OLHI – OmbudService for Life & Health Insurance | Resolution of your Canadian Insurance Concerns | OLHI

Contra proferentem (life)

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When Mr. N. purchased life insurance in 2000, he explained to his agent that he wanted to pay the same monthly premium for the lifetime of the policy. His agent helped him fill out an application and also provided him with illustrations to show how his premium would never change.

Fifteen years later, Mr. N.’s premiums increased. He contacted the insurance company, asking that his previous premium be reinstated and that he be reimbursed the difference. In the final position letter, Mr. N.’s request was denied. The company pointed to the wording in the contract, which stated the level premium was for the first 10 years of the policy, after which time the cost of insurance could be increased. Mr. N. was given the option to reduce the sum insured, in order to bring his premiums back down to the original cost.

Mr. N. decided to bring this letter to OLHI. OLHI’s Dispute Resolution Officer (DRO) reviewed the contract and spoke with Mr. N., who told her that his insurance agent recently told him that he wholly believed he had sold him a level policy for its lifetime. The DRO also saw that the agent’s illustrations clearly indicated a monthly premium for life. She recommended that an OmbudService Officer (OSO) investigate further.

The OSO spoke with both Mr. N. and the insurance company to better understand their positions. She also delved deeper into the contract language, finding multiple examples of conflicting, ambiguous statements. In some instances, the policy stated the cost would be level for the duration of the policy. In others, it stated the cost could be adjusted.

The OSO approached the insurance company, pointing to the legal principle of contra proferentem. This principle states that, where there is unclear language in an insurance contract, consumers’ interpretations of the meaning of the contract are permitted. For this reason, she recommended that Mr. N.’s previous premium be reinstated and that he be reimbursed the difference in price. The insurance company agreed.

Disclaimer: Names, places and facts have been modified in order to protect the privacy of the parties involved. This case study is for illustration purposes only. Each complaint OLHI reviews contains different facts and contract wording may vary. As a result, the application of the principles expressed here may lead to different results in different cases.