{"id":19150,"date":"2023-02-15T16:48:09","date_gmt":"2023-02-15T21:48:09","guid":{"rendered":"https:\/\/www.verreaudufresneavocats.com\/?p=19150"},"modified":"2026-05-05T11:50:57","modified_gmt":"2026-05-05T15:50:57","slug":"insurer-refuses-to-pay-aggravation-of-risk","status":"publish","type":"post","link":"https:\/\/www.verreaudufresneavocats.com\/en\/publications\/insurance\/insurer-refuses-to-pay-aggravation-of-risk\/","title":{"rendered":"Your Insurer Refuses to Pay: Did You Disclose Everything?"},"content":{"rendered":"\n

Your insurer refuses to pay for the damage after a loss. It claims you failed to disclose certain circumstances that increase the risks to which the property is exposed. This argument can sometimes be valid, but it has its limits. Our insurance law lawyers<\/a> explain everything you need to know about this ground for refusing to pay, known as <\/strong>\u201caggravation of risk<\/em>.\u201d<\/strong><\/p>\n\n\n\n

The insurer\u2019s obligation to indemnify<\/strong><\/h2>\n\n\n\n

An insurance contract that covers property requires the insurer to indemnify the insured in the event of a loss, up to the amount of the insurance coverage. In return for this obligation, the insured must pay the insurance premium to the insurer.<\/p>\n\n\n\n

For the insurer to indemnify the insured, the loss must of course be covered by the insurance policy. It must not be subject to an exclusion from coverage<\/strong><\/span>.<\/p>\n\n\n\n

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Did you know?<\/strong> Every exclusion must be clearly highlighted in writing in the insurance contract. It is important to read them to avoid unpleasant surprises if a loss occurs. The law provides that any exclusion from coverage must be written clearly, precisely and restrictively.<\/p>\n<\/blockquote>\n\n\n\n

Our insurance law lawyers regularly negotiate insurance indemnities in cases where the insurer relies on an exclusion to justify its refusal to pay. Don\u2019t hesitate to contact our team<\/a> for legal advice on this subject.<\/p>\n\n\n\n

The obligation to disclose when taking out insurance<\/strong><\/h2>\n\n\n\n

When an insurance contract is entered into, the insurer must have the information it needs to assess the risks to which the property is exposed. The risk of losses and possible claims will influence the price of the insurance (called the \u201cinsurance premium\u201d). Some insurers may also refuse to cover property if the risks are considered too high. That is why, when entering into the insurance contract, the insured must make certain representations <\/strong>to the insurer.<\/p>\n\n\n\n

Under article 2408 of the Civil Code of Qu\u00e9bec<\/em>, the insured must disclose the circumstances that are likely to influence the insurer in assessing the risk of loss and setting the premium. However, the insured is not required to disclose minor circumstances<\/strong>.<\/p>\n\n\n\n

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Example \u2013 <\/strong>When insuring your cottage, you fail to mention that the drinking water is brownish. While this situation may limit your enjoyment of the cottage, it is of minor importance to the insurer because it does not increase the risk of loss. <\/p>\n<\/blockquote>\n\n\n\n

In addition, the insured is not required to disclose circumstances that the insurer knows or should know<\/strong> because they are common knowledge.<\/p>\n\n\n\n

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Example \u2013 <\/strong>When insuring your cottage, you tell the insurer that it is an old, 50-year-old building and that it has not been renovated since it was built. Unless the insurer asks you, you do not have to disclose that the sheet metal roof looks worn. The insurer has enough information to reach that conclusion on its own. Knowing that the building has not been renovated, it will conclude that the risk of loss is higher and will set the annual premium accordingly. <\/p>\n<\/blockquote>\n\n\n\n

If needed, our insurance law lawyers<\/a> can advise you on taking out an insurance contract or on your obligation to disclose risks when entering into the contract.<\/p>\n\n\n\n

I would like advice<\/span><\/a><\/div>\n\n\n\n

The obligation to disclose once the contract is in force<\/strong><\/h2>\n\n\n\n

Following the same logic, article 2466 of the Civil Code of Qu\u00e9bec<\/em> provides that, while the contract is in force, the insured must promptly notify the insurer of circumstances that increase the risks <\/strong>originally stated in the insurance policy. However, two points need to be clarified.<\/p>\n\n\n\n

