Northern Life v. Reierson, [1977] 1 SCR 390

Supreme Court of Canada

Northern Life v. Reierson, [1977] 1 S.C.R. 390

Date: 1976-04-01

The Northern Life Assurance Company of Canada (Defendant) Appellant;

and

Florence Reierson (Plaintiff) Respondent.

1976: March 10, 11; 1976: April 1.

Present: Martland, Judson, Spence, Dickson and Beetz JJ.

ON APPEAL FROM THE SUPREME COURT OF ALBERTA, APPELLATE DIVISION

Insurance—Life insurance—Group policy—Termination of policy for non-payment of premium—Cheque given for monthly premium dishonoured—No response to demand for replacement until after death of one of insured and after advice coverage no longer in force—No waiver by insurer of right to rely on s. 238(1) of The Alberta Insurance Act, R.S.A. 1970, c. 187.

The appellant company issued a group policy of insurance to cover employees of L.J. Scobie Co. Ltd. with effect from January 1, 1972. One of the employees covered by the policy was L.J. Scobie and he designated the respondent as beneficiary. The monthly premium amounted to $84.60 and was due on the first day of each month during the continuance of the policy. Provision was made for a grace period of 31 days for the payment of each premium falling due after the first premium, during which the policy would remain in force.

In response to a premium billing notice of January 26, 1972, which indicated a credit of $15.40 from the January billing, a cheque, dated February 15, 1972, for $69.20 (the balance of the February premium) was delivered to the appellant. This cheque was later returned N.S.F. The appellant asked for a replacement cheque but such was not received until about a week after the death of Scobie, which occurred on March 11, 1973. The replacement cheque was held by the appellant pending a decision on possible reinstatement of coverage and was later returned to the Scobie Company.

An action on the policy was dismissed at trial. An appeal was allowed by the Alberta Appellate Division which was of the view that the acts of the appellant in retaining the N.S.F. cheque and demanding a replacement cheque were unequivocal and could relate only to an election to continue holding the N.S.F. cheque for the purpose for which it had been received, that is, payment of the February premium. The Appellate Divi-

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sion concluded that the February premium was paid and that as Scobie had died during the period of grace which commenced on March 1st, the respondent was entitled to succeed. From this decision the insurance company appealed to this Court.

Held: The appeal should be allowed.

The respondent’s submission that the demand for a replacement cheque was equivalent to payment of the February premium was not tenable. Section 238(1) of The Alberta Insurance Act, which provides that where a cheque is given for the whole or part of a premium, and payment is not made according to its tenor, the premium or part thereof shall be deemed not to have been made, negated any argument that delivery of the February 15 cheque, later dishonoured, amounted to payment of the February 1 premium. Payment of the premium could be made within the days of grace but failing that the policy, by its terms, terminated. Nothing whatever was done in response to the demand for a replacement cheque until after the death of Scobie and after advice that the insurance coverage was no longer in force. There could be no doubt that the coverage under the contract came to an end on March 2 with the expiry of the days of grace, subject to the possibility of reinstatement upon compliance with certain conditions which were never satisfied. Before waiver can be found there must be express and unequivocal language or conduct, which could not be found in the present case.

McGeachie v. North American Life Insurance Company (1893), 23 S.C.R. 148, followed.

APPEAL from a judgment of the Supreme Court of Alberta, Appellate Division[1], allowing an appeal from a judgment of Primrose J. Appeal allowed.

T. Mayson, Q.C., for the defendant, appellant.

Angus G. Macdonald, Q.C., for the plaintiff, respondent.

The judgment of the Court was delivered by

DICKSON J.—The narrow issue in this appeal is whether the appellant, The Northern Life Assurance Company of Canada, waived its right to rely upon s. 238(1) of The Alberta Insurance Act R.S.A. 1970, c.187, which provides that where a cheque is given for the whole or part of a premium, and payment is not made according to its

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tenor, the premium or part thereof shall be deemed not to have been made.

During argument, my brother Spence expressed concern that the appeal was on a question of fact alone and that the Court was without jurisdiction under s.36 of the Supreme Court Act (since repealed) to entertain the appeal. That section permitted an appeal on a question that was not a question of fact alone from a final judgment pronounced in a judicial proceeding where the amount in controversy in the appeal exceeded $10,000. Counsel for the respondent did not take the jurisdictional point, being of the view that the question raised on the appeal was one of law. At an earlier date, a motion was brought on behalf of the respondent to quash the appeal for lack of jurisdiction but on the ground that the amount of the matter in controversy did not exceed $10,000. The amount of insurance claimed by the respondent, Florence Reierson, in these proceedings is exactly $10,000. Rule 520 of the Alberta Rules of Court provides, however, that interest runs from the date of judgment at trial if, as occurred here, the trial Court is reversed. When interest runs from the date of judgment of the Court of first instance to the date of the judgment of the Court of Appeal that interest must be included in computing the amount in controversy in the appeal to this Court, because the judgment appealed from is necessarily the judgment of the Court of Appeal: Dominion Cartage v. Cloutier[2], at p.397. For these reasons the motion to quash was dismissed. It is the opinion of the Court that in all the circumstances any doubt as to the Court’s jurisdiction should be dispelled by granting leave to appeal and leave is hereby granted.

