Reaume et al.v. Caisse Populaire Windsor Limitee et al.

[1987] I.L.R. 1-2182

Ontario

Supreme Court, April 2, 1987.

Insurance (Disaility) Exclusions -- Disability as a result of mental, nervous or psychoneurotic illness -- Diabetes combined with mental distress -- Bizarre and violent conduct -- Exclusion clause not binding -- Action against insurer allowed. The 43-year-old plaintiff claimed against an insurer on a disability policy which he obtained from the defendant credit union at the time he renewed his mortgage. One year earlier his health had begun to deteriorate due to the combination of diabetes and mental distress. One year after obtaining the insurance he was unable to return to his work on an assembly line. He was very fatigued and subject to violent conduct directed towards his family and co-workers. His doctor certified that he was unable to work. The policy excluded disability payments after more than two years where the disability was the result of mental, nervous or psychoneurotic illness.

Held: The action was allowed. It was very difficult to separate the plaintiff's physical problem of diabetes from his emotional problem. He was very nervous. His mood disturbance, low frustration tolerance, irritability and tension and stress reaction lead to difficulty in controling his diet and diabetes. The Court accepted that the plaintiff was disabled within the meaning of the policy.

The exclusionary clause was not binding on the plaintiff. The Court followed authority that in certain circumstances all the conditions of a contract need not be binding on a party. Significant circumstances here were: the policy was in French and the plaintiff had an imperfect command of French; the plaintiff did not read the documents; the defendant's agent knew of the plaintiff's inability to read the documents; if the document was given the effect contended for by the insurer, the exclusion would deny the plaintiff coverage in the circumstances in which it was most required, namely permanent disability; the plaintiff was never given a copy of the policy; the policy was very difficult to understand; the exclusion was not drawn to the plaintiff's attention; and, if it had been, the plaintiff would not have taken the coverage.

Even if the exclusionary clause was binding, it did not apply to the plaintiff. The disability occurred as a result of the combination of mental and physical illness. The exclusion applied only to mental illness by itself.

Counsel: R. G. Colautti for plaintiffs;

K. Rohaly for Caisse Populaire;

B. A. Dumont, Q.C. and G. E R. McAndrew for insurer;

Before: Anderson J.

Anderson J.: This is an action for a declaration and other relief concerning a policy of insurance (the policy) for disability issued by Assurance-Vie Desjardins (the insurer), an injunction restraining the defendant Caisse Populaire Windsor Limitee (the Caisse) from proceeding with power of sale or other enforcement proceedings under a mortgage made by the plaintiffs in favour of the Caisse, and for other relief. There is a counterclaim by the Caisse for a declaration that it is entitled to receive any benefits payable pursuant to the policy. The insurance relates to a mortgage debt of the plaintiffs owed to the Caisse. The defendant Jean Pierre Renaud was attorney in fact of the insurer; his involvement is not concerned in the action. The defendant Nicole Wagner was an employee of the Caisse. Two principal issues fall to be determined, namely: (1) is the plaintiff Marvin Reaume so disabled as to entitle him to claim benefits under the policy, and (2) if the plaintiff Marvin Reaume is so entitled, is he precluded from recovering such benefits by an exclusionary clause.

BACKGROUND

The plaintiff Marvin Reaume is 43 years of age. (Unless the context otherwise requires, subsequent reference to "Reaume" is to Marvin Reaume.) He was married to the plaintiff Gayle Reaume on August 4, 1962. His formal education ceased at Grade 9, the first year of high school, when he went to work at the age of 16. He first worked for his father in a family business. He commenced working for Chrysler of Canada Ltd. (Chrysler) in September of 1963. In March of 1967 he was given by his father a house in Malden Township. It is that house which is the subject of the mortgage to the Caisse. The plaintiffs moved into the house in March of 1967 and made substantial improvements to the property. The gift was finally perfected by a deed dated the 25th of September, 1972, made by the father and mother of Reaume to him and the plaintiff Gayle Reaume as joint tenants. It has been the matrimonial residence since that time.

Reaume was raised in a francophone home; both his father and mother spoke French. His only formal education in that language was in Grade 2 or 3, in elementary school. He has never tried to write French since then. His wife has no French nor have his children. He still speaks French but not as well as he would like to, finds himself uncomfortable in the language, cannot express himself well and has only limited capacity to read it.

In his employment with Chrysler he has done various jobs on the assembly line. In addition to his work at Chrysler, he played the drums on a fairly regular basis in the evenings at various places of entertainment. Until the onset of the difficulties which give rise to this litigation he was an industrious, hard-working man who had achieved a reasonable degree of success at those undertakings which were within the ambit of his training and capacities. His health was normal. In 1979 it began to deteriorate. This will have to be explored in detail. For the present it is sufficient to say that by April of 1981 he had deteriorated to the point where he had ceased to work for Chrysler, and the insurer had commenced payments under the policy of insurance. These benefits were discontinued in April of 1983 under circumstances to be discussed, and this litigation followed.

The problems which Reaume experienced during the years 1979 and following gave rise to difficulties between himself and his wife and between himself and his children, such that for the most part he is living apart from his wife. He spends some time in Florida where his parents live in retirement. He has not been regularly employed in any gainful occupation since April of 1981.