First, the circumstances that must be disclosed are those that influence the risk of loss and the amount of the premium, except for minor ones.<\/p>\n\n\n\n

Second, the aggravating circumstances that must be disclosed are those that result from the insured\u2019s own actions, not those that are beyond the insured\u2019s control or will.<\/p>\n\n\n\n

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Example <\/strong>\u2013 You insure your house. A few months later, you install a wood stove. This is important information that involves an additional fire risk. You must therefore disclose this new circumstance to your insurer. Admittedly, the annual premium could go up, since the risk of loss increases. But if you do not disclose the situation, the insurer could refuse to indemnify you in the event of a fire. <\/p>\n<\/blockquote>\n\n\n\n

If the risks increase while the contract is in force, the insurer may cancel <\/strong>the contract or propose an adjusted premium in writing<\/strong>. If the insurer does not change the contract or does not cancel it, it will be deemed to have accepted the change disclosed to it as soon as it collects the next premium.<\/p>\n\n\n\n

The limits of the obligation to disclose<\/strong><\/h2>\n\n\n\n

It can sometimes be tricky to determine what the insured must disclose to the insurer, whether when entering into the contract or while it is in force. That is why our insurance law lawyers<\/a> are frequently called upon on this issue, because one thing is certain: the obligation to disclose the risk is not absolute.<\/p>\n\n\n\n

First, to determine whether an insured has failed to properly inform the insurer, the case law holds that the new circumstance must be likely to influence not a specific insurer, but a reasonable insurer<\/strong> in its decision to cover the property or set the premium. The test is therefore objective, not subjective.<\/p>\n\n\n\n

Second, the insured must act in good faith and with reasonable prudence when required to inform the insurer. However, the insured does not have to guess and anticipate every detail that might matter to the insurer. The insured is not an insurance expert and cannot be treated as one. Instead, the insured must behave like a normally prudent insured<\/strong> and must not be guilty of material concealment<\/strong>.<\/p>\n\n\n\n

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Example \u2013<\/strong> An insurer refuses to indemnify its insured after acts of vandalism on a building. It argues that the insured did not disclose that he was living with his new partner, who has a criminal record. A normally prudent insured would not necessarily think that the criminal record of a third party to the insurance contract (the partner) increases the risk of loss for the insurer. The insured cannot be blamed for failing to disclose this information if the insurer did not raise the subject.<\/p>\n<\/blockquote>\n\n\n\n

Analyzing the risk of loss is, first and foremost, the insurer\u2019s job. It must ask the insured about any factor that influences its assessment of the risk. If the insurer does not take the initiative to ask all the relevant questions, it will be harder for it to blame the insured for failing to disclose information.<\/p>\n\n\n\n

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Example \u2013 <\/strong>An insurer that is concerned about criminal records must take a proactive approach so that the insured understands how much importance it gives to this risk. The insurer must therefore ask the insured specific questions on this subject. <\/p>\n\n\n\n

I would like support<\/span><\/a><\/div>\n<\/blockquote>\n\n\n\n

Failing to disclose: the consequences<\/strong><\/h2>\n\n\n\n

If an insured has failed to meet the obligation to disclose circumstances that increase the risk of loss, the insurer may cancel <\/strong>the insurance contract retroactively <\/strong>to the date of the aggravation. It can then refuse to indemnify the insured if a loss occurs.<\/p>\n\n\n\n

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Example <\/strong>\u2013 Let\u2019s go back to an earlier example. You decide to install a wood stove in your home. This new circumstance influences the risk of loss and must be disclosed. If it is not, the insurer may refuse to pay in the event of a fire, on the grounds that the insurance contract was cancelled as of the date the wood stove was installed. <\/p>\n<\/blockquote>\n\n\n\n

Furthermore, in two situations the insurer may refuse to indemnify the insured even if the loss has no connection<\/strong> with the aggravating circumstance the insured failed to disclose:<\/p>\n\n\n\n

