Not so much fun in the California sun: Turpin v. Manufacturers Life Insurance Company 2011 BCSC 1162

In the recent coverage decision of Turpin v. Manufacturers 2011 BCSC 1162 the British Columbia Supreme Court applied the doctrine of reasonable expectations to find coverage in the face of an applicable exclusion clause in a travel insurance policy.

On September 23, 2007 Ms. Turpin experienced abdominal pain which continued overnight resulting in her visiting a doctor on September 24th. The pain increased in intensity and on September 25th she attended at the Emergency Department of the Royal Jubilee Hospital where she underwent various tests and was given pain medication and prescribed antibiotics. Ms. Turpin followed the regime of antibiotics and by September 27th was free of pain.

On September 28th she applied for and acquired the Policy of travel insurance issued by the Defendants.

On October 4th the Turpin’s flew to Southern California. Starting on October 5th Ms. Turpin experienced a recurrence of her abdominal pain resulting in a her visiting a “walk-in” clinic on October 6th, where she was prescribed medication and advised to consult a doctor if she saw no improvement over the next 3-5 days. The abdominal pain increased in intensity resulting in her subsequent admission to a Hospital from October 7th – 12th. Upon her discharge the Turpin family returned to British Columbia where Ms. Turpin’s complaints continued and she ultimately underwent an appendectomy on December 10, 2007.

Ms. Turpin incurred expenses totalling $ 27,170.81 for the medical services provided in Southern California and a claim was made for reimbursement under the travel insurance policy.

The claim was denied on the basis of the following exclusion:

This insurance does not cover and no benefits will be payable for:
. . .
pre-existing conditions or related medical conditions which were not stable and controlled during the 90 day period immediately preceding your effective date.

The policy contained the following  defined terms referred to in the exclusion clause:

Medical Condition means an irregularity in your health which required or requires medical advice, consultation, investigation, treatment, care, service or diagnosis by a physician.
Pre-Existing Condition means a medical condition for which treatment has been received or taken, or which exhibited symptoms, prior to the insured trip in question and within the period specified in this policy . . .
Stable and Controlled means the medical condition is not worsening and there has been no alteration in any medication for the condition or its usage or dosage, nor any treatment prescribed or recommended by physician or received within the period specified in this policy for the plan you chose and for which you are eligible prior to the trip in question.
Treated or Treatment means any medical, therapeutic or diagnostic procedure prescribed, performed or recommended by a physician, including but not limited to prescribed medication, investigative testing and surgery.

The Court held that Ms. Turpin had suffered an irregularity in her health, namely abdominal pain and that Ms. Turpin determined that treatment for that irregularity was required and underwent medical procedures by virtue of attending at a doctor and the Hospital. Accordingly the exclusion ought to apply to oust coverage. However, the Court went onto consider the doctrine of reasonable expectations.
The Court quoted from Chilton v. Co-Operators General Insurance 1997 CanLii 765 (ONCA) where the Ontario Court of Appeal described the application of this doctrine as follows:

In considering whether to apply the reasonable expectations principle to cases in which there is no ambiguity in the policy, first the court should consider whether a reasonable insured could have expected coverage. An arguable case for coverage may exist, for example, if the policy is difficult to read or understand and if the insurer, either by its marketing practices or by giving its policy a misleading name, created or contributed to a reasonable expectation of coverage. Coverage may also be warranted where the insurer’s interpretation of the relevant policy provision would virtually negate the coverage the insured expected by paying a premium. In these circumstances the court may be justified in looking beyond the words of the contract and holding the insurer responsible for the insured’s reasonable expectation of coverage

The Court in Turpin ultimately applied this doctrine and found coverage for the claim holding that:

[56] On the construction I have applied to the exclusion clause in this case, Ms. Turpin was not eligible for medical coverage because she suffered an irregularity in her health, three days before the policy issued. the medical coverage is nullified. That is not what the parties expected. I find they expected that Ms. Turpin would be so covered.

[57] Ms. Turpin applied to the defendants’ agent for medical insurance, for a planned trip to Southern California. The defendants’ agent presented a travel insurance policy, “off the shelf” as it were, without inquiry. Ms. Turpin paid the policy premium and left the agent’s office, without reading the policy, notwithstanding the caution on the policy cover that she “PLEASE READ CAREFULLY”.

[58] I find however, that if she had read the policy, she would have found it difficult to understand, with its myriad of excluding conditions, variously applicable, or not applicable, to an infinite array of possible risks.

[59] This is a proper case to apply the reasonable expectations principle. Accordingly, the plaintiffs will recover their expenses for medical services in Southern California in the sum of $27,170.81 plus court order interest. Costs may be spoken to.

The doctrine of reasonable expectations to defeat a clear and unambiguous exclusion has been widely considered by the U.S. Courts but has only relatively recently been showing up in Canadian decisions [see for example Cabell v. The Personal Insurance Company 2011 ONCA 105] and the effects of such a broad application of this principle on coverage cases remains to be seen.