to the wrongdoer and then impress the money with a trust in favour of the estate. A constructive trust cannot be used to bring property into existence by determining the liability of the insurer to pay. The situation would be different, if, as in Cleaver, the insurance money were payable to the estate to be held in trust for the beneficiary. Public policy would step in to prevent the execution of the trust leaving the proceeds in the hands of the estate. But where, as here, there is no provision for payment to the estate, a constructive trust cannot be used to rewrite the contract which clearly and explicitly provides that the insured "agrees to pay the Sum Insured at its Head Office to the beneficiary."
I agree with my colleague that s. 171 of the Insurance Act, R.S.O. 1980, c. 218, has no application to the facts of this case.
In the result I would dismiss the appeal with costs.
The reasons of Gonthier and Cory JJ. were delivered by
//Cory J.//
Cory J. (dissenting) -- Two questions must be resolved in this appeal. First, and most importantly, where a joint policy of insurance with the proceeds payable to the survivor is issued to a couple, does the murder of the wife by the husband absolve the insurance company from paying anything under the policy? Second, if the insurance company must pay, then is the accidental benefit clause applicable as a result of the murder?
Factual Background
Gerald Brissette and Mary Brissette were married and living in Windsor, Ontario. In 1980, when Gerald was 32 and Mary 31, the couple purchased a life insurance policy from Pitts Life Insurance Company (now Westbury Life Insurance Company). The policy was issued on June 18, 1980. The insurance was said to be joint, five-year and convertible level term insurance. The expiry date was June 16, 1985 with a provision for renewal for a further five- year term on that date. The sum insured was $200,000 which was payable to the survivor. The premium was fixed at $712 per annum.
Two years and two months later, Gerald Brissette murdered his wife. There is no question that, at the time of death, the policy was in effect and none of the conversion clauses had been exercised by either Gerald or Mary. The wife had, by her will, appointed her husband as executor and prime beneficiary of her estate. The appellant Bernard Bezaire was named as the alternate executor.
The husband in his capacity as a beneficiary and executor made a claim against the insurance company for the proceeds of the life insurance policy. The statement of claim sought judgment for the amount of the policy, including the accidental benefit. It went on to allege that in the event that Gerald Brissette was not personally entitled to the proceeds, the estate of his late wife was entitled to them. The husband was subsequently convicted of his wife's murder by a Michigan court and all avenues of appeal from his conviction have been exhausted. During the course of his criminal proceedings, the husband renounced his appointment as executor and trustee of his wife's estate and surrendered to Bernard Bezaire any rights he may have had under the policy. An order was then made that the claim initiated against the insurance company by the husband in May, 1986 be continued with Bernard Bezaire as executor.
In March, 1989, the respondent insurance company brought a motion for summary judgment seeking the dismissal of the appellant's claim. The appellant brought a cross-motion for a declaration that the estate was entitled to payment of the insurance proceeds including the accidental death benefits.
Judgments Below
Supreme Court of Ontario (1989), 69 O.R. (2d) 215
Chilcott J. first considered whether the wife's estate was entitled to the insurance proceeds. He reviewed the decision in Demeter v. Dominion Life Assurance Co. (1981), 33 O.R. (2d) 839 (H.C.), aff'd (1982), 35 O.R. (2d) 560 (C.A.), but distinguished it on the ground that, here the wife, unlike Mrs. Demeter, was indeed a party to the insurance contract since she was a joint owner of the policy and therefore she (or her executor) had a legal interest in the policy and in its proceeds.
The judge of first instance then considered the decision in Cleaver v. Mutual Reserve Fund Life Association, [1892] 1 Q.B. 147. He determined that it was applicable to this case. He found that Bernard Bezaire, as executor of Mary Brissette's estate, was a party to the contract. As a result, he could enforce the insurance contract without raising public policy concerns.
With regard to the second issue, Chilcott J. determined, based on the decision of Horwitz v. Loyal Protective Insurance Co., [1932] O.R. 467, that the murder of Mary Brissette constituted death by accidental means. He noted that although the act causing the injury was not accidental as regards the person inflicting the injury, it was accidental so far as the murdered victim was concerned.
He also applied the doctrine of contra proferentem resolving any doubt as to the meaning and scope of the contract against the party who inserted it.
