The Facts
In the case of Aviva Insurance Company of Canada v. Cahill, Litigation Administrator, Mr. Manzon purchased a used 2011 Chevrolet Corvette and insured it with Aviva through a broker in September 2016. The application for insurance was done over the phone in a recorded call, and Mr. Manzon was never sent a copy of his OAF-1 Application for Insurance. The Court found that, during the recorded call, the broker asked Mr. Manzon whether any modifications had been made to the Corvette, and he answered no.
The policy renewed in September 2017. After the policy renewed, Mr. Manzon made multiple modifications to his vehicle: he added a supercharger, exhaust headers with high flow catalytic converters, a methanol injection kit, and street legal drag radial tires. In short, he took an already fast car and made it substantially faster. These modifications cost over $21,000. He did not advise his broker or his insurer about the modifications to the Corvette.
On August 4, 2018, Mr. Manzon was speeding and collided with another vehicle, causing death and serious injury to the occupants of the other vehicle and to the passenger in his vehicle. He was charged criminally and convicted of three counts of Dangerous Driving Causing Death and two counts of Dangerous Driving Causing Bodily Injury.
Four civil actions were brought against Mr. Manzon with respect to the accident. At the time the Application was heard, Mr. Manzon was deceased; the action proceeded against his estate.
The Application and the Issues
Aviva brought an Application to determine whether it has a duty to defend and indemnify its insured Mr. Manzon in the four actions. At issue in the Application was the following:
- Whether the modifications made by Mr. Manzon to the Corvette affected the performance of the Corvette, and therefore constituted a ‘material change in risk’;
- Whether Mr. Manzon had a duty to report the modifications to Aviva;
- Whether Aviva (or the broker) had a duty to inform Mr. Manzon of his obligation to report any material changes in risk, both at the time of the original application and at the time he renewed his policy; and
- Whether Mr. Manzon’s failure to report the modifications to the Corvette, if found to be a ‘material change in risk’, entitled Aviva to deny coverage for the bodily injury claims under Section 233 of the Insurance Act
Experts on both sides tendered evidence as to the performance of the Corvette, the issue of ‘materiality’, and the obligations of the broker and insurer.
The Policy and the Insurance Act
The decision considered various key portions of the standard automobile policy (the OAP 1) and Insurance Act. First, Section 1.4.1 of the OAP-1 states as follows:
1.4 Your Responsibilities
By accepting this contract you agree to the following conditions.
1.4.1 You agree to notify us promptly in writing of any significant change of which you are aware in your status as a driver, owner or lessee of a described automobile. You also agree to let us know of any change that might increase the risk of an incident or affect our willingness to insure you at current rates.
You must promptly tell us of any change in information supplied in your original application for insurance, such as additional drivers, or a change in the way a described automobile is used.
The Statutory Conditions to the policy also state as follows:
Material Change in Risk
1. (1) The insured named in this contract shall promptly notify the insurer or its local agent in writing of any change in the risk material to the contract and within the insured’s knowledge.
(2) Without restricting the generality of the foregoing, the words,
“change in the risk material to the contract” include:
(a) any change in the insurable interest of the insured named in this contract in the automobile by sale, assignment or otherwise, except through change of title by succession, death or proceedings under the Bankruptcy and Insolvency Act (Canada);
and, in respect of insurance against loss of or damage to the automobile,
(b) any mortgage, lien or encumbrance affecting the automobile after the application for this contract;
(c) any other insurance of the same interest, whether valid or not, covering loss or damage insured by this contract or any portion thereof
Section 233 of the Insurance Act states in part as follows:
Misrepresentation or violation of conditions renders claim invalid
233 (1) Where,
(a) an applicant for a contract,
(i) gives false particulars of the described automobile to be insured to the prejudice of the insurer, or
(ii) knowingly misrepresents or fails to disclose in the application any fact required to be stated therein;
(b) the insured contravenes a term of the contract or commits a fraud; or
(c) the insured wilfully makes a false statement in respect of a claim under the contract,
a claim by the insured is invalid and the right of the insured to recover indemnity is forfeited.
