There is no statute of limitations on a life insurer finding out about a potential health issue before a life insurance policy kicks in — and effectively voiding that policy — an Ontario court ruled.
The Court of Appeal for Ontario upheld an appeal brought by Canada Life Assurance Co., and an insurance agent, which sought to overturn a decision of the Ontario Superior Court of Justice that was handed down in May 2025.
That decision granted summary judgment against the insurer, ordering it to pay a life insurance claim, plus interest, after finding that it was wrong to deny coverage based on a change in a deceased woman’s health status between the time that she applied for insurance and the time her policy took effect.
According to the decision, in July 2014, Elizabeth Trebell bought a $500,000 life insurance policy. Before the policy was delivered in September, she visited her doctor, and a colonoscopy was ordered.
In the meantime, the policy was delivered, and Trebell signed a declaration that there had been no change in her health status since she’d applied for insurance.
However, when the colonoscopy took place in December, a malignant tumour was discovered, and she ultimately died from colon cancer in March 2018.
The insurer refused to payout on her insurance policy, arguing that there had been a change in her health status that affected her insurability, which wasn’t disclosed — and that if it had known about the pending colonoscopy, it would have delayed delivery of the policy.
According to the court, the company relied on a provision of insurance legislation, which stipulates that a policy doesn’t come into force if there’s a change in insurability between the time an application is made and when the policy is delivered.
“It took the position that the insurance contract relating to the policy did not take effect… notwithstanding that Ms. Trebell had faithfully paid the premiums, since there had been a change in her insurability…” the court said.
The Superior Court rejected the insurer’s position — ruling that the company couldn’t raise the insurability issue almost four years after the policy was issued, and that there’s a two-year limitation on its ability to raise that objection.
Among other things, the motion judge found that, “… allowing this provision to be used retroactively to treat a policy as never having come into effect after the delivery requirement and the payment requirement have been satisfied would leave the insurance applicant in a state of perpetual uncertainty as to whether they have insurance, thus defeating their reasonable expectations that the insurance exists.”
On appeal, Canada Life argued that there is no time limit on finding that there was a change in insurability between an application and the delivery of a policy — and the appeal court agreed, filing that the motion judge “erred in imposing a two-year contestability limitation… .”
The appeal court found that the motion judge erred by importing a limitation period from one part of the insurance legislation to the part dealing with changes in initial insurability — and that, in fact, there is no time limit on this provision.
“I would interpret this provision as requiring no change in the factual state of the risk undertaken by the insurer in insuring the insured. Where this requirement is not met, the contract of insurance does not exist,” the court said — adding that this condition “… can be relied upon at any time by the insurer to resist a claim for life insurance benefits.”
“While this may seem like a harsh result, it is the one the legislature intended,” the appeal court said.
As a result, the appeal court set aside the summary judgment.
However, it also declined to dismiss the motion for summary judgment, saying that this would require it to conclude that there is a genuine issue requiring a trial.
“The record is far from clear that the issue of whether Ms. Trebell’s insurability changed between her application and the delivery of the policy is one that requires a trial,” the court said. “The motion judge did not consider this point.”
“The better approach is to set aside the summary judgment in favour of Mr. Trebell and leave it to the parties to decide how they wish to litigate the insurability issue,” it said.