Limitation period in policy trumps Limitation Act

Appeal by the insured from the dismissal of his action on the basis that the action was brought outside the one-year limitation period in the Insurance Act. The British Columbia Court of Appeal held that the trial judge erred in law in failing to apply the two-year limitation period contained in the policy and further that the policy limitation gave rise to a rolling limitation period.

Sander v. Sun Life Assurance Co. of Canada, [2011] B.C.J. No. 5, January 6, 2011, British Columbia Court of Appeal, L.S.G. Finch C.J.B.C., M.E. Saunders and K.E. Neilson JJ.A.

The appellant insured, a former dentist, received disability benefits from the respondent insurer under a group insurance policy after being diagnosed with cataracts. The insurer advised the insured in June 2001 that no further benefits would be made because the insured had refused to undergo cataract surgery as was required under the policy. The insurer provided the insured with a notice of denial by letter dated June 29, 2001. The insured underwent cataract surgery in 2003 but maintained that he was still unable to practice dentistry. He then commenced an action for disability benefits.

At issue was whether the insured’s action was barred for being commenced outside the limitation period. At summary trial, the Supreme Court of British Columbia held that the action commenced by the insured was barred by s.22(1) of the Insurance Act, R.S.B.C. 1996, c. 266 (the “Act”) which mandates that, “…every action on a contract [of insurance] must be commenced within one year after the furnishing of a reasonably sufficient proof of loss or claim under the contract…”. The summary trial judge held that the one-year limitation period was triggered when the respondent insurer provided the insured with a notice of denial by letter dated June 29, 2001. The limitation period for issuing a Writ of Summons therefore expired and the Writ of Summons was issued out of time.

The insurance policy held by the insured stated that:

“No action or proceeding against the Company for recovery of a claim under this policy shall be commenced more than two years after the date the insurance money became payable or would have become payable if it had been a valid claim.”

The Court held that the limitation period in Part 2 of the Act guarantees a minimum level of protection. However, the Court held further that the insurer must be held to the terms of the contract it provided where they are more favourable to its insured than the provisions of the Act. The Court held that insurers are only prohibited from providing a less generous limitation period than that which is prescribed in Part 2. The Court held that nothing in s.3(a) prevents an insurer from stipulating for a limitation period greater than in the Act itself. As such, the Court held that the two-year limitation period as set out in the insurance policy prevailed over that set out in the Act.

The insured argued further that the wording in the policy limitation has been interpreted in cases involving continuous entitlement to benefits as creating a “rolling” limitation period where that cause of action accrues at each successive interval at which benefit instalments are to be paid. In other words, so long as the insured continues to be entitled to benefit payments as a result of a continuous disability, the cause of action against the insurer is renewed every time a benefit becomes payable.

The Court held that upon review of the insurance policy, it was clear that the insured had a right to monthly benefit payments so long as he met the conditions of the insurance policy with regard to total disability. The risk insured against was continuing total disability and in that sense, insurance money was also payable on a continuing basis after the prescribed elimination period. As such, the Court concluded that each benefit payment gave rise to its own limitation period and the insured had a continuing claim through the period of disability. That claim was not extinguished by the failure to sue within two years of the commencement of that continuum. The insured’s claim accrued monthly and therefore the limitation must be viewed as commencing a new on each successive entitlement.

The appeal was allowed and the order of the summary trial judge set aside. The action was remitted to trial for determination of whether the insured was entitled to benefits under the insurance policy for the period of two years preceding the date on which he issued the Writ of Summons and anytime thereafter.

This case was digested by Aaron D. Atkinson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at or or review their biographies at

Grow-ops qualify as an act of vandalism


An insured homeowner sought insurance coverage for the damage caused by a marijuana grow-operation carried out by  the insured's tenants.  The insured argued that a grow-op falls within coverage for vandalism or malicious acts.   The insurer argued that mould and moisture damage caused by the grow-op fell outside of coverage. The British Columbia Supreme Court held that a tenant who has a grow-op shows a reckless disregard for the landlord's rights.   That disregard provides a sufficient basis to infer malice on the part of the tenant.  The Court held that the mould and moisture damage caused by the grow-op can therefore be considered damage caused by an act of vandalism.

Hanlon v. ING Insurance Co. of Canada, [2011] B.C.J. No. 84, January 24, 2011, British Columbia Supreme Court, R.J. Sewell J.