The Decision
Legal Principles to Insurance Contracts
The Court reiterated the following legal principles that apply to all insurance contracts, as set out by the Court of Appeal in the case of Sagl v. Cosburn, at paras. 51-52 (and reaffirmed in the more recent decision of Davies v. AIG Insurance):
- The relationship between an insurer and insured is governed by the doctrine of uberrima fides meaning that the parties are held to a standard of utmost good faith in their dealings with each other.
- There is a heavy burden on applicants for insurance to provide full disclosure to the insurer of all information relevant to the nature and extent of the risk.
- A fact is relevant or material if it would influence a prudent insurer in deciding whether to issue the policy or in determining the amount of premium.
- Whether a misrepresentation or non-disclosure is ‘material’ is a matter of fact to be determined by the trier of fact.
- There is a subjective element to the test. The non-disclosure or misrepresentation must have induced the insurer to enter into the contract.
- The duty to disclose all material facts applies even in the absence of questions from the insurer, although the absence of questions may be evidence that the insurer does not consider a fact to be material.
a. Did the modifications made by Mr. Manzon to the Corvette affect its performance?
Aviva’s automotive expert confirmed that the modifications to the Corvette increased the horsepower of the vehicle by up to 220-270 (from 430 to 650-700) when the modifications were set to their maximum levels. This affected the performance of the vehicle. The Respondent’s expert agreed that the modifications altered the vehicle’s performance characteristics; however, asserted that the modifications did not meaningfully affect the insurance risk. Justice Shaw ultimately rejected the latter part of the Respondent’s expert’s opinion, as he was a mechanic and not an expert in risk assessment or underwriting issues from the perspective of an insurer.
The Application Judge concluded that the modifications done by Mr. Manzon affected the performance of the Corvette.
b. Did the modifications to the Corvette constitute a ‘material change in risk’?
The test of ‘materiality’ was referenced in the case of Johnson v. British Canadian Insurance Co., which held that:
Every fact is material which would, if known, reasonably affect the minds of prudent and experienced insurers in deciding whether they will accept the contract, or in fixing the amount of premium to be charged in case they accept it.
The onus was on Aviva to prove that: (1) there was a change in risk after the policy was issued; (2) the change was objectively ‘material’ to the risk from the standpoint of a reasonable insurer; (3) the change was within the knowledge of the insured; and (4) the change was not disclosed.
The test of materiality has both an objective and a subjective component. This analysis turned on Aviva’s decision to accept/decline the risk or charge a different premium (the subjective component), and whether a “reasonable insurer” would have accepted the risk or charged a different premium (the objective component).
All parties agreed that the change was within Mr. Manzon’s knowledge, occurred after the policy was issued, and that he did not disclose it. The dispute was over whether the change was ‘material’.
A representative from Aviva’s underwriting confirmed that, had it been advised of the modifications to the Corvette, it would not have written the risk. Aviva had a specific decline Rule filed with FSRA (the insurance regulator) which stated that Aviva would not insure modified vehicles. This satisfied the subjective part of the test. Aviva also called an expert regarding industry practices which was held to satisfy the objective part of the test.
Accordingly, the Application Judge held that the modifications to the Corvette were a material change in risk.
c. Did there need to be a causal connection between the material change in risk and the loss?
The respondents argued that Aviva had to establish a causal connection between the material change in risk and the loss. This argument was rejected by the Application Judge. Referencing the prior Wolfe v. Western General decision, the Judge held that the Statutory Condition dealing with material change in risk related to the insurer’s right to assess the risk it had agreed to underwrite and did not relate to post-loss causation.
A connection between the undisclosed change and the loss was held to be not relevant to the assessment of ‘materiality’.
d. Did Mr. Manzon have a duty to report the modifications to Aviva?
This issue turned on whether Mr. Manzon only had to report changes which he knew were material to the risk to his insurer. The Judge held that ‘materiality’ was to be assessed by the insurer, not the insured. ‘Materiality’ does not depend on an insured’s subjective appreciation of its significance. It is sufficient that an insured is aware of the underlying facts giving rise to the change. Therefore, Mr. Manzon had a duty to report the modifications to the Corvette to Aviva.
e. Did Aviva (or the broker) have a duty to inform Mr. Manzon of his obligation to report any material changes in risk, both at the time of the original application for insurance and at the time he renewed his policy?
