Manufacturers Life Insurance Co. has been ordered to pay out a $350,000 life insurance claim to a widow whose husband died of a drug overdose, despite Manulife’s assertion that the man didn’t report prior drug use on his application.

Manulife denied the claim saying Michael Metcalfe materially misrepresented facts on his life insurance application. His widow, Kati Ilona Metcalfe, sued. On November 23, B.C. court ordered the firm to pay the claim.

The court noted that the “evidence leaves hardly a doubt that there were material misrepresentations. The difficult question is whether they were fraudulent.” It concluded they weren’t.

The court heard that the policy was sold following a cold call solicitation by an insurance agent. The widow testified that in filling out the application her husband reported that he suffered drug problems in the past, but that he had been clean and sober for three and a half years. The agent reportedly told Metcalfe that he need not concern himself about that because after two years it was a “non-issue”. The agent flatly denied Ms. Metcalfe’s account and specifically recalled that there was no such disclosure by him nor any assurances that she gave to him.

The court judge found the wife’s testimony more believable, and ruled that Metcalfe was not reckless in not closely reading the policy and asking for clarification, and that they reasonably relied on the agent. “It seems to me that the Metcalfes were more or less typical of individuals meeting with a life insurance sales person. They would tend to rely on the agent and the agent’s knowledge. They would not necessarily understand the boundaries of the agent’s authority,” the court said.

“The fact that Mr. Metcalfe lost his life to a drug overdose understandably would cause the insurer to be extremely dissatisfied with the misinformation received from [the agent]. I do not find, however, that the conduct of Mr. Metcalfe rises to the level of fraud for his participation,” the court found. “He did not need this new policy. He purchased the Policy at a time when he had a reason for hope that his drug using years were behind him. He paid his premiums faithfully through to the time of his death, and the Policy was in effect at that time. On a balance of probabilities, fraud has not been proven, and Ms. Metcalfe is entitled to the proceeds of the Policy.”