The essential facts are not in dispute. In late December 1971, a group policy of insurance was issued by Northern Life to cover employees of L.J. Scobie Co. Ltd. with effect from January 1, 1972. The Scobie Company was a small plumbing and heating concern carrying on business in the City of Edmonton. The monthly premium amounted to $84.60. The sum of $100 was paid to cover the January premium leaving a credit of $15.40 to

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be applied on the February premium. One of the employees covered by the policy was L.J. Scobie and he designated the respondent as beneficiary. The policy contained several provisions of importance in the present appeal. The first premium was stated to be due and payable on the effective date of the policy, i.e. January 1, 1972, and monthly premiums were due and payable on the first day of each insurance month thereafter during the continuance of the policy. Provision was made for a grace period of 31 days for the payment of each premium falling due after the first premium, during which period the policy would remain in force. The provision also stated that: “If any premium be not paid within the days of grace this policy shall automatically terminate.”

On January 26, 1972, a premium billing notice was sent to the Scobie Company for the February premium indicating a credit of $15.40 from the January billing and a net amount payable of $69.20. In the lower right-hand corner of the notice these words appear: “This premium must be paid not later than March 1, 1972 in order to continue this contract in effect.”

In response to the premium billing notice the respondent, who was secretary-treasurer of the Scobie Company, prepared a cheque for $69.20 which was signed by Scobie and forwarded to the head office of Northern Life in London, Ontario. The cheque was received on February 17, 1972, and deposited. Eleven days later, on February 28, 1972, a Monday, the Canadian Imperial Bank of Commerce in Edmonton marked the cheque to be returned for insufficient funds to the bankers for the Northern Life at London, Ontario. On the same day a notice was forwarded to the Scobie Company by the Canadian Imperial Bank of Commerce advising that the cheque for $69.20 and two other cheques had been dishonoured for insufficient funds. Several days later, the N.S.F. cheque was received by Northern Life in London. On March 3, an officer of that company forwarded an inter-office memorandum to W.B. McAthey, group manager for Northern Life at Edmonton, reading: “The cheque of $69.20 to pay the balance of the February premium has been returned by the

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Bank N.S.F. Please obtain a new cheque for this amount.” McAthey asked Paul Shelemey, the insurance broker who had represented the Scobie Company in obtaining the insurance coverage, to obtain a replacement cheque. Shelemey telephoned that company and spoke to the respondent, who was already aware that the cheque had been returned, and asked her to make arrangements to replace the dishonoured cheque. He followed this up by telephone and by one or two personal calls. On March 10, Shelemey attended at the office of the Scobie Company; Scobie was not there and he spoke to the respondent, advising her that the insurance was out of force because the days of grace had expired and that the N.S.F. cheque should be replaced immediately. He was particularly concerned about the 10 or 11 employees who would think they were covered but were not. The respondent told Shelemey that the employees’ contributions had been deducted from their pay cheques but the company was without funds with which to pay the premium. Scobie died the following day.

About a week later, on March 17, Shelemey received a telephone call asking him to pick up a cheque for $69.20 drawn on the personal bank account of Carlo Schwartz, a foreman with the Scobie Company, and payable to Northern Life.

Shelemey forwarded the cheque to the Edmonton office of the company with a covering letter reading: “Please find enclosed the replacement cheque for the February statement. This plan is to remain in force and the March premium will be paid as the statement is presented.” Upon receipt of the letter McAthey telephoned Shelemey and told him that the policy was out of force as the days of grace had expired. He added that if the surviving employees wished to continue the plan, evidence of insurability would be required before the plan could be reinstated. McAthey wrote to the group department at London on March 20. The letter reads:

Please find enclosed cheque in the amount of $69.20 paying the balance of the February premium and replacing the cheque that was N.S.F.

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You will recall that I mentioned that Lloyd Scobie had died sometime during the weekend of March 11 and 12. I have never seen an announcement in the paper and we haven’t heard from relatives or the company as to our liability. Paul Schelemey, the agent, tells me that the rest of the group want to carry on with their coverages, but I told him we would have to have the policy re-instated as they had gone over the 30 days allotted for payment of premium.

If you wish to have the group carried on, would you please prepare a Re-instatement form that we can have signed?