THE MORTGAGE AND THE INSURANCE: BACKGROUND

In 1972 the Caisse made its first loan to Reaume in the sum of $20,000 for the purchase of motor vehicles, payment of debts and repairs and renovations to the house. For all practical purposes material to this action, the discussions and negotiations had by Reaume with the Caisse were with its employee, the defendant Nicole Wagner. When this first loan was made there was discussion of disability and life insurance pertaining to the loan. Reaume had had previous loan experience with a company credit union, and in consequence of that experience had some knowledge of what has been referred to in the evidence as "group debtors insurance." All the forms pertaining to the loan were in French, were filled out by Nicole Wagner and were signed by Reaume and, where appropriate, by Gayle Reaume. The latter took no real part in any of the transactions with which I am concerned but depended in all respects on her husband.

In 1977 Reaume negotiated an increase in the loan to $42,925 and, as security for that loan, gave the mortgage which is involved in this action. The loan application was completed by Wagner. It is in French and was signed by Reaume. There was some discussion of insurance which will have to be dealt with in more detail later. The evidence is not entirely satisfactory but it indicates that during some part of the time in which the plaintiffs were dealing with the Caisse, life and disability insurance were automatic incidents of a loan transaction, and the appropriate premiums were added to the charges otherwise payable. This situation changed by 1980 when the plaintiffs' mortgage came up for renewal. At that time Reaume was required to sign a document which is dated the 30th of June, 1980, the signature being witnessed by Wagner. The document is in French but an English translation was provided which is entitled "Acceptance or Refusal of Loan Insurance". This document reads in part as follows:

A --- LOAN REFUND BENEFIT

TO BECOME INSURED UNDER THE LOAN REFUND BENEFIT IN CASE OF TOTAL DISABILITY.

--------------------

I accept or I refuse

In the space provided, Nicole Wagner wrote "J'accepte". The reverse side of this document is entitled "Loan Refund Benefit In Case of Total Disability." The text which follows, however, contains no provision concerning the nature or extent of such benefit. It does set out the exclusion relied on by the insurer:

The insurer pays no benefits for more than 2 years if the total disability occurs as a result of a mental, nervous or psychoneurotic illness, except if the insured borrower is confined to a clinic, hospital or any other institution for people suffering from mental illnesses or if the borrower suffers from psychotic problems.

Reaume was given a document, on which his signature appears, entitled Attestation D'Assurance-Prt. No English form of this document is in the record. Therefore, the partial translation which follows lacks the sanction of the parties.

CERTIFICATE OF LOAN INSURANCE GUARANTY OF LOAN REPAYMENT IN CASE OF TOTAL DISABILITY

...

Upon a borrower aged 60 or less becoming totally disabled for a continuous period of at least 30 days the insurer will pay the company, beginning at the end of such 30 day period, the periodic instalments provided in the written agreement between the company and its borrower at the onset of total disability, until the date of the last instalment provided in the written agreement between the company and the borrower. If on that date the debt is not fully repaid and the total disability continues, the insurer will extend the insurance coverage for a maximum period of twelve months.

...

If the total disability is declared permanent by the insurer, the insurer will pay in advance to the company the insured amount provided in the General Provisions of the policy at the time the total disability is declared permanent by the insurer.

...

IMPORTANT

This certificate has been written only as an explanation and therefore has no contractual value. Only the policy may aid to solve legal questions. The borrower may consult the policy at the office during business hours and may obtain a copy of it on the payment of a fee.

An English version of the policy of insurance is in the record. Concerning it, I speak with little confidence. I have been reading commercial documents throughout my professional life but I find this one largely unintelligible. I would be more embarrassed by my difficulty had it not been apparent that it was shared in large measure by counsel. The document may have some utility for those who know, from some other source, what it is intended to mean, but it conveys very little to one who does not.

The opening provisions of the policy are in the following terms:

L'Assurance-vie Desjardins siege social : Levis (Quebec)

(hereafter referred to as the insurer)

in accordance with the provisions of this policy insures the eligible borrowers of:

NAME OF THE INSURED SAVINGS AND CREDIT UNION (hereafter referred to as the savings and credit union)

LA CAISSE POPULAIRE WINDSOR LTEE

Next follow a series of items under the caption Coverages or Riders. I have found it impossible to relate these to the pages which follow. For example, this list contains the following item: "Loan Refund Benefit in Case of Total Disability, Effective Date 01-12-79." Of the pages that follow, the only ones which can be related to that caption are rider no. 2 and rider no. 3. Rider no. 1 is expressed to become effective on April 1, 1981, and rider no. 3 is silent as to the date upon which it becomes effective.

The prospective insured is asked to sign a form of application which refers only in the most general and imprecise terms to the coverage to be provided. He has delivered to him, and is asked to sign, a Certificate of Loan Insurance which does give some indication of the coverage (and an exclusionary clause) but contains the careful disclaimer that it has no contractual value. He is invited to consult the policy and may obtain a copy for a fee. Had he done so he would have had the benefit of a document which I am not able to understand. I am confident Wagner never understood it. I am not one of those who believes that all contracts can be successfully and satisfactorily reduced to grade school language, but the documents in this case speak forcefully of the need for a measure of reform.

