In Demetriou v AIG Insurance Co. of Canada, 1 the Ontario Superior Court considered a motion for summary judgment brought by the plaintiff for $550,000 in damages. This amount represented the appraised value of the plaintiff’s ring—a valuable family heirloom that the plaintiff claimed was stolen during a visit to the Dominican Republic in August 2015. Prior to his departure, the plaintiff had the ring appraised and added it to an all-risk insurance policy held by AIG.
The plaintiff claimed that the ring was stolen at knifepoint while he was walking alone on a beach in Punta Cana. Upon returning home, he reported the theft to AIG who started an investigation into the loss.
AIG later denied the claim on the basis that it had insufficient information to substantiate the claim and that the plaintiff had failed to cooperate with the investigation.
The plaintiff commenced litigation. In its Statement of Defence, AIG pled its reliance on the policy provisions without identifying any specific exclusions on which it intended to rely. The plaintiff brought a motion for particulars. The Court determined that this aspect of the Defence, while “apparently benign”, disguised “an inchoate allegation of fraud.”2 The Court directed AIG to provide particulars of any alleged fraud or deliberate act on the part of the plaintiff.
Following the motion, AIG took the position that no particulars were required. Rather, AIG confirmed it was not relying on the policy exclusions, but nonetheless reserved the right to rely on them if further information became available.
In granting summary judgment to the plaintiff, the motions judge (who also heard the motion for particulars) acknowledged that the suspicious circumstances of the ring’s disappearance were certainly relevant to a determination of whether the plaintiff’s claim was fraudulent. The motions judge found, however, that despite multiple opportunities to put fraud in issue, AIG had declined to particularize its reliance on the exclusion.
The plaintiff was awarded a further $50,000 in punitive damages for AIG’s bad-faith handling of the claim.
The decision of the motions judge is noteworthy for its treatment of the Ontario Court of Appeal’s decision in Shakur v Pilot Insurance Company,3 which involved similarly suspicious facts surrounding a theft of jewellery.
The Court of Appeal in Shakur explained the onus of proof on an insured when making a claim:
It is fundamental insurance law that the burden of proof rests on the insured to establish a right to recover under the terms of the policy. In this case, the burden rested on the respondent and remained on the respondent to prove on the balance of probabilities that a theft of her jewellery had occurred. That the appellant, in denying the allegation of theft, impliedly alleged that the respondent was fraudulent in putting forward the claim in no way shifted the basic burden of proof resting on the respondent.
The issue was not whether the appellant had proven a fraud on the part of the respondent. The simple issue was whether the respondent had established a theft within the meaning of the policy.4
The motions judge considered Shakur but found it was “clearly distinguishable” on the basis that AIG had “expressly disclaimed any reliance on fraud or deliberate acts.”5 For reasons to be discussed, this conclusion is questionable.
Respectfully, AIG’s waiver of any fraud defence was irrelevant to the threshold issue of whether the plaintiff had proven that a fortuitous loss falling within the coverage grant had occurred. In other words, AIG was not under any obligation to prove fraud without the plaintiff having first proven on a balance of probabilities that an insured loss (in this case, a theft) had taken place.
To establish proof of entitlement, a policyholder’s evidence must be credible. A policyholder’s credibility should be assessed in the context of the surrounding circumstances, including timeliness of the claim, statements by other witnesses, and the conditions in which the policy was obtained. If a policyholder can credibly establish that a covered loss occurred, only then does it become necessary for any exclusions, including fraud, to be analyzed.
Allegations of fraud often arise where the insurer is concerned that the policyholder may have exaggerated or misrepresented portions of a legitimate loss event. While the credibility analysis is certainly relevant when determining if the insurer has proven fraud, it is not the sole requirement. Proof of fraud also requires proof of an illegal purpose or evil intention. Therein lies the distinction between the policyholder’s obligation to prove a loss within the coverage grant and the insurer’s obligation to prove fraud.
In Demetriou, the real issue on summary judgment was whether or not a theft had occurred as alleged by the plaintiff. Therefore, the motions judge ought to have grappled with the surrounding circumstances that called the plaintiff’s credibility into question, such as his failure to cooperate in the investigation and the inconsistencies in his story. The motions judge should have considered whether, having regard to those circumstances, the plaintiff had met the burden of establishing a loss within the coverage grant of AIG’s policy.
AIG’s non-reliance on fraud should have only factored into the analysis if the motions judge concluded that the plaintiff’s testimony credibly established a fortuitous loss. In that situation, AIG would have been precluded from arguing the claim was not payable on grounds such as the plaintiff’s fraudulent inflation of his claim or falsification of the appraisal.
The motions judge could have granted summary judgment to the plaintiff on the basis that he had credibly proven his claim under the coverage grant. The only remaining task would have been for the motions judge to value the plaintiff’s loss. The plaintiff would have been successful in recovering the ring’s value without fraud ever becoming an issue.
The real takeaway from this case is that the motions judge may have reached the right result for the wrong reason. The onus is always on the policyholder to prove a loss falling within the coverage grant. If the policyholder’s assertions are inconsistent with the surrounding circumstances, that alone is a well-established basis upon which credibility can be questioned and a claim denied.6 An insurer is not required to plead fraud in order to do so. In my view, Demetriou should not be considered a compelling authority altering that proposition.
 2019 ONSC 627.
 Ibid at paras 30–31.
 (1990), 74 OR (2d) 673 (CA).
 Ibid at paras 30, 32.
 Demetriou, supra note 1 at para 67.
 Faryna v Chorny,  2 DLR 354 (BC CA); Coates v Allstate Insurance Co. of Canada (2002), 15 CCLI (4th) 204 (Ont Sup Ct J (Div Ct)); Shakur, supra note 3