Ontario Court of Appeal (1990), 74 O.R. (2d) 1
Finlayson J.A., for the court, expressed the opinion that the question as to whether Mary Brissette's estate could recover turned upon the proper interpretation of the insurance contract. He found that the judge of the first instance had erred in finding that Mary Brissette had a legal interest in the Westbury policy and its proceeds. He expressed the view that the case was governed by Demeter, supra, and that the decision in Cleaver, supra, did not apply.
Finlayson J.A. then considered the argument that s. 171 of the Insurance Act, R.S.O. 1980, c. 218, could be applied so as to designate Mary Brissette's estate as the alternate beneficiary. That section provides that where a beneficiary predeceases the person whose life is insured, and no disposition of the share of the deceased beneficiary in the insurance money is provided in the contract or by a declaration, the share is payable to the personal representative of the deceased beneficiary. Finlayson J.A. rejected this argument on two grounds. First, the insurance policy named the survivor of Gerald Brissette or Mary Brissette as the beneficiary. By definition, the survivor can never be the estate of the first to die. Second, s. 171 cannot be relied on to create on "implied designation" of the wife's estate as the alternate beneficiary.
He held that on a proper construction of the contract the beneficiary of the policy was the survivor of Gerald and Mary Brissette or the survivor's designated beneficiary. The husband as the survivor was incapable of making a claim. He concluded that neither could anyone else claim through the husband. In the result the appeal was allowed.
Analysis
Entitlement to the Insurance Proceeds
What then is the effect of Gerald Brissette's conviction for the murder of his wife on the liability of Westbury Life Insurance Company to pay under the insurance policy? The answer to this question will turn upon the interpretation of the contract itself and on the applicable public policy principles.
1.The Contract
(a)Interpretation of an Insurance Contract
A policy of insurance constitutes a contract. Yet there are some significant differences between a contract for insurance and an ordinary commercial contract. It must be remembered that the policy itself is drawn by the insurance company. It is the company that chooses the language which sets out the terms and conditions of the policy. That language is not always a model of clarity which can be readily understood by lay persons. The policy is not negotiated between the parties. Rather it is submitted to a potential policy holder on a take-it-or-leave-it basis, with, I am sure, an emphasis by the insurance company representative on benefits that the purchaser will receive. Further, the insurance company will enter into a great number of contracts for insurance while the insured will but rarely enter into such a contract. The sole obligation resting upon the insured is to pay the premiums as they fall due.
Life insurance policies impose upon the insurance company the obligation to pay the stipulated sum upon the death of the insured. It should be remembered that it is the insurance companies that have ready access to actuaries and the actuarial statistics which enable them to calculate their risk effectively. It is on this basis that they can assess and fix the premium to be paid by the insured that will permit them to meet their obligations and to profit from the transactions. How then should these contracts of insurance be interpreted?
(i)The American Approach
In the United States, a doctrine of "reasonable expectations" has been applied in the interpretation of the insurance contracts. Generally, the aim of that doctrine is to make certain that insurance policies provide the coverage which the insured can reasonably expect to receive. There the courts have essentially applied three variations of the doctrine. In the first variation, the doctrine is applied wherever there is an ambiguity in the policy of insurance, so that ambiguities are resolved in favour of the insured in order to satisfy his or her reasonable expectation. See National Union Fire Insurance Co. v. Reno's Executive Air, Inc., 682 P.2d 1380 (1984). The American courts have reasoned that insurance policies are contracts of "adhesion" and therefore ambiguities contained in them should be resolved in favour of the insured. A contract of "adhesion" has been defined as a written contract with the following characteristics:
1. Drafted by one party to the transaction;
2. On a form regularly used by the drafter;
3. Presented to the adherent on a take-it-or-leave-it basis;
4. One in which the adherent enters into relatively few such transactions as compared with the drafting party;
5. One in which the principal obligation of the adherent is the payment of money.
See Leitner, in "Enforcing the Consumer's `Reasonable Expectations' in Interpreting Insurance Contracts: A Doctrine in Search of Coherent Definition" (1988), 38 F.I.C.C. Quarterly 379, at pp. 379-80.
The second application of the doctrine operates to provide that the insured is entitled to all the coverage that might reasonably be expected to be provided under the policy. Only an unequivocal plain and clear manifestation of the company's intent to exclude coverage will defeat that expectation.
The third application of the principle is even broader and more controversial than the second. It was originally advocated by Professor Keeton who stated:
The objectively reasonable expectations of applicants and intended beneficiaries regarding the terms of insurance contracts will be honored even though painstaking study of the policy provisions would have negated those expectations.
