By James Langton

(January 11 – 17:45 ET) – An Ontario appeals court has overturned a decision that would have seen a life insurance policy payoff for a woman despite the fact that the premiums were not fully paid.

On appeal from the judgment of Justice Lee Ferrier on April 23, 1999, Gerling Global Life Insurance Co. was seeking to overturn a decision that awarded a $280,000 life insurance payoff to Karen Pluzak.

In 1988 Gerling Global issued a life insurance policy to Mr. and Mrs. Pluzak. Both were owners of the policy and each was named a beneficiary in the event of the other’s death. Initially, premiums were paid by automatic withdrawal from the husband’s business account.

In 1992, they separated. He agreed to make the premium payments on the policy, but in subsequent family law proceedings a consent order made no mention of the insurance. Mrs. Pluzak left the family home and had her mail redirected, but did not inform Gerling of the separation or her new address.

During the summer and fall of 1992, Global Gerling sent three letters to their home informing them that the premium due on July 25, had not been paid. Global Gerling received no response to these letters, and no further premiums were paid.

In December 1992 Mr. Pluzak died in a car accident. Mrs. Pluzak learned the policy had lapsed when she tried to cash it in, and the issue eventually wound up in court. The first judge concluded that she acted reasonably and found in her favour.

The appeals court disagrees. “Life insurance claims tend to be for large sums and the beneficiaries of them are often needy, but the court cannot be in the position of re-writing a contract out of sympathy. If there is a policy reason for isolating insurance contracts from others it should be legislated, and should include appropriate criteria for granting relief which can be assessed by insurers and dealt with as a commercial factor in setting premiums,” wrote Judge Carthy.