In Assaad v. The Economical Mutual Group, the
Ontario Court of Appeal set aside a judgment and dismissed a claim
finding that the plaintiff did not have sufficient insurable interest
in property for which the plaintiff claimed recovery from the defendant
The plaintiff was a financial consultant. One of his
clients owed him $10,000.00 for services rendered and agreed to
sell him a new car worth $30,000.00 for $16,000.00 and forgiveness
of the loan. The client was heavily in debt and had decided to leave
The plaintiff agreed and purchased the new car for
$16,000.00. He did not conduct any lien searches nor did he have
a bill of sale. He then insured the vehicle with the defendant insurer.
The vehicle was stolen. The plaintiff claimed recovery
from the defendant for the loss. The insurer conducted an investigation
and determined that the car had been previously stolen. As a result,
the insurer denied the claim on the basis that the plaintiff did
not have an insurable interest in the vehicle.
The plaintiff commenced the action and at trial obtained
judgment. The trial judge ruled that the plaintiff met the "factual
expectancy test" set out by the Supreme Court of Canada in Kosmopoulos.
In Kosmopoulos, the plaintiff was a sole shareholder
in the assets of a corporation. The plaintiff was the named insured
under the insurance policy but the corporation was, in fact, the
owner of the assets that were insured. When a loss occurred, the
insured denied coverage on the basis that the named insured had
no insurable interest. The Supreme Court held, however, that the
plaintiff had an insurable interest on the basis that he could demonstrate,
through the corporation, "some relation to or concern in the
subject of the insurance, which relation or concern by the happening
of the perils insured against may be so affected as to produce a
damage, detriment or prejudice to the person insuring". This
has been labelled the "factual expectancy test".
In the subject case, the insurer appealed against
the trial judge's findings arguing that the Kosmopoulos'
decision should not be given universal application, at least without
context and policy considerations. The Appellant Court allowed the
appeal and set outside the judgment. The trial judge had found that
the plaintiff's evidence should be viewed with suspicion and that
the plaintiff must have suspected, if not being blind to, the origins
of the vehicle. The evidence clearly showed willful blindness. These
policy concerns led the appellate court to find the plaintiff had
no higher insurable interest then the thief and could not rely on
the factual expectation test as a basis for recovery.
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