Doing my best with the policy and taking the case as it was argued before me, I am proceeding on the assumption that if Reaume can establish disability, and if his entitlement is not excluded by a term of the policy, the insurer is under obligation to repay the loan. There may be some room for argument as to whether that repayment should be immediate or, at the election of the insurer, in the instalments provided by the loan agreement, but that issue is not critical to disposition of the case.

Regardless of the difficulties inherent in the policy, it is common ground that in order to establish liability on the part of the insurer Reaume must bring himself within the following definition:

1) TOTAL DISABILITY: The total incapacity, as certified by a physician, of performing any occupation for remuneration and all normal activities of a person of the same age as a result of an illness or an accident.

It is with that definition in mind that I proceed to examine the question of disability.

DISABILITY

As early as November, 1981, Reaume was certified by a physician, Dr. A. A. MacVicar, as being totally disabled. While the record is not entirely clear, it was apparently on the basis of such certification that the insurer commenced payments under the policy. The first interruption of these payments occurred in 1982. On October 18, 1982, the Caisse wrote to Reaume in the following terms:

The present is to inform you that L'Assurance-vie-Desjardins have discontinued your benefits relative to your disability claim.

Their decision is based on additional information obtained by other sources unknown to us.

In their opinion they find that you are capable of performing an employment other than your previous position held, hence, you no longer qualify for total disability insurance benefits.

If you should require additional information, contact the undersigned or write directly to L'Assurance-vie-Desjardins to the attention of Christian Dumas, 200 avenue des commandeurs, Levis, Quebec G6V 6R2.

Subsequent to the writing of this letter, payments were resumed and were made until discontinued in the spring of 1983. The basis of termination was discussed in a letter of July 27, 1983, from the insurer to a solicitor for the plaintiff. Fundamentally, it was the exclusionary clause. As late as March 31, 1983, Dr. MacVicar certified with respect to Reaume, "Cannot go about usual occupation -- cannot perform another job."

EVIDENCE CONCERNING DISABILITY

It is necessary to consider whether Reaume continued to be totally disabled at the time of the trial. In this connection it is necessary to examine all of the evidence bearing on his state of health, including the various medical reports made by physicians from time to time. The insurer denies liability on the ground that Reaume is not totally disabled. In the alternative, however, it defends on the ground that even if he is totally disabled he is to be denied recovery because of an exclusionary clause to which reference has already been made. This clause has to do with the cause of disability. Because it will be convenient to consider the evidence related to this aspect of the matter concurrently with a consideration of the larger question of disability, it is appropriate to make a digression to deal with the exclusionary clause.

This clause is to e found in the form entitled "Acceptance or Refusal of Loan Insurance", in the "Attestation D'Assurance-Prt" and at various places throughout the policy itself. In all of these it appears in substantially the same terms. For convenience it is repeated here.

Reaume is not and has never been confined to an institution. The position of the insurer is that if total disability exists (which it denies) it has occurred "as a result of a mental, nervous or psychoneurotic illness." The plaintiff does not deny that "mental, nervous or psychoneurotic illness" was present, but contends that the disability occurred as a result of a number of causes, including that. Further, the plaintiff contends that Marvin Reaume suffers from "psychotic problems". These divergent positions on the cause of the illness must be kept in mind when examining the evidence concerning the health of Reaume, a topic to which I now return.

Reaume in his best days was afflicted by a somewhat unfortunate disposition to being aggressive and hot-tempered. He inherited a predisposition to diabetes, which first became overtly manifest in 1979. From then on there was a continual history of a malignant interrelationship between mental distress and physical disease. Reaume's account of the consequences of this interaction cannot do other than make one profoundly sympathetic. In the giving of his evidence, he made a favourable impression. For a person whose disposition is admittedly not of the best he was remarkably restrained in his testimony. He is deeply aware of his difficulties and shortcomings and of the unhappy consequences which they have produced. At the conclusion of his evidence I was convinced of his honesty.

The real onset of his difficulties was early in 1981. He had experienced layoffs and job changes, suffered from extreme fatigue and exhibited all kinds of bizarre and violent conduct to the members of his family and to his fellow workers at Chrysler. As a result of these accumulated difficulties he voluntarily left his employment early in April of 1981 and has not had any regular employment since.

He was admitted to hospital in June of 1981. On June 24, 1981, his family physician, Dr. Barnby, made a report on his condition. Under the caption "Diagnosis of Present Disability" is found the following, "Uncontrolled diabetes and associated nervous instability and family problems." Under the caption "Previous History Which Might Affect the Duration of the Disability" is found the following, "Highly nervous type." The report indicated that he might possibly return to work in four to six months. From about the same period is the report of Dr. H. Gopinathan, an internist. That report reads in part as follows:

Mr. Reaume is a 37-year-old gentleman who was discovered to be a diabetic about one year ago....

The patient has quite a strong history of diabetes in the family, both on maternal and paternal side.

...

PHYSICAL EXAMINATION: Mr. Reaume is a very honest but extremely angry young man who is in no acute distress....

IMPRESSION: 1. Uncontrolled diabetes mellitus from exogenous dietary indiscretion.

