There is a general public policy rule followed by Canadian and American courts which prohibits a person from benefiting from his or her own criminal act. Recently, in Dhingra v. Dhingra (2012), the Ontario Court of Appeal wrestled with whether a person should be exempt from the public policy rule when they are found not criminally responsible on account of mental disorder.
The Facts In Dhingra
Ved Dhingra was charged with second degree murder for killing his wife in 2006. At the resulting criminal trial he was found to be not criminally responsible on account of mental disorder.
Mr. Dhingra was the beneficiary of his deceased wife’s life insurance policy, which was worth $51,000. Mr. Dhingra submitted an Accidental Death Claim application to the insurance company claiming the proceeds of the policy. The administrator of the deceased’s estate submitted a conflicting claim seeking to have the proceeds paid into the estate. Because of the conflicting claims, the insurance company paid the proceeds into court which required Mr. Dhingra to bring an application to have the proceeds paid to him.
The application was heard before Justice Pollak of the Superior Court of Justice. Justice Pollak found that while there was some American law which found that a person could benefit from his or her own criminal act so long as the killing was not intentional, this jurisprudence was not applicable in Canada. In her reasons, the application judge found the following:
The Applicant committed second degree murder of his ex‑wife Kamlesh. Even though he was not found criminally responsible, he still physically committed the crime. There is no judicial support in Canada for the Applicant’s submission that this Court ought to require a finding of intent to commit the crime in order to apply the public policy rule.
The Court Of Appeal’s Decision
In its reasons, the Ontario Court of Appeal reaffirmed that the rationale for the public policy rule is to prevent a person from profiting from their own criminal acts and that this rule is imposed by the courts regardless of the insurance contract, because of public policy and social values.
In reaching its decision on the facts before them, the court examined the concept of not criminally responsible. The court indicated that the application judge erred in “describing [Mr. Dhingra] as having ‘committed second-degree murder’” as the Criminal Code states that a not criminally responsible accused cannot be found to have committed a crime. The court also quoted from Winko v British Columbia (1999), where the Supreme Court of Canada stated that a person who is not criminally responsible on account of mental disorder should not be considered morally responsible. Accordingly, the Court of Appeal held that if a person is not morally responsible then there is no rationale for applying the public policy rule.
Further, the court concluded that Mr. Dhingra, and other persons found to be not criminally responsible, should not be punished but rather “treated with the utmost dignity and afforded the utmost liberty compatible with his or her situation”. Therefore, there was no principle of public policy that should prevent Mr. Dhingra from collecting the proceeds of the life insurance policy.
When Will The Public Policy Rule Apply?
Dhingra provides an example of when the public policy rule will not apply and an insurance company will be required to pay proceeds. The Supreme Court of Canada, in earlier jurisprudence, has laid out the circumstances under which an insurance company does not have to pay out proceeds because of the public policy rule. The key principles are as follows:
An insurance contract designed to cover illegal activity is unenforceable. A necessary requirement of this principle is that parties cannot contract out of the public policy rule. There is, however, nothing preventing insurance companies from including the public policy rule explicitly in their insurance contracts. If this is done, courts will not need to turn to the public policy rule, instead they will simply apply the written terms of the insurance contract.
A criminal should not be permitted to profit from his crime. This principle operates to deny a convicted murderer from collecting insurance proceeds from the victim of his crime. The scope of this principle was at issue in Dhingra.
The public policy rule does not apply to an innocent beneficiary who is not claiming through the estate. This was at issue in Oldfield v. Transamerica (2002) where the insured died of a heart attack when a condom filled with cocaine ruptured in his stomach. The Supreme Court of Canada held that the wife was entitled to the proceeds of the life insurance policy, even though the husband had died while committing a crime, because she was an innocent beneficiary to the contract. Provincial legislatures have extended this principle even further in the case of automobile insurance. An automobile liability insurer is prohibited from denying payment to a third party claimant because the insured was engaged in a criminal act.
The criminal’s estate, and anyone claiming through the estate, is not allowed to profit from the crime because, at law, ‘the estate’s claim is equivalent to a claim brought by the criminal’. This is a traditional principle of the public policy rule; however, Justice Major, in Oldfield, suggested that the legislature or the court should revise this principle to allow third parties, including the estate, to claim proceeds of an insurance policy based on the same reasoning that permits innocent beneficiaries to claim such proceeds.
The decision in Dhingra adds another subtlety to the public policy rule whose jurisprudence is growing. It is a reminder that the public policy rule, which applies to all insurance contracts, remains strong but that the courts will examine each new circumstance in light of the rationale of the rule and will be guided by public policy and social values.
Ed. Note: Although the insurer in Dhingra did not seek leave to appeal to the Supreme Court of Canada, the Ontario Ministry of the Attorney General commenced proceedings under the Ontario Civil Remedies Act for a forfeiture order requiring the policy proceeds to be paid to the Ontario Government as proceeds of unlawful activity.