Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

The Plaintiff commenced an action against the Defendant insurer for disability benefits under a group benefits policy issued by the Plaintiff's employer. The Defendant argued that the Plaintiff's claim was barred by a time limit imposed by British Columbia's Insurance Act. Under the Act, "every action on a contract must be commenced within one year after the furnishing of reasonable sufficient proof of loss or claim under the contract and not after."

The parties agreed that there must be a clear and unequivocal denial of further benefits in order to trigger the limitation period. However, they disagreed on whether such a denial had occurred. The Defendant submitted that a letter to the Plaintiff advising his benefits would terminate on December 4, 2004 constituted a clear and unequivocal denial of further benefits. The letter read:

"There is insufficient medical evidence to support the reported restrictions and limitations and to support a continued absence from work. Therefore your file has now been closed.

If you disagree with this decision, you have a right to appeal. You will need to send us a letter explaining the reasons you feel a review is necessary. This will need to be supported by further medical information not already on file."

The plaintiff relied on the continued communication between himself and the Defendant's representatives pursuing the various levels of appeals of the Defendant's decision to argue that there had not been a clear and unequivocal denial of further benefits.

The Court reviewed the case law in this area and concluded that the legal test for the commencement of the limitation period was clear: the clear and unequivocal denial of benefits test agreed to by the parties. The Court also determined that whether there had been such a denial was a question of fact. The Court found that on the facts of the case, the Defendant's letter advising the Plaintiff of the closure of the Plaintiff's file constituted a clear and unequivocal denial of benefits and that a mere willingness to entertain an appeal if the Plaintiff were to obtain new evidence did not render the denial equivocal.

The Plaintiff was covered by a group policy of insurance with the Trustees of the Office and Professional Employees International Union Local 378 Ltd. Trust. The policy provided long-term disability coverage to eligible employees. The Plaintiff became disabled from performing the usual and customary duties of her own occupation on July 8, 2003. She received sick benefits from her employer from that date until October 21, 2003. On October 21, 2003, Co-Operators Life Insurance Co. began paying benenfits to the Plaintiff under the terms of the policy. She was eligible for own occupation benefits until October 18, 2005. By letter dated July 27, 2005 Co-Operators advised that as a result of a report from an independent medical examination, the Plaintiff would not receive benefits beyond October 18, 2005.

The Plaintiff sent Co-Operators additional information, and on August 23, 2005 Co-Operators wrote to the Plaintiff and advised her that they had received the additional medical information. The letter also stated that she would receive benefits until October 18, 2005 and then her file would be closed.

The parties agreed that s. 22 of the Insurance Act governed the litigation. The Court applied the decision of Balzer v. Sun Life Assurance Company of Canada, 2003 BCCA 306 and found that the limitation period ran from the date of the termination of the benefits, not the notice of the termination of the benefits. Accordingly, the limitation defence was struck and the Plaintiff could bring her action on the merits.

Pansy Burry was insured under a fire insurance Policy (the “Policy”) at the time when her house was destroyed by fire on December 31, 2000. She was represented by counsel, and made a claim for insurance benefits after December 31, 2001. Co-operators General Insurance Company (“Co-operators”) had issued the policy, and denied her coverage on the basis that statutory condition 14 of the Fire Insurance Act requires any claim for insurance proceeds to be made within one year of the occurrence. 

Ms. Burry commenced an Action for entitlement to insurance proceeds under her insurance policy. Ms. Burry was successful at trial against Co-operators based on the decision of the Supreme Court of Canada in K.P. Pacific Holdings Ltd. v. Guardian Insurance Co. of Canada, 2003 SCC 25, [2003] 1 S.C.R. 422. Co-operators appealed the declaration. In hearing the appeal, Roberts J.A. noted the reasoning relied upon in K.P. Pacific Holdings Ltd. for not applying the limitation periods contained in the legislation pertaining to policies providing fire insurance to all-risks or multi-peril policies is equally pertinent to the case at Bar. There is nothing in the language of the Fire Insurance Act which exempted it from K.P. Pacific’s persuasive authority. The trial judge did not err in deciding as he did and the appeal was dismissed. 

A second issue raised on appeal was: even if the statutory condition did not apply, was the limitation period still valid since it had been incorporated into the wording of the insurance policy? Roberts J.A. cited the decision of the Manitoba Court of Appeal in Royal Bank of Canada v. Red River Valley Mutual Insurance Co. (1986), 28 D.L.R. (4th) 595 for the proposition that:

…The mere fact that the statutory conditions are printed on the policy form does not mean that they have been adopted contractually by the parties. Their inclusion in the policy form is a requirement of the Act…. Whether or not the statutory conditions, in addition to being a statutory requirement, have been adopted contractually by the parties must depend on the circumstances of each case. [p. 601]

The Newfoundland Labrador Court of Appeal found the reasoning of Twaddle J.A. in Royal Bank of Canada persuasive and dismissed this aspect of the appeal as well.

