McArthur v Mercantile Mutual Life Insurance Co Ltd

The case involved the insured, McArthur, who sought a declaration that he was entitled to benefits under an insurance policy due to total permanent disability. The insurer, Mercantile Mutual Life Insurance Co Ltd, refused to pay on the basis that their opinion that McArthur was likely never to work again was a condition precedent to their obligation to pay under the policy. The opinion was formed improperly, as the insurer did not consult with an appropriate medical expert. The dispute reached the court, which was tasked with determining the legal nature of McArthur’s claim and whether the court could consider evidence that emerged after the insurer made its decision.

The primary legal issue was whether McArthur's claim was in debt or damages for breach of contract, and if the court could take into account evidence that arose post the insurer's determination. The court needed to assess whether the insurer's failure to properly form its opinion constituted a breach of the policy terms, and if so, what the appropriate remedy would be. Additionally, the court had to decide if it was appropriate to consider evidence that came into existence after the insurer had made its decision.

The court determined that McArthur's claim was indeed in damages for breach of contract, not in debt, as the insurer's obligation to pay was contingent upon forming a proper opinion regarding McArthur's disability. The court held that the insurer's failure to consult with an appropriate medical expert rendered the opinion invalid, constituting a breach of the policy terms. Consequently, McArthur's claim for damages was upheld. The court also found that it was appropriate to consider evidence that emerged after the insurer's decision, as it did not prejudice the insurer's position and was relevant to the proper formation of the opinion. The appeal was dismissed with costs awarded to the respondent.