BMO Insurance Pays a Claim Without a Premium

Posted on February 3, 2015 and updated February 6, 2015 in Life Insurance Canada News 5 min read
bills and papers 7
BMO agreed to pay a policy
without a premium.

We often hear those stories about a beneficiary’s battle with a loved one’s insurance company to pay out a claim. In many cases they end with the insurance company refusing to pay. The following story is one exception.

The world shattered for Thornhill, Ontario’s Cherniavski family on June 10, 2013. The Toronto Star reported that this was the day when their beloved daughter, 28-year-old Biana, went out to walk her dog Harley and never returned. Instead, she was struck and killed by a 2001 Lexus sedan driven by 85-year-old Betty Kestenberg. Harley the dog also died.

The Lexus was traveling north on Thornhill Woods Dr, when it veered off the road and onto the sidewalk at about 8:15 p.m. hitting Biana, a driving instructor. It then continued north over several lawns, hit several trees and knocking out power to the area when it hit a hydro transformer before coming to a stop on a driveway and flipping onto its roof. Kestenberg and her husband were treated for non-life threatening injuries. She was eventually charged with stunt driving and careless driving for going more than 50 Km/h over the speed limit and not wearing a seatbelt.

That winter, the family’s insurance broker, David Shelmov came over and pitched Biana on the idea of buying life insurance. After all, she was young and it would be cheaper for her than it would be for her parents. Mom and dad presented various arguments against it. “You’re young, beautiful and strong,” they would say, “Why do you need these extra expenses?” while trying to convince her to buy insurance plans that covered prescriptions and dental care.

But Biana liked Shelmov’s idea and in early May of that year she asked him to bring over the paper work for the policy they discussed, She filled out the paperwork and sent it off, planning to send in her first premium payment once she received the policy details. In an ironic twist of fate, Shemlov was going to bring over her policy on the day of the accident that took her life. Instead, he spent the rest of the night with the Cherniavski family and called BMO in the morning to explain that though he didn’t have time to deliver the documents and receive the first premium payment, he still believed they should pay the claim and made various strong arguments to that effect.

LSM Insurance contacted Mr. Shelmov hoping for insight into what those arguments were, but he declined to be interviewed, citing any details surrounding the claim as confidential. 

None the less, he presented those arguments to BMO Insurance and was rejected twice. The insurance company reiterated that they had not received a premium payment and the policy would not be in force until June 11 — the day after Biana had died. Still, being the dogged professional that he was, he called BMO Insurance President Peter McCarthy  – who he knew personally — and left him a message. The next day, BMO’s Regional Vice-President Paul Tsourounis called him back and asked how he could help. Shelmov explained the situation and just a short three days later, Tsourounis called back with good news — President Peter McCarthy had approved the claim.

“We’re not going to delve into who’s right and who’s wrong. We simply have to make the right decision to resolve this tragic and extraordinary situation,” he reportedly said.

Whatever the reason, exactly a year later, after BMO had done their OHIP investigation as to Biana’s health status, the Cherniavski family received that hard won cheque directly from Mr. Shelmov. Nothing will bring Biana back to her parents, but the money from the insurance company certainly helped them move on with life.

As much as BMO Insurance did the absolute right thing for this family, the Cherniavski’s story does raise some important questions for the life insurance industry in Canada and the many policyholders there are across this country. 

LSM Insurance did their research and we couldn’t find any other instance of a claim being paid out without a premium being paid.

“Anytime claims are paid it adds to the effect of increased premiums for future policyowners. It was nice of BMO Insurance to do, but it was at the expense of future premium payers, not BMO’s bottom line,” points out our own Syed Raza.

“Technically, the premium was not paid and the death occurred before the issue date. So, according to contract law, the claim should not have been paid.”

Plus, as much as David Shelmov did the right thing for his client and did not give up, even when told “No,” the claim went through more because of who he knew than what he knew and one wonders if the family would have got the same treatment had they just purchased the insurance through a call centre?

All of this is food for thought, what do you think? Feel free to comment below.

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Ami Maishlish
Ami Maishlish

Richard, There is no contention that it is beneficial for all involved (consumer, broker, and insurer) if a Temporary Insurance Agreement (TIA) is applied for and issued at time of application for insurance; however, that matter remains irrelevant within the constraint and context of this story. As you should know, the TIA is conditional upon its wording and pre-requisites, and particularly on whether the insurance company would have deemed the risk acceptable. In other words, if the life insurance company would wish to contest a death claim presented on the basis of a TIA, they could do so. You could… Read more »

Richard Proteau
Richard Proteau

Ami, I am in full disagreement with you. First it is important to understand that the beneficiary received a benefit they were not supposed to receive. Why BMO did this for them and not for others? If clients become aware of this story they will believe that there is no need for Temporary insurance since BMO will pay the death benefit if they die before payment of premium. It also give the impression to other advisors that BMO will pay a death benefit if a premium is not paid, so truly these advisors don’t have to put too much energy… Read more »

Ami Maishlish
Ami Maishlish

Richard, relating to your points in your comment of 02/03/2015 at 5:55 pm: 1. Whether the insured was given the a TIA (Temporary Insurance Agreement) slip is irrelevant to the story as a whole since the TIA, in its wording (normally) is conditional to the payment of premiums AND also conditional to the policy wording, and also on the acceptance of the risk by the insurance company. 2. The “void” cheque and PAC assumes that the insured was talked into financing the premium to be paid in monthly installments (For BMO as for nearly all other insurers, the current effective… Read more »

Ami Maishlish
Ami Maishlish

It is just proper to commence this response by praising David Shelmov for his exemplary professionalism and efforts on behalf of his clients. BMO insurance, and particularly its President’s good judgement, also deserve accolades for their logic, good business sense, and fair treatment of the beneficiary. Mr. Shelmov also deserves to be recognized for the professionalism that he displayed in his good judgement to decline to disclose potentially private and confidential information about his client for the article. Such private information, IMO, would not have added to the substance nor the message of the article – an article that is… Read more »

Syed Raza
Syed Raza

Great points Richard and Ami, thanks to both of you for your valuable input. Its obvious that one payout is not going to immediately trigger higher mortality rates but its the fact that this case could now set precedence for future claims that is troublesome.

Interesting point Ami, on the insurance company possibly chalking this one up to ‘advertising/marketing’ costs but doesn’t that just sully BMO’s intention behind paying the claim?

Richard Proteau
Richard Proteau

Some puzzling information is missing. Was the client presented the temporary insurance? Also, in submitting the app there should have been 1 month premium + void cheque/PAC info. This means that the policy would have been issued on acceptance of the risk by insurer. It would just not have been delivered. The story said that this was because the client wanted to review policy. This is wrong. This is why we have a 10 days provision on a life contract for a client to change his mind. I really don’t see why the first month premium was not included…Did the… Read more »

LSM Insurance
LSM Insurance

Hi Richard, Thanks for the comment. We reached out to the insurance broker who declined to be interviewed and told us that Biana’s family would like to do the same, so we didn’t get a chance to ask them about the particulars you’re asking about. The information we do have comes from an open letter written by Biana’s family and published in a York Media Group publication.It says in that article that Biana filled out the documents and decided to make the first payment after she received approval for her policy, after which she was scheduled for a medical examination.… Read more »