An insurer does not have to advise an insured about a limitation period despite the fact that the insurer intends to rely on the limitation. Funds paid to an insured in error may not be recoverable from a bankrupt insured.
An Insured’s claim for benefits under an overhead expense policy was dismissed where the Court held that the claims were barred by the expiry of the limitation period. The Insurer’s counterclaim for disability benefits paid out in error was also dismissed where the Insured was bankrupt and the Insurer could not establish the benefits were obtained by fraud.
Here is the citation: Armstrong v. Provident Life and Accident Insurance Co. [2007] B.C.J. No. 1282. British Columbia Supreme Court. Gray J. June 12, 2007.
Here is a link to the decision.
This case was originally digested by Jonathan Meadows and edited by David Pilley.
The insured dentist ("Armstrong") claimed $63,600 plus interest for benefits for the period July 4, 2003 to July 3, 2004 under a one-year overhead expense policy issued by a predecessor company of RBC Life Insurance Co ("RBC").
An action was commenced by Armstrong on September 10, 2005. RBC denied the claim under the overhead expense policy on the basis that it was barred by the limitation period set out in the policy and in the Insurance Act, R.S.B.C. 1996, c. 226. Armstrong argued that RBC waived the limitation period by its conduct in asking him for further information both during and after the limitation period without advising him that it was relying on that time limitation.
Both parties agreed that the overhead expense policy was properly classed as accident and sickness insurance and that the applicable limitation provision was section 89 of the Insurance Act. Section 89(12) provides for a "rolling limitation period" as follows:
An action or proceeding against the insurer for the recovery of a claim under this contract must not be commenced more than one year after the date the insurance money became payable or would have become payable if it had been a valid claim.
The policy had a 30 day Elimination Period. Armstrong’s claim was for the period commencing July 4, 2003 and his completed disability claim form was date stamped September 3, 2003. Therefore, if the claim was proven, RBC was required to pay the initial benefits within 30 days, by October 3, 2003 and to pay subsequent months within each succeeding 30 day period. Applying the "rolling limitation period", the Court held that Armstrong should not have sued for the first two months of benefits after October 4, 2004 and for benefits for the following months on the 3rd or 4th of each corresponding month in 2004 and 2005. He should not have sued for the final month of benefits after August 4, 2005. In fact, Armstrong sued on September 13, 2005, a month after the last date allowed under the limitation.
The Court then reviewed the issue of whether the actions of RBC gave rise to waiver or estoppel. The Court noted that the leading decision regarding the application of the doctrine of estoppel to limitations periods contained in the policies of insurance was the Supreme Court of Canada decision in Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50. In that case, the Court held that to establish waiver, the Insured must establish that the Insurer had, by words of conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. Furthermore, the Insured must establish that, in reliance on the representation, he acted on it or in some way changed his position. In this case, the Court held that there was nothing in the correspondence between Armstrong and RBC suggesting that RBC unequivocally intended to abandon its rights under the limitation period.
The Court noted that there was no legal obligation on the part of the Insurer to state in positive terms that it will rely on a limitation period. In the result, Armstrong’s claim benefits under the overhead expense policy was dismissed as the claim was barred by the expiry of the limitation period. RBC had brought a counterclaim seeking the return of approximately $125,000 in disability benefits paid out to Armstrong in error. A disability policy had been issued to a different dentist with the same first and last names as Armstrong and RBC’s claims staff provided Armstrong with a claims form for that policy at the time he was making his claim under the overhead expense policy. Armstrong filled out the claims form but advised the RBC claims person that he did not believe he had such a policy, although he could not be sure as his accountant paid his premiums for him. The mistake was ultimately discovered and RBC sought a return of the funds. By that time, Armstrong had made an assignment into bankruptcy.
The Court held that the counterclaim could not proceed as RBC was unable to establish that Armstrong acted fraudulently and, therefore, section 178(1)(e) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 did not protect the claim from the order of discharge.
