Recently we came across an article describing an Ontario driver who had his $15,000 insurance claim denied. Why? All because after getting into a car accident he told his insurance company he occasionally used his car to do food deliveries. Worse yet, he wasn’t even making making a delivery at the time of the accident!

Material Change in Risk

The reason the insurance company denied his claim after the accident was because there was a “material change in risk”. A material change in risk is exactly as it sounds – if there is a change in the risk that an insurance policy covers, insurance companies are allowed by law to deny insurance claims made. This is because all insurance is purchased to insure certain risks or a certain level of risk. If things change, why should the insurance company be on the hook if you haven’t told your insurance company and you’re not paying the right amount of premiums?

In the case of the delivery driver, he purchased personal automobile insurance which covers personal activities like driving to work and driving to the grocery store. Yet, he was using his car for food delivery, which was a commercial or business-use activity. This meant that he would likely be on the road more than regular drivers, which meant more risk of an accident occurring, which ultimately meant that he should be paying higher insurance premiums. Yet, the insurance company was not informed of any of this until the accident occurred.

Thankfully, in the case of the delivery driver, after some negotiations (or possibly with the help of pressure from the media), he was fully reimbursed for the claim.

Besides automobile insurance, some other examples of material change in risk can include everything from installing a more powerful engine in your car to installing a pool in your home. These changes likely carry with them more risk and as such you should probably tell your insurance company of these changes.

An Extreme Case of Material Change in Risk

The above examples of material change in risk are “regular” examples of changes in our lives that may affect our insurance policies. To better highlight what a material change in risk may be, we thought we’d share the more extreme case of Schellenberg v Wawanesa Mutual Insurance Company, 2019 BCSC 196. In that case, a British Columbia couple failed to tell their insurance company that they operated a 500-plant marijuana grow operation from the first floor of their building. Unfortunately, a fire burned down the second floor of that same building. The couple made a claim to their insurance company for compensation.

When the insurance company found out about the marijuana grow operation, they declined the couple’s insurance claim. The couple sued the insurance company. In finding for the insurance company the presiding judge stated that “clearly the magnitude and complexity of the grow operation installed in their outbuilding was a significant change, very far from an ordinary use of the property”. The judge also went on to say that “given its elaborate infrastructure, the number of marijuana plants being grown, the amount of space they and the drying/dried marijuana occupied, and the Schellenberg’s fear of being targeted, the suggestion Mr. Schellenberg never considered the grow operation relevant to their insurance is simply not believable”.

The moral of the story? Make sure to tell your insurance company next time that there’s a change in your circumstances.

Do you need legal help with your insurance claim? Consider using our free Legal Referral Service to talk to an insurance lawyer near you.

DISCLAIMER: articles posted in this blog are for informational purposes only. It may not be up-to-date, is not intended to serve as a comprehensive treatment of the topic, and may not be accurate. It shall not be construed as legal advice. No solicitor-client relationship is established from accessing this website and/or webpage. Nothing replaces retaining a qualified, competent lawyer or other legal professional, well versed in this area of the law to provide you legal advice.