Ms. Silva worked for Teknion. RBC Life Insurance Company (“RBC”) became her disability insurer when Teknion purchased employee disability insurance on her behalf (the “Policy”). Ms. Silva was injured in an accident in the Fall of 1996. On December 12, 1996, she ceased working as a spot welder at Teknion due to injuries suffered in a motor vehicle accident. On January 12, 2000, she was terminated by Teknion. On October 7, 2004, almost eight years after the accident, Ms. Silva submitted an application for disability insurance to RBC Life. 

On January 21, 2005, RBC advised Ms. Silva that her claim for benefits was denied because it was out of time. On June 16, 2006 Ms. Silva commenced an action against RBC for a declaration of entitlement to benefits (the “Action”). The action was commenced more than ten years after the accident, nine years after the date by which proof of claim was to be submitted under the Policy, and six years after the last time the Action could have been commenced under the relevant limitation legislation. The Plaintiff sought relief from forfeiture to remedy her failure to comply with both the notice requirements in the Policy and the statutory limitation period. Section 328 of the Insurance Act, R.S.O. 1990, c. I-8, provides relief from forfeiture as follows:

328. Where there has been imperfect compliance with a statutory condition as to any matter or thing to be done or omitted by the insured, person insured or claimant with respect to the loss insured against and a consequent forfeiture or avoidance of the insurance in whole or in part, and any court before which a question relating thereto is tried deems it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it deems just.

The essence of Ms. Silva’s claim was that she had a very poor grasp of the English language; the highest grade she completed in school was Grade 4 in Portugal, and that she was unaware of the existence of the Policy. Her counsel noted that permanent disability claims are continuing claims and for that reason are not susceptible to be extinguishment by limitation periods in the way that other actions may be. RBC relied upon Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., (1989), 62 D.L.R. (4th) 236 in which the Saskatchewan Court, in dealing with a provision similar to section 328 of the Insurance Act, noted as follows:

The case law has generally treated failure to give notice of a claim in a timely fashion as imperfect compliance whereas failure to institute an action within the prescribed time period has been viewed as non-compliance or breach of a condition precedent. Thus the courts have generally been willing to granting relief against forfeiture where notice of claim has been delayed.

On the other hand, cases in which failure to meet a time requirement has been held to be non-compliance rather than imperfect compliance have largely been cases in which the time period was for the commencement of an action rather than for the giving of notice: [authorities omitted]

Hoilett J. determined that RBC suffered real prejudice due to Ms. Silva’s delay. Nearly a decade had passed without RBC having the opportunity to conduct reasonable medical investigations in relation to Ms. Silva’s health. Granting of relief from forfeiture, assuming it was even available for failure to comply with the limitation period, would render the whole concept and purpose of limitation periods nugatory. Hoilett J. dismissed the Plaintiff’s claim.

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.

The Trial Judge dismissed the Insured’s action against his Insurer, but left the action against his lawyer untouched.

On appeal, the Court of Appeal upheld the Trial Judge’s decision finding that the Insured’s reliance on his lawyer’s advice was not a reasonable excuse for failing to file his claim with the Insurer in time. The Trial Judge was entitled to conclude that the Insured had an alternative to the action against his Insurer in the form of an action against his lawyer and as such, would not suffer significant hardship from the dismissal of his action against the Insurer.

Of note, the Ontario Court of Appeal commented that relief from forfeiture is an equitable remedy and is purely discretionary, therefore requiring an examination of all relevant facts.

Aviva Canada Inc. ("Aviva") issued a comprehensive owner’s policy (the "Policy") to the Dewhirsts (the "Insureds"). On March 1, 2003, the Insureds’ daughter held a party on the Insureds’ deck. Unfortunately the deck collapsed. Approximately 45 people were on the deck. As a result of the collapse, seven parties have commenced actions against the Insureds. Many of the people injured in the collapse were minors at the time and consequently, the limitation dates for commencing actions may not commence until they reach the age of majority. Aviva wished to enter into settlement negotiations with the existing claimants. However, Aviva wished to be credited for funds paid under the policy such that it would not be liable for future claims in excess of its policy limits.

Aviva took a variety of steps to locate additional potential claimants, including obtaining a list of the individuals at the social event, phoning each individual on the list and leaving messages for them, writing letters to the individuals, placing ads in newspapers, and asking individuals who had been contacted to pass on Aviva’s adjuster’s name and number on to people whom they knew or suspected having had been at the social event. Despite these efforts, a number of people who attended at the social event have not been contacted.

