Estate Planning

You Be the Judge - Life Insurance Under a Separation Agreement - Part II

By Hull & Hull LLP

Yesterday, I set out the fact situation in Turner v. DiDonato (2009), 95 O.R. (3d) 147 (Ont. C.A.).

The trial judge decided that Dilia was entitled to the difference between the insurance proceeds that she received and the $100,000 insurance policy that was supposed to be in place. The trial decision was upheld on appeal.

The trial judge held that there was a clear breach of the Separation Agreement, and that the remedy was appropriate in order to put Dilia in the position that she would have been in had the contract been performed.

The Court of Appeal did not agree that the trial judge did not give properly interpret the Separation Agreement. In particular, it did not agree that the clause allowing Dilia to have a first charge against the estate for in the event that Albert died without insurance provided Dilia with the appropriate remedy. This clause, the Court of Appeal held, did not apply because Albert did, in fact, have insurance – it was simply insufficient. 

The Court of Appeal also dismissed the suggestion that the insurance policy was simply security for the support payments. Firstly, the Separation Agreement did not express that it was security. Secondly, the Separation Agreement did not allow Albert to reduce the amount of insurance as the support obligations diminished. Thirdly, it was held that allowing Dilia less under the Separation Agreement as a result of its breach by Albert than Dilia would have received but for the breach was 'counterintuitive'. Fourthly, the estate's suggestion that it would have a claim against Dilia for any insurance proceeds in excess of the support obligations was 'at odds' with the stated intention of the parties in the Separation Agreement to fully settle their rights and obligations.

The Court of Appeal agreed that Dilia's admission that her understanding was that the insurance policy was security for the support payments was not relevant. The Separation Agreement was unambiguous, and contained an 'entire agreement' clause, and extrinsic evidence was irrelevant. Further, as such, corroboration under s. 13 of the Evidence Act was not required, as the decision was based on the interpretation of the agreement, and not the evidence of Dilia. Finally, the Court of Appeal dismissed the suggestion that Dilia received a windfall: it held that Dilia received simply what she was to receive under the Separation Agreement.

Did you concur or are you in dissent?

Paul Trudelle

Full post as published by Toronto Estate Law Blog on July 15, 2009 (boomark / email).