(R. Keeton, "Insurance Law Rights at Variance with Policy Provisions" (1970), 83 Harv. L. Rev. 961, at p. 967.)
In a thoughtful article, "Insurance Law: The Doctrine of Reasonable Expectations" (1988), 37 Drake L. Rev. 741, at pp. 746-47, Holz sets out the pros and cons of this last approach:
. . . the reasonable expectations of a policyholder, having an ordinary degree of familiarity with the policy coverage, should be given effect for three reasons: (1) policy forms are long and complex and cannot be understood without detailed study; (2) rarely do policyholders read their policies carefully enough to acquire such understanding; (3) most insurance transactions are final before a policyholder has a chance to see the detailed policy terms. The Keeton doctrine has been criticized on the grounds that: (1) if there is to be any predictability and uniformity of decisions, the courts need to establish more precise guidelines for the doctrine; (2) the analysis fails to consider the well-established rule of adhering to express contract language; (3) it would allow recovery to insureds who fail to read and understand their policies despite clear and unambiguous policy language; (4) the insurer would no longer be able to rely on the terms of a written insurance policy.
I have set out the American approaches not with any intention of slavishly following any of them but as an indication of how far some jurisdictions have gone to give effect to the reasonable expectations of the insured and the reasoning that lead to the adoption of that approach.
(ii)The Canadian Approach
It has been held that the reasonable intention of the parties must be taken into account in the interpretation of the policy. Generally it would be expected that the intention of the parties entering into a life insurance contract would be that the insurance company would pay out the sum stipulated by the policy upon the death of the insured party, provided that the death was not within one of the listed exceptions to the policy. The principle that the reasonable intention of the parties must be taken into account in the interpretation of insurance contracts was set out by this court in Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888. In that case, Estey J. wrote at pp. 901-2:
. . . the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intention of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result. It is trite to observe that an interpretation of an ambiguous contractual provision which would render the endeavour on the part of the insured to obtain insurance protection nugatory, should be avoided. Said another way, the courts should be loath to support a construction which would either enable the insurer to pocket the premium without risk or the insured to achieve a recovery which could neither be sensibly sought nor anticipated at the time of the contract. [Emphasis added]
That same case also stressed the principle that any ambiguities found in the insurance contract should be construed in favour of the insured. At p. 899 the following appears:
. . . it is trite to say that where an ambiguity is found to exist in the terminology employed in the contract, such terminology shall be construed against the insurance carrier as being the author, or at least the party in control of the contents of the contract.
In Wigle v. Allstate Insurance Co. of Canada (1984), 49 O.R. (2d) 101 (leave to appeal to S.C.C. refused, [1985] 1 S.C.R. v), the Ontario Court of Appeal considered the principles that should be applied to an interpretation of a standard policy of insurance. There the majority of the court adopted some but certainly not all of the rules that have been applied in the United States to the interpretation of an insurance contract. It was said that the basic rules which should apply are as follows, at p. 117:
1.The court should look at the words in the contract to determine if there is ambiguity;
2.the court should ascertain the intention of the parties concerning specific provisions by reference to the language of the entire contract;
3.the court should construe ambiguities found in the insurance contract in favour of the insured, and
4.the court should limit the construction in favour of the insured by "reasonableness". . . .
In my view, it is just and appropriate that the rules referred to in those cases be applied in interpreting insurance contracts.
(b)The Aspect of Public Policy
It is trite to say that a wrongdoer cannot profit from his or her wrongdoing. This principle is clearly applicable to contracts of insurance. See Cleaver v. Mutual Reserve Fund Life Association, supra. The insurance policy in that case was owned by the husband who insured his own life with the proceeds of the policy payable to his wife if she were living at the time of his death and if she were not, to his legal representatives. The wife was subsequently convicted of murdering her husband. The English Court of Appeal found that the proceeds of the policy should go to the husband's estate. It was noted that the right to recover on the policy vests in the owner/deceased and "it is only when it is a question as to the application of the money by them that considerations of public policy arise" (at p. 149). Lord Esher wrote at pp. 151-52:
The contract is with the husband, and with nobody else. The wife is no party to it. Apart from the statute, the right to sue on such a contract would clearly pass to the legal personal representatives of the husband. The promise is one which could only take effect upon his death, and therefore it must be meant to be enforced by them. The condition on which the money is to become payable is the death of James Maybrick