Insurer wrong to deny payout in murder case

An Ontario court has rejected an insurance company’s bid to deny a life insurance payout to a murder victim’s son on the basis that the victim failed to disclose his alleged criminal past to the company when applying for coverage.

The Ontario Superior Court of Justice ruled that Desjardins Financial Security Life Assurance Co. must pay out on a life insurance policy bought by Dean Costanza from State Farm Insurance (which later became Desjardins) in January 2012. Costanza was found murdered outside his house in December 2017.

The company declined to pay the $500,000 benefit to his son, who was named as the primary beneficiary on the policy.

According to the court’s decision, the claim was denied on the basis that Costanza had lied on his insurance application, which asked whether he’d been convicted of a criminal offence in the previous three years.

The company argued that, in fact, he was convicted of assault causing bodily harm in March 2009 — about two years and 10 months before applying for insurance. The false answer voided the policy, it contended.

However, the court disagreed. It ruled that the company failed to demonstrate that Costanza was actually convicted within the three-year window.

While the conviction appeared in a criminal background check, the court noted that this didn’t establish when Costanza was convicted.

“There is no evidence to establish that the date of the entry is the date of the conviction, sentence or some other date,” the court said. More likely, the date refers to when he was sentenced, it suggested.

Even if he was convicted in March 2009, the court said the insurer failed to establish that Costanza sought to mislead the firm.

“It is at least as likely (if not more likely) that Mr. Costanza was mistaken or merely negligent as to the date of the conviction when he filled out the application for insurance,” the court said.

The court also rejected the company’s assertion that Costanza was obliged to disclose his alleged “criminal history” — namely, allegations that he was involved with organized crime.

“In support of its contention that Mr. Costanza was obliged to disclose his criminal involvement, the [company] relies on two printouts from news stories posted on the internet in the days after Mr. Costanza was shot and killed,” the court noted.

“Based on these generically sourced media reports — and only this evidence — the [company] argues that Mr. Costanza was known to the police, his murder was believed to be targeted and related to a dispute over money or drugs connected to ‘a massive cocaine bust involving drug kingpin Nick Nero,’” the court said.

The court said this evidence was both “inadmissible and woefully unreliable.”

“The unsubstantiated media reports posted on the internet are not evidence — they are the most dangerous sort of hearsay, namely rumour and unsubstantiated innuendo,” it said.

“It would be fundamentally improper for a court of law to rely on such evidence to conclude on a balance of probabilities (the onus that is on the respondent) that Mr. Costanza had any criminal history to disclose on this application,” the court found.

Ultimately, the court concluded the the company failed to establish that Costanza obtained insurance through material misrepresentation or fraud. It ruled that the policy is valid and payable to his son.