As between the limitation period in an insurance policy and the limitation period set out in Section 22(1) of the Insurance Act of British Columbia, the limitation period in the policy prevails so long as it is not shorter than that prescribed by Section 22(1).
Colgur v. Manufacturers Life Insurance Co.,  B.C.J. No. 1644, August 17, 2009, British Columbia Supreme Court, C.E. Hinkson J.
The Defendant Insurer applied for a dismissal of the Plaintiff Insured's claim. The Insured was employed by the Royal Bank of Canada as a customer service representative. The Insurer provided insurance coverage, including long term disability coverage for the bank's employees, including the Insured.
The Insured developed laryngitis and, as a result, was told to rest her voice. She attempted to return to work but was unable to do so. On the advice of her employer, she accepted short-term disability benefits for eight weeks. After the Insured's short-term disability benefits were exhausted, she applied to the Insurer for long-term benefits based on her doctor's then diagnosis of "muscular tension dysphonia". The Insurer approved her application for long-term disability benefits. The Insured was advised that if her medical condition prevented her from performing the duties of her own occupation, she would, in approximately 18 months, be eligible for disability payments only if she was unable to work at any occupation for which she was qualified, or might reasonably become qualified by training, education or experience.
The Insured was eventually advised that her claim would be closed at the expiration of the 18 month period as she was no longer entitled to disability benefits. Approximately six months after the Insured's benefits were cut off, she received a new diagnosis of conversion disorder and advised the Insurer. The Insurer rejected the Insured's claim for benefits based on the new diagnosis and the Insurer issued a Writ of Summons.
The Insurer brought this application to have the Insured's claim dismissed on the basis that section 22(1) of the Insurance Act of British Columbia requires that "every action on a contract must be commenced within one year after the furnishing of reasonably sufficient proof of a loss or claim under the contract and not after".
In this case, the policy provisions that applied to the Insured's claim, on a literal rating, permitted the Insured to commence legal action two years after the last day on which a proof of claim would be accepted under the terms of the policy. Thus, the issue before the Court was which limitation period applied. If section 22(1) of the Insurance Act applied, the Insured had not brought her claim within time whereas, if the limitation period in the policy applied, the Insured had brought her claim within time.
The Court found that while section 3 of the Insurance Act prevents an Insurer from contracting for a limitation period shorter than that provided for in the Insurance Act, there is nothing in section 3 that prevents an insurer from contracting for a period greater than that in the Act. The Court also granted the Insured relief from forfeiture as she had failed to formally file a proof of loss, which the Court viewed as imperfect compliance given the circumstances of the case. In the result, the Insurer's application was dismissed.