2. Anxiety and anger

DISCUSSION: Mr. Reaume is 37-years-old and unemployed. His financial status is very bad. He has some backache from work and I believe this has been a work injury. He cannot see any improvement in the financial status even into the future and this makes him seem more angry. Because of this he has been eating too much and I believe his diabetic control has been thrown off because of this. He [sic] agitation also makes it worse. On a 1500 calorie diet which according to the patient is about ID="1/3"rd of what he eats. His sugar might be controlled but I doubt he will follow this diet. He will be given time to get over his emotional problems and also the diet may be relaxed a little bit more so that he would follow it. The long term prognosis is a lot dependent on his financial outlook and hopefully with a little time it would not look as bleak to him as it does now.

Reaume was referred by Dr. Gopinathan to Dr. Yaworsky. Dr. Yaworsky examined Reaume and made a report on the 13th of June, 1981. That report reads in part as follows:

Mood disturbance, low frustration tolerance, irritability and tension and stress reaction which lead to difficulty to diet control for his diabetes. He is for diabetic condition control. He is not on Insulin, "sugar" was discovered about one year ago and he states he has lost all control of stress. Stress comes from many areas mainly he notices this from work....

...

IMPRESSION: This man does seem sincere in his efforts to try to get some understanding of his overflow of volatile anxiety and tension. He has marked difficulty now in trying to handle his aggressive impulses but his insight and judgment still are intact. He is not psychotic, he seems to want help....

He was also referred by his family physician, Dr. Barnby, in August of 1981 to Dr. MacVicar, a psychiatrist. In May of 1982 Dr. MacVicar made a report to the Department of Health and Welfare Canada. That report reads in part as follows:

Mr. Reaume was referred to me by his family physician Dr. Barnby on August 22nd 1981. He had been referred because he was unable to work since April 23rd 1981, was unable to stand work, was "mad all the time and could not cool down", blood sugar had gone up, felt so violently angry he wanted to kill people but no one in particular, he had beaten his wife and felt he had no control over himself. He had been seen by Dr. Yaworsky, another psychiatrist, for a month and a half before that for weekly psychotherapy but felt he was not improving fast enough and was afraid to go back to work too soon in case he blew up and lost his job. He had been back in the plant since January 1981 for the first time in seven years demoted from other work which was a higher level. The pressure was worse than he ever had before, he could not make decisions, was compulsively eating, was very irritable with his family and was even thinking of having a trial separation.

...Diagnosis was considered to be Anxiety Reaction in an Aggressive Personality Disorder and possible Cyclothymic Personality also.

...

I called Dr. Schisler, the Chrysler doctor, because I felt his continuing tension, his low anxiety tolerance and his fear of losing control would prevent him from returning to work for the foreseeable future, and I felt that I could not keep on saying that this person can be improved with therapy that I was trying to give him.

By the January 13th interview he was not as angry as he was, he still got upset easily but had some control but the fear about returning to Chrysler's continued.

In December of 1981 Dr. MacVicar reported to Dr. Barnby.

...He is quite a problem.

...

In my mind I do not think he is going to be able to go back to the job he had and unless he is going to be re-categorized he is going to have trouble to remain working at Chrysler's. This is a real fear both financially and for his future.

I will continue to see him as long as is necessary His next appointment is in January 1982. He thinks his problem is caused by the factory but I think that his personality is actually being aggravated by the changing work situation where he has gone back to a job he had not been working in for a long time.

Dr. Gopinathan made a report following an attendance by Reaume in April 1983. From that report I extract the following:

Mr. Reaume is a 39 year old gentleman who has had diabetes now for 3 years. About 2 years ago he was admitted to the hospital with uncontrolled diabetes mellitus and he was discharged home on Diabinaze 250 mg daily. His major problem is that of extreme anxiety and depression and usually the diabetes gets worse when he is like that. Two years ago he had been laid off from Chrysler and this triggered off a sequence of events which led to his admission. Since then he has been on disability and now he is applying for total disability. The stresses at work are extremely difficult for him to handle and he has had a lot of problems at home with his wife and these have also contributed to his psychological state but he tells me recently he has overcome most of his problems at home by becoming a Christian.

Patient goes to Florida where his parents have a home and the physical exercise, the weather and just psychological improvement that he gets in Florida seem to help his diabetes enormously. He was there for a 3-month period recently when his urine was completely negative and he had really felt good. He came back to apply for his disability and just the emotional strain of going through this has aggravated his diabetes. He has been consistently spilling 4+ sugar in the urine. Because of this he decided he should starve and he starved himself for 2 days, drinking some fluids but eating nothing. He started noticing acetone appearing in the urine and this concerned him. He also became very irritable and jittery. He developed some dizziness and it is these symptoms that led him to come to the hospital.

...

PHYSICAL EXAMINATION: Mr. Reaume is a robust young man who is much better than he was two years ago. Even though he is easily excitable he is quite calm now. He would like to control his temper and anxiety and though he is better than before he still feels that he is unable to do it himself. When he is down in Florida something about just moving there makes it much better for him and he improves dramatically. Whenever he has to apply for disability or think of his work at Chrysler he seems to get into problems. He tells me that he does not plan to not work the rest of his life but has to find the right kind of job where the stresses would not be bad....

...