On March 21, the respondent wrote to the head office of Northern Life advising tht she was the beneficiary of Scobie’s insurance and requesting claim forms. The company replied that the policy had terminated on February 1 due to non-payment of the premium due that date and as a result coverage under the policy had ceased. On March 28, the head office group department of the insurance company wrote the Scobie Company stating that the March 17 cheque for $69.20 was being held, that the policy had terminated on February 1 due to non‑payment of the February premium and that the company would consider reinstatement of coverage upon completion of forms enclosed in the letter. The forms were never completed. The remaining employees decided not to seek reinstatement. Northern Life returned to the Scobie Company (i) the March 17 cheque for $69.20 which had been held pending a decision on reinstatement, (ii) a cheque in the amount of $15.40 representing the credit from the January billing and (iii) a cheque for $84.60 which had been forwarded to cover the March 1 premium. And so the matter rested.

Northern Life has taken the position that the policy lapsed on February 1 in accordance with its terms and was not reinstated, and that the death of Scobie occurred after the days of grace, at a time when the policy was out of force. The company relies upon s. 238(1) of The Alberta Insurance Act to which I have earlier referred according it the right to treat non‑payment of the February 15 cheque as non-payment of the February 1 premium.

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The position of the respondent is that by retaining the N.S.F. cheque, the $15.40 paid on account, and in making a demand for a replacement cheque, Northern Life elected to accept the obligation set out in the N.S.F. cheque in payment of the February premium and thereby waived its rights under s. 238(1) of the Act. The trial judge, Primrose J., dismissed the action, declaring himself “unable to find any area where the defendant appears to have elected to treat the policy as valid and binding, although it had requested a replacement cheque for the N.S.F. cheque, still reserving its right to consider reinstatement evidence of insurability, that decision to be made by Head Office.” The Appellate Division reached a different conclusion. Mr. Justice Prowse, speaking for the Court, was of the opinion that the acts of Northern Life in retaining the N.S.F. cheque and demanding a replacement cheque were unequivocal and could relate only to an election to continue holding the N.S.F. cheque for the purpose for which it had been received, that is, payment of the February premium. The learned judge of appeal concluded that the February premium was paid and that as Scobie had died during the period of grace which commenced on March 1st, the respondent was entitled to succeed. I have very great difficulty in accepting this view.

It seems to me that this appeal is practically concluded by the decision of this Court in McGeachie v. North American Life Insurance Company[3] dismissing, without calling upon counsel for the respondents, an appeal from a decision of the Court of Appeal for Ontario reported in 20 O.A.R. 187. In that case, a condition in a policy of insurance provided that if any premium or note given therefor was not paid when due the policy would be void. A note given for the premium under the policy was partly paid when due and renewed. The renewal note was three weeks overdue and unpaid at the death of the insured. The Court held that the policy was void at date of death. It was also held that a demand for payment after the maturity of the renewal note, a demand which reached the

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city in which the assured resided on the day on which the assured died, and was delivered to his brother on the same day was not a waiver of the breach of the condition so as to keep the policy in force. On this point Mr. Justice Osler said, p. 195:

I do not wish to be understood as saying that a demand, even if actually communicated to the insured, unless followed by actual payment and acceptance of the premium in his lifetime, would be evidence of a waiver of the forfeiture or sufficient to reinstate the policy.

In the present case the meeting between Shelemey and the respondent on March 10, the day preceding the death of Scobie, is of critical importance. The respondent was advised at that time that the insurance was out of force. Shelemey did not have authority to keep the insurance in force. He was not an agent of Northern Life. He was an insurance broker, holding an agency contract with The Manufacturers Life Insurance Company. He was entitled to place through another company coverage which Manufacturers Life did not provide. The trial judge accepted his evidence that he could in no way bind Northern Life. The policy stated that except by written authority signed by the president or vice-president and by the secretary or actuary of Northern Life no person had power on behalf of the company to accept premiums in arrears or to extend the time for payment of any premiums or to waive the company’s rights or requirements.

The Scobie Company was also alerted by the premium billing notice that the premium must be paid not later than March 1 if the contract were to continue in force. The submission urged by counsel for the respondent that the demand for a replacement cheque was equivalent to payment of the February premium is simply not tenable. Section 238(1) of The Insurance Act negates any argument that delivery of the February 15 cheque, later dishonoured, amounted to payment of the February 1 premium. Payment of the premium could be made within the days of grace but failing that the policy, by its terms, terminated. If the Scobie Company had given Shelemey the sum of

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$69.20 immediately after March 3 following expiry of the days of grace, other questions might arise as to waiver but the difficulty which remains, so far as the respondent is concerned, is that nothing whatever was done in response to the demand until after the death of Scobie and after advice that the insurance coverage was no longer in force. I do not think there can be any doubt that the coverage under the contract came to an end on March 2 with the expiry of the days of grace, subject to the possibility of reinstatement upon compliance with certain conditions which were never satisfied. Before one can find waiver there must be express and unequivocal language or conduct, which one does not find in the present case.

I would accordingly allow the appeal, set aside the judgment of the Appellate Division and dismiss the action with costs in this Court and in the Courts below.

Appeal allowed with costs.

Solicitors for the defendant, appellant: Milner & Steer, Edmonton.

Solicitors for the plaintiff, respondent: Macdonald, Spitz, Edmonton.