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  1. When the insured acted in bad faith<\/strong> to conceal <\/strong>information;<\/li>\n\n\n\n
  2. Or when the insurer can prove that it would not have continued to insure the property if it had been informed of the new circumstance increasing the risk.<\/li>\n<\/ol>\n\n\n\n
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    Example 1 \u2013<\/strong> The insured installed a wood stove in his cottage. He hides this from the insurer because the installation does not meet standards. He knows the insurer would not agree to cover the building if it were informed of the situation. If there is major water infiltration, even though this loss has no connection with the installation of the wood stove, the insurer may refuse to indemnify. It can show that its insured acted in bad faith and that it would have ended the insurance contract had it been informed that the stove was installed. <\/p>\n<\/blockquote>\n\n\n\n

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    Example 2 \u2013 <\/strong>On October 13, 2021, your building is destroyed by fire. The insurer\u2019s claims adjuster discovers that you rented out your building a few times, starting on May 27, 2020. If your insurer proves that it would not have agreed to insure your building for rental purposes, it may refuse to indemnify you for the fire damage. It will then rely on the cancellation of the contract as of May 27, 2020, even though the fire was not caused by a tenant.<\/p>\n<\/blockquote>\n\n\n\n

    Without such proof, the insurer will still have to pay an indemnity to the insured, but only in proportion to the premium collected compared with the premium it should have collected<\/em>.<\/p>\n\n\n\n

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    Continuing the previous example \u2013<\/strong> Your insurer manages to prove that if it had known you were renting out the building, it would have continued to insure it, but the premium would have been increased to $1,500\/year instead of $1,000\/year. The ratio of 1,000\/1,500, or 2\/3, will then apply to the indemnity payable. If you suffer $150,000 in damage from the fire, you will only be entitled to two thirds of that amount, or $100,000. <\/p>\n<\/blockquote>\n\n\n\n

    In such a case, it is up to the insurer to prove the new premium it would have charged the insured if it had known about the aggravating circumstances. At any time, an insured can consult one of our insurance law lawyers<\/a> if they believe the insurer is mistaken or acting in bad faith in calculating the indemnity payable.<\/p>\n\n\n\n

    Conclusion<\/strong><\/h2>\n\n\n\n

    In principle, a property insurer is required to indemnify you in the event of a loss. This obligation depends on the insured meeting their own obligation to promptly disclose to the insurer various circumstances likely to influence its assessment of the risk of loss. This obligation applies when the insurance contract is entered into and while it is in force.<\/p>\n\n\n\n

    If you are unsure what to disclose to your insurer, it is generally safer to disclose the information. The consequences of failing to disclose are often far more serious than a possible increase in the premium.<\/p>\n\n\n\n

    Contact our insurance law lawyers<\/strong><\/h2>\n\n\n\n

    Our lawyers regularly assist insureds with their claims against insurance companies. Among other things, our team can:<\/p>\n\n\n\n

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    1. Advise you <\/strong>when negotiating a new insurance contract;<\/li>\n<\/ol>\n\n\n\n
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      1. Provide a legal opinion <\/strong>on your rights and obligations under the insurance contract;<\/li>\n<\/ol>\n\n\n\n
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        1. Interpret and assess the legality<\/strong> of the clauses in your insurance contract;<\/li>\n<\/ol>\n\n\n\n
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          1. Identify the information to disclose <\/strong>to your insurer;<\/li>\n<\/ol>\n\n\n\n
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            1. Contest a settlement offer <\/strong>made by your insurer;<\/li>\n<\/ol>\n\n\n\n
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              1. Negotiate an out-of-court settlement<\/strong> with your insurer and prevent a dispute;<\/li>\n<\/ol>\n\n\n\n
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                1. Oversee an expert assessment <\/strong>or investigation after a loss;<\/li>\n<\/ol>\n\n\n\n
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                  1. Represent you before the courts <\/strong>against your insurance company.<\/strong><\/li>\n<\/ol>\n\n\n\n

                    For more information on insurance law<\/a>, we invite you to contact one of our lawyers<\/a> in Qu\u00e9bec City, L\u00e9vis or Montmagny.<\/p>\n\n\n