IMPRESSION: 1. UNCONTROLLED DIABETES MELLITUS aggravated by anxiety.

[emphasis added]

DISCUSSION: Mr. Reaume has had severe diabetes mellitus in the recent past due to his emotional stresses. In addition he starved himself and pushed himself into ketosis and I am sure that is why he became jittery and dizzy. Even since coming into the hospital 16 hours ago patient has improved and his blood sugar is coming down. I am sure within a matter of a few days he will be completely controlled with Diabinaze. What one can do about his anxieties induced by coming to Windsor and thinking of his job I do not know. However since he has a place to go in Florida which is not as expensive and there he can undertake his physical activity easily, it does seem proper that he go down to Florida when he can.

He seems to cope with his own personal problems rather well now and in course of time I am hopeful that he will conquer it permanently. He is unable to be physically active in Windsor as much as he can be in Florida and once the warmer weather comes possibly with swimming and physical activity he will improve himself even here.

I will watch him while in hospital but I do not believe he is a candidate for insulin. His problems are so totally related to his anxiety that once he stabilizes and he is on insulin he will have more risks of hypoglycomia. [sic] We have to aim at improving his psychological status.

Reaume made his last attendance on Dr. MacVicar in 1983 and Dr. MacVicar reported to his solicitors on the 27th of September, 1983. That report reviews his experience with Mr. Reaume and concludes with the following:

Many of the visits especially from 1982 to 1983 were mainly discussing what to be done and filling out insurance papers. Since the medication was stopped the only therapy was supportive psychotherapy and absence from work.

Mr. Reaume's illness is not a psychosis, I do not consider him psychotic at any time. There are no signs in the electroencephalogram of any organic lesion, no signs of epilepsy, and he is always fully conscious in these explosive episodes.

Mr. Reaume is improved since he has been off work, but the prognosis for him resuming work will have to be guarded because of his low anxiety and frustration tolerance which may trigger off such episodes again.

I was notified on 26th September 1983 by Mr. Reaume's internist, Dr. H. Gopinathan, that he has severe diabetes, very difficult to control, and I am to see him for emergency consultation on 28th September 1983. Such serious diabetic episodes can be caused by emotional disturbances but also high and low blood sugars can cause episodic behaviour disturbances.

I do not consider the diabetes to have caused his emotional troubles, but the combination of both emotional disturbances and markedly changing blood sugars could act on each other adversely.

[emphasis added]

Reaume was also examined by another psychiatrist, Dr. Schumacher, who on September 27, 1983, reported to his solicitors. The report reads in part as follows:

As a result of the interview on November 17, 1982, I felt that Mr. Reaume suffered from a very aggressive personality with precarious control of his aggressive impulses which, in my opinion, at that time rendered him potentially dangerous to his environment or potential co-workers and, as such, I felt that he was disabled and prevented from gainful employment. I did agree that he should remain on disability pension at that time. However, Mr. Reaume was not psychotic at the time of the interview. He was not delusional, did not exhibit any hallucinations and was aware of his environment.

I was made aware of the history of diabetes mellitus, in fact, Mr. Reaume repeated that he was in hospital in June of 1981 and that his diabetes was being controlled with the help of diet and all medication to keep his blood sugar under control.

Reference should be made to two further reports of Dr. Gopinathan, the first pertaining to a consultation of August 18, 1984. The following excerpts are from that report:

Date of consultation August 18, 1984

CHIEF COMPLAINT: Uncontrolled diabetes mellitus.

[emphasis added]

HISTORY OF PRESENT ILLNESS: Mr. Reaume is a 40-year-old gentleman with a history of diabetes mellitus since 1980. He was admitted to Grace Hospital in 1981 with uncontrolled diabetes and was discharged home on Diabinese 250mg daily. While in hospital, his control was fairly good. However, outside his blood sugars have always been high.... His emotional lability drives him to eat when he is upset and this is very often and his blood sugars go up....

Patient goes down to Florida a few months a year and surprisingly his blood sugar dropped remarkably. He relaxes and he does a lot of physical work down in Florida and does not eat all the wrong things. He feels better within himself. He checks his urine and usually it is negative. He has not been able to reproduce the activity or the diet while in Windsor and the cause of this is not very clear. He has legal hassles with his house and the mortgage company and he feels that may be the reason that when he is around Windsor his sugars are so bad.

...

IMPRESSION: 1. Uncontrolled diabetes mellitus.

2. Emotional lability with temper tantrums and depression.

[emphasis added]

The next is a report to the solicitors for the plaintiff dated December 20, 1984:

Mr. Reaume has been known to me since 1981 when I first saw him in Grace Hospital with uncontrolled diabetes mellitus. Since then he has had a major problem with control of his diabetes. I have seen him periodically. In April of 1983 he was admitted to Grace Hospital with uncontrolled diabetes mellitus. He was markedly dehydrated. In August of 1984 he was again admitted to Grace Hospital with uncontrolled diabetes mellitus. During all these admissions the control of diabetes in hospital with various modalities has not been difficult. However there is a great effect of his emotional problem on the diabetic control. In the latest admission he was started on insulin and was controlled well in the hospital. He was instructed and seemed very well motivated in terms of his management. He even went and bought a glucometer on his own to keep a control over his blood sugar. In spite of this within a short time of discharge his blood sugars have been totally out of control.