Since the broker asked Mr. Manzon whether he had made any modifications, and he answered no, the Judge held that Mr. Manzon was aware that this was an important issue as it related to coverage for his vehicle. He had been asked the same thing previously by his broker about his motorcycle. It was also noted that, based on the case law, an insured has a duty to disclose all matters within an insured’s knowledge which are relevant, even in the absence of questions from the insurer.
The Judge noted that it was settled law in Ontario, based on the prior decisions of Seetaram v. Allstate, Wolfe and Pereira v. Hamilton Township, that an insurer does not have a duty to explain to the insured what constitutes a material change in risk, and that the insured has a duty to disclose all material facts and changes in risk known to them regardless of whether the insured subjectively appreciated their importance.
The Judge held that neither Aviva nor the broker had a duty to inform Mr. Manzon of his obligation to report any material changes in risk, either at the time of the application or at the time of the renewal, in order to bring this to Mr. Manzon’s attention as information of significance to Aviva in assessing the risk. Rather, the onus was on Mr. Manzon to disclose all material facts promptly, including the performance modifications made to the Corvette, once they were made after the policy was renewed.
f. Conclusion – Did Mr. Manzon’s failure to report the modifications entitle Aviva to deny coverage under Section 233 of the Insurance Act?
On the Application, Justice Shaw decided that Mr. Manzon’s failure to report the modifications entitled Aviva to deny coverage pursuant to Section 233(1)(b) of the Insurance Act. He contravened a term of the contract by failing to advise of a material change in risk. Accordingly, Aviva did not have a duty to defend Mr. Manzon in the four actions, and Aviva’s exposure was limited to the statutory minimum limits of $200,000 by the operation of section 258(4) of the Insurance Act.
Takeaways
This decision provides a clear roadmap for understanding insurance contracts in Ontario, materiality, and an insured’s obligation to report a material change in risk. The facts of the case were somewhat novel as they involved a post-renewal change in risk (versus a misrepresentation at policy inception or at the time of renewal).
The decision reinforces that an insured does not need to know or be told by their insurer that a fact is ‘material’ to create an obligation to inform the insurer of the change. Rather, an insured has an obligation to disclose all facts and to promptly report all changes within their knowledge. It was notable that only Mr. Manzon had the knowledge of the modifications to the Corvette. This was not something publicly available or searchable by his insurer.
Once informed of a fact or a change, an insurer can then assess materiality and its willingness to charge the same rate, change or increase the rate, or decline to insure the risk altogether.
The decision also highlights the importance of evidence. Aviva satisfied the subjective part of the materiality test through its underwriting representative and a decline Rule filed with FSRA stating that it would not insure modified vehicles, and the objective part of the test through an expert on industry practices. By contrast, the Court rejected the opinion of one of the Respondent’s experts on insurance risk because he was a mechanic, not an expert in risk assessment or underwriting.
Finally, and equally importantly, the decision expressly rejects the argument that there must be a causal connection between the material change in risk and the loss itself.
Case Law
The decision:
Aviva Insurance Company of Canada v. Cahill, Litigation Administrator, 2026 ONSC 4975 (CanLII), https://canlii.ca/t/kn1cb.
Other decisions referenced:
Sagl v. Cosburn, Griffiths & Brandham Insurance Brokers Ltd, 2009 ONCA 388, 249 O.A.C. 234.
Davies v. AIG Insurance Company of Canada, 499 D.L.R. (4th) 423, 2024 ONCA 509.
Johnson v. British Canadian Insurance Co., 1932 CanLII 64 (SCC), [1932], 4 D.L.R. 281 (S.C.C.).
Wolfe v. Western General Mutual Insurance, 2000 CanLII 50963 (ON SC), https://canlii.ca/t/kbq35.
Iacobelli v. Federation Insurance Co, (1975), 1975 CanLII 551 (ON HCJ).
Wen v. Unifund Assurance Co., 2012 ONSC 5274.
Seetaram v. Allstate Insurance Company of Canada, 2019 ONSC 683.
Pereira v. Hamilton Township Farmer’s Mutual Fire Insurance Co. (2006), 2006 CanLII 12284 (ON CA).