Aviva sought a declaration that it is entitled to pay settlements and judgments on behalf of the Insureds in chronological order in which defendants’ costs, settlements and judgments incur, that the amounts paid will reduce the limits of liability specified in the policy, and that no additional relief for the incident will be available once the policy limits have been exhausted.

Wong J. noted that Aviva sought a declaration that British Columbia courts adopt the "first past the post" approach in regards to the allocation of insurance policy limits in the non-automobile context. The "first past the post" approach means that insurers pay insurance proceeds to judgment creditors in the order in which the creditors obtain judgment. It also applies to settlements negotiated on behalf of the insured. As such, insurers are free to pay judgment creditors as soon as judgment is obtained and to settle with claimants with the knowledge that the insurer’s aggregate policy limits will be reduced accordingly. Once the policy limit has been realised, the insurer’s liability would be extinguished.

In British Columbia, the Courts have interpreted the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 and Part 6 of the Insurance Act, R.S.B.C. 1996, c. 226 to mean that insurance proceeds, in the automobile context, are to be distributed to successful third party claimants on a pro rata basis. Wong J. noted that Bartkow and Walker v. Merit Insurance Co., [1962] I.L.R. 336 (B.C.C.A.), Henry v. Zurich Insurance Co. (1998), 50 C.C.L.I. (2d) 35 (B.C.S.C.) and Regency Plymouth Chrysler Inc. v. ICBC (1999), 11 C.C.L.I. (3d) 94 (B.C.S.C.) support this proposition. However, Wong J. stated that in contrast to the automobile context, third party claims in the non-automobile context are governed solely by s. 24 of the Insurance Act. Wong J. determined that s. 24 of the Insurance Act does not use the same limiting language present in s. 21 of the Insurance (Motor Vehicle) Act and s. 159 of the Insurance Act.

Wong J. noted that in Ontario, the Ontario Superior Court of Justice in Solway v. Lloyd’s Underwriters (2005), 22 C.C.L.I. (4th) 138 (Ont. S.C.J.) and the Alberta Queen’s Bench in Commerce & Industry Insurance Co. of Canada Inc. v. Singleton Associated Engineering Ltd., 2005 ABQB 500, have applied the "first past the post" approach in the property insurance context. Applying a pro rata obligation in this context would require claimants who have diligently brought their claims forward to wait until all potential claimants have come forward and had their cases heard. In addition, Aviva took steps to ensure that all potential claimants were identified and provided with an opportunity to initiate their claims.

Wong J. determined that public policy suggest that British Columbia should adopt the "first past the post" approach, as it encourages early settlement that lessens the burden on the Courts, rewards claimants who diligently move their claims forward, and affords judgment creditors the opportunity to realise the fruits of their judgments as soon as possible.

In 1995, Connor McIlvenna (the "Infant Plaintiff") was hit by a car. He was six years old. He suffered a head injury. Initially he appeared to make a full recovery. In the months immediately following the accident, the Insurance Corporation of British Columbia ("ICBC") paid a small amount of benefits under its First Party Insurance provision. In 2001, intellectual and learning impairments became apparent in the Infant Plaintiff and his mother requested rehabilitation assistance from ICBC. ICBC refused to provide any benefits because the two-year limitation period set out in the Regulations had expired. The limitation period applies even if a child is involved.

The Infant Plaintiff commenced an action against ICBC for failing to advise the Infant Plaintiff’s mother about his entitlements to first party benefits, including advice about the kind of therapy and treatment that could have been funded and the existence of a limitation period; and for failing to recognise the possible future implications of a brain injury in a child, including a failure to make further inquiries and, if necessary, specifically recommend or initiate appropriate therapy or treatment. ICBC brought a summary application to have the Statement of Claim struck on the basis that the pleadings did not disclose a reasonable cause of action.

In determining whether a viable cause of action existed, Smith J. relied upon Cooper v. Hobart et al, [2001] 3 S.C.R. 537, for the proposition that the Court must apply a two-part test set out in Anns v. Merton London Borough Council, [1978] A.C. 728. The two part test requires the Court to first decide whether there was sufficient proximity between the parties to create a prima facie duty of care, and if so, whether there were any factors negating such a duty.

Smith J. concluded that the first pleading, the duty to advise the Infant Plaintiff’s mother about his entitlement to benefits, fit within a well established category of negligent misstatement in circumstances where one party is reasonably relying on another parties superior knowledge or expertise. Smith J. noted that Fletcher v. Manitoba Public Insurance Corp., [1990] 3 S.C.R. 191, is an example of such a case. In Fletcher, the Supreme Court of Canada held that a public insurer had a duty to advise purchasers of liability insurance that underinsured motorist coverage was also available. The Court held that the relationship between the insurance customer was of sufficient proximity to impose liability for negligent misstatement. Smith J. distinguished this situation from Esau v. Co-operators Life Insurance Co., 2006 BCCA 249 and Pekarek v. Manufacturer’s Life, 2006 BCCA 250 on the basis that the Plaintiffs in those cases knew or ought to have known that the insurer was taking a position adverse to their interest. The adversity changed the relationships between the parties and negated any suggestion of reasonable reliance on advice from the insurance companies.