Patient has been under the care of Dr. MacVicar because of personality problems. However there is such a tremendous effect of his mood changes on his diabetes that it is very hard to separate his physical problem of diabetes from his emotional problem. It is also well seen when is [SIC] diabetic control is better his behaviour is much better....

I am convinced that Mr. Reaume's diabetes mellitus contributes a lot to his problem with his temper and in reverse the emotional problem is causing an enormous effect on the poor control of his diabetes.

[emphasis added]

Remaining to be dealt with in this survey of the medical evidence is the report of Dr. Cassidy, a psychiatrist, made in December of 1985 to the solicitors for the plaintiffs. I do not propose to quote at length from that report nor from his evidence, but rather to record my impressions of the combined effect of both.

At the time he made his assessment, Dr. Cassidy was of the view that Reaume could function in some type of work if it had a very low stress factor. At the same time, the length of the undoubted period of disability made it questionable whether the disability would not be permanent. Reaume was not then suffering from any significant psychiatric disorder but he had been treated as psychotic and off and on had been psychotic. All illnesses are a combination of psychological, physical and social factors. He could not conclude that a single uniform cause had been postulated for the disability. Reaume's problems on the job were not due exclusively, or even in the majority sense, to a psychiatric problem but to the combination of his diabetic condition and his emotional state. His problems could all have been considered under the definition of diabetes. The following quotation from one of his answers is instructive:

...all medical conditions, whether they are so-called psychiatric, or so-called physical, you are dealing with one person with a biochemical mixture that's interactive and you can't treat a diabetic unless you understand how he is functioning as a person, having some regard to his environment, his exercise patterns, his dietary patterns, and I would have considered all of that could have been considered just under the definition of diabetes....

Also to be considered in this context is the evidence of Reaume himself. He testified in detail about his difficulties at work and with his family, and concerning his frustrations because of the way in which his diabetic condition affected his behaviour in a vicious circle. He testified as to his distress concerning being unable to perform simple jobs at work, and about his inability to deal satisfactorily with people when he and his wife made some desultory attempts at selling second-hand goods. He was raised in a family in which work was considered the norm and as being essential to respectability. The history of his early life discloses a consistent pattern of hard work. During his good years with Chrysler he was in effect working at two jobs because he was playing the drums in the evening on a fairly regular basis. When asked in his examination-in-chief concerning the possibilities of return to work his evidence was to the effect that in one way he felt that he could, but that in another way he knew that he could not. He could not envisage a job on which he could go and lie down when he needed to when overcome by the extreme fatigue of which he testified. It was, he said, like being an infant. He thought he could probably work a four-hour day but for the difficulty that he could never tell when the conditions which prevented him from working would overtake him. His evidence in respect of these matters was uncontradicted and practically unchallenged. I am prepared to give it substantial weight.

I realize that in a claim such as this there are obvious dangers in relying on the evidence of the person asserting disability. At the same time I feel that when a man who gives every impression of being both honest and industrious gives evidence that he cannot work, it cannot be ignored. I also have in mind that nowhere in the numerous medical reports, nor elsewhere in the evidence, is there any suggestion that Reaume was malingering. I conclude and find without hesitation or doubt that his disability has been continuous from its first onset to the date of trial.

In this connection I have not overlooked the vigorous and articulate submission of counsel for the insurer that there was evidence that Reaume could return to work and that the policy did not insure against potential disability. I agree that it does not, but in my view the disability is not potential but actual. It has been exhibited in so many ways, so frequently, and over such a period of time that it cannot be held to be potential only.

In arriving at my conclusions related to this aspect of the case I have found assistance in the reasons for judgment of Barr J. in Walls v. Constellation Assurance Co., (unreported, delivered May 12, 1986, at Windsor). In that case, which was similar in many respects to this, Barr J. gave weight to the evidence of the plaintiff himself, saying, at p.24 of the typescript:

I accept the evidence of the man who knows best, Mr. Walls.

I have also been mindful of the fact that no evidence was adduced on behalf of the defendants to establish that the plaintiff was not disabled.

Having concluded that prima facie the plaintiff, being disabled, is entitled to the benefit of the insurance, I must turn to a consideration of whether he is precluded from recovery by the operation of the exclusionary clause. This in turn involves two questions. The first is whether the disability occurred "as a result of a mental, nervous or psychoneurotic illness," and, secondly, whether under the circumstances in which the contract was negotiated the plaintiff is bound by the clause. I propose to deal with the second of these questions first.

THE EXCLUSIONARY CLAUSE

For convenience of reference I set out again the terms of the clause:

The plaintiffs contend that, having regard for the circumstances under which the contract of insurance came into existence, the plaintiffs ought not to be bound by this clause. In support of this contention reliance is placed chiefly upon the judgment in Tilden Rent-A-Car Co. v. Clendenning (1978), 32 D.L.R. (3d) 400. In that case the defendant, on renting a motor vehicle from the plaintiff, elected to pay an additional premium for "collision damage waiver". The car was damaged and the plaintiff brought action to recover, relying on conditions printed on the reverse side of the contract. The court held that, notwithstanding the signature of the defendant on the contract, those conditions were not binding on the defendant. I do not propose to review in detail the reasons for judgment of Dubin J.A. who delivered the majority judgment. I have examined them in an effort to extract the controlling circumstances which led that learned judge to his conclusions. I trust that I do his reasons no injustice by the following enumeration.

