Canadian PressMany banks operating in Canada have decided to waive a controversial exclusion clause in their mortgage policies that was making it difficult for widows of Canadian soldiers killed in Afghanistan to collect on their insurance.
The Canadian Bankers Association said Tuesday it surveyed its members to find out if they applied an act-of-war clause on their mortgage insurance and found they have chosen to remit them for Canadian Forces personnel serving in Afghanistan.
Spokeswoman Maura Drew-Lytle said it's not clear how many banks actually have the clause in their policies, but it appears most do not.
"We have gone to the banks, as this has come up, and they've certainly told us that they will waive it," she said from Toronto.
Finance Minister Jim Flaherty announced in the House of Commons on Monday that he had sent a letter to banking officials, asking that they clarify the industry's position on the issue.
In response, the association said its members will not "refuse to pay a claim on a mortgage life insurance or a mortgage disability policy because the insured died or was injured while serving in Afghanistan."
Flaherty said he was pleased with the position, but will continue monitoring the situation to make sure widows are getting the payments he says they deserve.
"They absolutely did the right thing and I'm sorry the issue came up in the first place, quite frankly," he said in an interview Tuesday after the issue was again raised in the House.
"The financial institutions have straightened this out."
Flaherty raised the question after media reports suggested widows of soldiers killed in Afghanistan were told by their banks or insurance companies that the mortgage insurance they'd spent years paying into didn't apply because their spouses died in combat.
Maureen Gillam, whose husband, Sgt. Craig Gillam was killed last October in a rocket attack near Kandahar, said she received a letter last week stating she could not benefit from her mortgage insurance because of an act-of-war clause.
However, hours after a reporter questioned Manulife Financial about the issue, the institution reversed its position and determined it would pay off the mortgage.
Others have found the process of figuring out whether their mortgage is covered to be confusing and fraught with mixed messages.
Kendra Mellish, whose husband Warrant Officer Frank Mellish died last September in a firefight in Afghanistan, said she was initially told she would likely not be able to collect on her mortgage insurance because of a war exclusion clause.
She pursued the issue with officials at the Bank of Montreal and, months after she continued to pay the mortgage, was informed the bank had no such exclusion clause and would begin payments.
In another case, Cpl. Kelly Dove said she was initially told by Scotiabank that her mortgage would not be paid after her husband, Warrant Officer Rick Nolan, died last September.
But after Christmas, the bank informed her the mortgage would in fact be covered.
The bankers association represents 54 chartered banks operating in Canada, and provides about 60 per cent of the residential mortgage market.
Drew-Lytle said there are other companies that provide residential insurance that are not represented by the association.
The Defence Department also offers life insurance from the government to cover debts up to $400,000 in case of death while in service.
Flaherty said he planned to raise the issue of insurance when he meets with military officials in the coming days.