Smith J. determined that the second duty alleged by the Plaintiff, that in addition to his duty to advise about what benefits are available, the insurer owes a duty to independently recognise treatment and therapy needs and take the initiative in recommending or providing them, does not fall within the same established category. Smith J. noted that the Claimant’s own treating doctors and therapists did not recognise any care that was needed at the time that the benefits were denied. He determined that an independent duty on ICBC to ensure treatment could create an intolerable situation for a claimant if ICBC, in furtherance of its duties, recommended or initiated a course of treatment that the Claimant’s own doctor did not agree with. Smith J. struck the second cause of action on the basis that it did not disclose a reasonable cause of action, but allowed the first cause of action.

The insured was injured in a motor vehicle accident. A neurologist authored a report in August 2003 which stated that the insured was catastrophically impaired. Following receipt of the report, the insurer advised the insured that it would require her to undergo an assessment at a designated assessment center ("DAC") to determine whether she was "catastrophically injured" within the meaning of the Insurance Act.

In December 2003, the insurer received the insured’s Application for Determination of Catastrophic Impairment ("ADCI"). Pursuant to section 40(2) of the Statutory Accident Benefits Schedule, Ontario Regulation 403/96 (SABS), the insurer had to respond within 30 days of receiving the ADCI. By oversight, the insurer only became aware of the insured’s ADCI in April 2004 and failed to respond to the ADCI within the required time frame.

The Court noted that the SABS was silent as to the consequences of the insurer’s failure to comply with the timelines set out therein. The Court held that the insurer’s failure to comply with the timelines was a procedural error that, in the circumstances, had not created any prejudice to the insured. The Court, in the absence of any statutory direction, rejected the notion that the catastrophic impairment designation followed automatically from the insurer’s non-compliance with the timelines set out in the SABS. The Court dismissed the insured’s application for partial summary judgment.

This was a claim by the Jesuit Fathers of Upper Canada ("Jesuits") against their Insurer Guardian Insurance Co. of Canada ("Guardian"). The Jesuits claimed that Guardian had a duty to defend them pursuant to the terms of a CGL policy in actions alleging sexual abuse at the Indian Residential School which they had administered until 1958.

The Jesuits purchased an annual CGL policy from Guardian in 1988. By January 1994, the Jesuits became aware of allegations of abuse of students at the school. Counsel for one of the students, Mr. Cooper, informed the Jesuits by letter dated January 27, 1994 of his client’s claim detailing physical and sexual abuse. Counsel for the Insureds wrote to the Insurer on March 18, 1994 to raise the possibility that the Jesuits might be facing other claims in the near future. The letter identified the nature of the possible claims and the names of Mr. Cooper, in addition to nine other victims. As a result, the Insurer refused to renew the policy beyond September 30, 1994 after which numerous additional claims alleging similar allegations were made. With the exception of Mr. Cooper’s claim, the Insurer refused to defend any claims arising from the operation of the School because they were only "first made" after the expiry of the policy and were not covered by the policy.

The trial judge construed the insurance contract as a claims-made policy and found that Mr. Cooper’s claims and the claims on behalf of the nine victims mentioned in the March 18, 1994 letter to the Insurer fell within the temporal limit of the policy and that the Insurer had a duty to defend against them. The Court of Appeal upheld the decision.

The Supreme Court of Canada dismissed the appeal but found that except for Mr. Cooper’s claim, the Insurer had no duty to defend the actions against the Jesuits resulting from the administration of the school. This was a claims-made policy and the occurrence based elements of the policy did not expand the coverage available. The clause limiting the scope of the insurance coverage suggested that a claim must be actively made as opposed to merely being discovered. This interpretation of the word "claim" was consistent not only with the wording of the policy, which distinguished between an "occurrence or circumstance" and a "claim", but also with the definition of "claim" under the common law, which requires a third party to communicate an intention to hold the insured responsible for damages. While a third party may communicate this intention through a representative, the key is that the representative be accurately communicating the intent of the claim and that this be done with the claimant’s full knowledge and approval.

Except in the case of Mr. Cooper, there was no intention communicated by former students or their representative during the policy period to hold the Insured responsible for damages and, as a result, the Insurer did not have a duty to defend the actions. The trial judge erred in concluding that there were claims made by the other nine individuals named in the March 18, 1994 letter to the Insurer because nothing in the records suggested that the person who gave the names of these individuals to the Jesuits’ investigator had the permission of these individuals to communicate an intention to hold the Jesuits responsible for injuries suffered at the School.