(1) The defendant did not read the contract and the clerk employed by the plaintiff who negotiated the contract knew that.

(2) The conditions sought to be relied upon were completely inconsistent with the express terms providing coverage.

(3) If the defendant had known of the full terms of the contract he would not have entered into it.

(4) The contract was not the result of formal negotiation and consideration but was entered into in haste.

(5) The plaintiff took no steps to alert the defendant to the onerous provisions in the contract.

Against that background I examine the circumstances under which the policy of insurance in the case at bar came into existence.

All of the documents relating to the insurance were in French, of which Reaume had only an imperfect command. He did not read them. Nicole Wagner, the only other participant in the inception of the transaction, must be taken to have known of his difficulty with French because she said that her dealings with him were customarily in English. She could not have failed to observe that he did not read the documents. The insurance related to a substantial long-term obligation. If given the effect contended for by the defendant insurer, the exclusion would deny the plaintiff coverage in the circumstances in which it is most required, namely permanent disability. Reaume testified that if he had known of the exclusion he would have sought other insurance to enable him to have complete coverage. The plaintiff was never given a copy of, or ever shown, the policy of insurance. Considering the difficulty encountered by trained professionals in trying to make any sense of it, it would have done him no good had he had and read a copy. After some discussion with Wagner he signed the document entitled "Acceptance or Refusal of Loan Insurance" indicating his acceptance of a "loan refund benefit" in case of total disability, and he received a document attesting that he had insurance but bearing the caveat that it was without legal effect. I have not overlooked that the "Acceptance or Refusal of Loan Insurance" contains the following clause:

I acknowledge that I have examined the provisions below and on the back of this form.

It must be taken that Wagner knew that he had not done so.

I find as a fact that the exclusion which was on the back of the "Acceptance or Refusal of Loan Insurance", and which comprised also a part of the certificate, was not drawn to his attention. The evidence in this regard is not entirely satisfactory. Wagner when she testified was unfamiliar with the exclusion as it pertained to disability insurance, and Reaume acknowledged that some exclusion, namely with respect to suicide and pertaining to the life insurance, had been discussed. I have in mind, however, that Reaume considered that in the event of disability his debt would be paid off. Whether this was as a result of something that was said to him by Wagner, or whether it was an impression which he gained from some other source or experience, I do not consider it necessary to find. Despite the confusion in his evidence, I am satisfied that if he had known of the existence of the exclusion he would have made some objection in view of his past experience and his determination to have protection against the disaster which could result from disability.

The whole transaction involved twenty minutes to half an hour of exchange between Wagner and the plaintiffs. The insurance was an incident, albeit an important one, of the main transaction, which dealt with the loan. There was no negotiation of the insurance policy. Reaume signified a wish "to become insured under the loan refund benefit in case of disability." The formation of the contract of insurance could scarcely have been more casual or informal. I need not repeat my general criticism of the documents.

There was much said in the pleadings and in argument about agency, specifically, the position occupied by the Caisse. It is not in dispute that Wagner, in negotiating the transaction under review, was acting in the course of her employment and that her words, actions and knowledge may be attributed to the Caisse. In argument, counsel for the defendant insurer submitted that there were three possibilities:

(1) That the Caisse acted as agent for the insurer.

(2) That the Caisse participated as a principal.

(3) That the Caisse acted as agent for the plaintiffs.

He conceded that these possibilities were not mutually exclusive.

In my view, the Caisse in its participation in the transaction acted in its own behalf and acted also as agent for the insurer. In concluding that it acted on its own behalf I have had regard for the fact that it is a party to the policy of insurance and had a direct potential interest in the negotiation of the contract. In concluding that the Caisse acted as agent for the insurer I have in mind that the only negotiations had by the plaintiffs with anyone were those which were had with Wagner and that her participation was essential to the completion of the contract. Knowledge which Wagner had with respect to the nature and extent of Reaume's knowledge of, and participation in, the contract, can properly be attributed to the insurer.

In my view, the circumstances are appropriate and sufficient to bring the case within the principles enunciated in Tilden and I conclude that the plaintiff ought not to be bound by the exclusionary clause. This is a conclusion readily susceptible of review on appeal. In consequence, I feel that I should express my conclusions concerning the application of the exclusionary clause if it were held to bind the plaintiff. In my view, it would not bar recovery.

The question which must be asked and answered to arrive at that conclusion is the following. Did the plaintiff's disability occur as a result of a mental, nervous or psychoneurotic illness? One cannot read the medical evidence without concluding that the disability occurred as a result of a combination of mental and physical illness. Indeed, no argument to the contrary was made on behalf of the defendant insurer. Instead it was argued that the dominant and proximate cause was mental. Some support for this is found in the fact that the sequence of disability reports which were submitted to the defendant and other insurers made explicit mention of mental disorder. Likewise, there is evidence throughout the medical reports concerning mental illness. However, the interaction and interrelationship of the mental disorder and the diabetics cannot be avoided or denied. There was discussion in argument of the percentage or degree to which each contributed. No medical evidence was adduced to indicate that any such mathematical consideration was appropriate. If I am being invited to make such a calculation I respectfully decline.

The question which I posed at the outset of this portion of these reasons cannot be answered by a simple affirmative. Reaume's disability resulted from a combination of causes, including both mental and physical illness.

In construing the exclusionary clause, the contra proferentem rule applies. In this connection I have in mind what was said by Dr. Cassidy in his report, "[All] illnesses are a combination of psychological, physical and social factors." It seems to me that it hardly requires medical training to arrive at and hold that conclusion. Such being the case, I think it not unreasonable to attribute such knowledge to the draftsman of a policy of disability insurance. Had it been intended that the exclusion should extend to disability occurring as a combined result of mental, nervous or psychoneurotic illness, and of other illness as well, no great ingenuity in drafting would have been necessary to accomplish such a result. Without being presumptuous, I suggest that the simple insertion following the word "illness", in the third word of the clause, of the words "either alone or in conjunction with any other illness" would have concluded the question which I am now considering, and would have done so effectively in favour of the insurer.

Counsel for the insurer emphasized that during the period of disability the medical reports submitted to it and to other insurers alleged mental disorder, and that the allegation of combined causes came only in the course of the litigation. I accept that this is so, but I do not find it to be of consequence in deciding the cause of disability. The most such a progression might do is cause a measure of skepticism concerning the combined cause. In my view, be one ever so skeptical, the evidence leads irresistibly to the conclusion which I have expressed.

Before leaving this topic I should deal with the submission on behalf of the plaintiffs that the effect of the exclusion is, in any event, avoided by the concluding words, "or if the borrower suffers from psychotic problems." I have referred to the evidence that the plaintiff probably had psychotic problems from time to time and it is probably not reaching greatly to contemplate the possibility that he might have such problems again. However, I consider the evidence too narrow and tenuous to give it the effect contended for by counsel for the plaintiffs.

The Claim Against The Caisse For Representations

The statement of claim raised a claim that the plaintiffs were entitled to succeed against the Caisse on the basis that its employee Wagner had made certain specific representations as to the nature and extent of the insurance coverage. Since I have found that the plaintiffs are entitled to recover on the basis of the policy of insurance I do not consider it necessary to explore this aspect of the action.

Claim For Damages

The statement of claim includes a claim for damages for mental distress stemming from the breach of contract by the defendant insurer and for aggravated and punitive damages. In my view this claim fails. I am not able to accept that, when the contract of insurance was entered into, it should have been held in contemplation by the insurer that the denial of coverage would have any except the predictable pecuniary consequences. There can be no question of aggravated or punitive damages.

Nor can I see any basis for an award of damages against the Caisse, which moved to act under the power of sale contained in the mortgage. That was a customary step in recovery of a mortgage debt. No dout it occasioned distress to the plaintiffs, but I am not at all persuaded that anything in that conduct sounds in damages.

JUDGMENT

Counsel for the insurer submitted that it was in the discretion of the insurer to declare disability permanent, and therefore discretionary whether to pay off the loan in full or in the instalments provided by the contract. As matters stand I think this is probably of small significance, but in this particular I may be spoken to if counsel are so instructed.

There were some arrears under the mortgage before the disability was recognized by the commencement of payments under the policy. I think it reasonable to conclude that those arrears were properly attributable to disability and should be included in the remedies afforded by the judgment in this action.

The plaintiffs are entitled to the declaration sought in paragraph 23(a) of the statement of claim:

A declaration that the policy of insurance for disability issued by Assurance-Vie Desjardins remains in full force and effect, and that any exclusions therein do not apply to the Plaintiff, Marvin Reaume's disability and that the Plaintiff, Marvin Reaume, remains wholly and continuously disabled within the terms of coverage of the said policy.

the injunction claimed in subparagraph (b):

A permanent injunction restraining the Defendant, Caisse Populaire, from proceeding with any power of sale proceedings or other foreclosure proceedings or any other action against the Plaintiffs pursuant to the mortgage between the Plaintiffs and the Defendant, Caisse Populaire.

and the mandatory orders claimed in subparagraphs (c) and (d):

c) A mandatory order directing the Defendant, Assurance-Vie Desjardins to pay to the Defendant, Caisse Populaire, all principal, interest and costs outstanding on the aforesaid mortgage.

d) A mandatory order directing the Defendant, Caisse Populaire, to provide to the Plaintiffs a full and complete discharge of the aforesaid mortgage.

No argument was made on the counterclaim by the Caisse. I see no need for any such order as it seeks, and it will be dismissed. As against the defendants Renaud and Wagner the action should be dismissed.

The plaintiffs should have costs against the insurer and the Caisse. The insurance was taken by Reaume with a view to indemnity against the mortgage debt in case of disability. In order that the plaintiffs be made whole, the costs should be as between solicitor and own client. There will be no costs of the counterclaim.

Neither the formal disposition of the action nor the costs were discussed in argument. Leave is therefore reserved to make further submissions on these questions, either oral or written, if counsel are so instructed. For the present the record will be endorsed for judgment pursuant to these reasons.