The insured’s home was rented to tenants who caused considerable damage in the course of carrying out a marijuana grow operation. The insured had a home insurance policy with the Defendant insurer that provided coverage for certain specified perils. At issue was the Vandalism Or Malicious Acts peril.

At the summary trial, the insurer sought a declaration that damages were limited to $5,435.33, while the insured sought a declaration that she was entitled to coverage under the policy for all damage.


The insurer recognized coverage for damage caused by the tenant such as cutting holes in walls, damaging carpeting and destroying plumbing. However, the insured’s home had significant mould and moisture damage and the insurer denied coverage for damage that was caused by excess humidity.


The insurer argued that the excess heat and moisture were caused by poor tenant maintenance and/or wear and tear and neither was covered under the policy. Further, the insurer argued that the mould and moisture damage could not be said to be caused by acts of vandalism because the tenants did not intend to cause such damage.


The insured argued that the marijuana grow operation was an unlawful act and that as a necessary part of that act the tenants created an excessively warm and moist environment. In doing so, the tenants acted with reckless disregard for the insured’s home. Essentially, a person who acts recklessly has the requisite intent to constitute his actions to be acts of vandalism.


The Court referred to and adopted Bowers v. Farmers Insurance Exchange, (2000) 99 Wash App. 41, 991 P. 2d 734, where the Court of Appeals of Washington State held at paragraph 4 that “malice can be inferred from the act of destruction. It is sufficient if the actor is guilty of wanton or intentional disregard of the rights of others.” The Court found that the tenants’ acts of turning the insured’s home into a grow op were clearly wanton in that they showed reckless disregard for the landlord’s rights.


The insurer also argued that coverage was only provided for damage caused directly by vandalism and the mould and moisture damage was not directly caused by vandalism but by a chain of events leading to the damage. The insured perils portion of the policy read as follows:


You are insured against direct loss or damage caused by the following perils as described and limited: …


7.         Vandalism Or Malicious Acts…


The court found that the word “direct” was used as an adjective to describe the damage or loss and not as an adverb to describe or modify the verb “caused”. Therefore, the Court saw no restriction on the application of the ordinary meaning of the word “caused”. As a result, the Court found that the mould and moisture damage was caused by the marijuana grow operation.  Accordingly, the insured’s declaration was granted.




This case was digested by Aaron D. Atkinson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at or or review their biographies at


Morally blameworthy civil conduct proved on balance of probabilities

In this case, a homeowner ("Johnson") brought an action against his insurer ("AXA").

Following a fire at his house, AXA denied coverage for a fire loss because it alleged Johnson failed to disclose the presence of a massage parlor in his basement suite and, further, that Johnson himself had started the fire.

The court held that Johnson had made a material misrepresentation in the application for insurance and had committed arson with respect to the fire loss at issue, and upheld the denial of coverage.

In doing so, the court reaffirmed that morally blameworthy civil conduct, such as arson, need only be proved on a balance of probabilities.

Johnson v. AXA Pacific Insurance Co., [2011] B.C.J. No. 414, March 14, 2011, British Columbia Supreme Court, T.C. Armstrong J.

Johnson owned a 4,100 square foot house in Surrey, British Columbia. He purchased the house in May 2001 for the sum of $220,000 and lived in the house over the relevant time period. After 2003, he invested about $40,000 in renovating the house. Johnson created two suites in the house. At the time of the fire, the basement suite was rented by Julie McNamara and the upstairs suite was rented to Alex Ingram. On September 10, 2007, the fire started in three distinct areas on the second floor of the house.

In June 2007, Johnson purchased fire insurance for the house through Gold Key Insurance. In the application for insurance, Johnson was asked questions about the house and indicated "no" to the question as to whether there were going to be any business operations at the location. Mr. Johnson also answered "no" to the question as to whether there were any other income producing opportunities at the house. Johnson acknowledged signing the application but stated that he did not read the small print.

Julie McNamara testified for AXA. She rented the suite but used it only for her aromatherapy and massage business. She and her daughter resided in a townhouse in a different location in Surrey. Ms. McNamara testified that she had advised Johnson of her use for the suite. Ms. McNamara did not have a business licence to operate her massage practice at the house. The Court accepted Ms. McNamara's evidence noting that it would not make sense for her to pay rent on two residential units unless one was used for a purpose other than a home. As well, Ms. McNamara had no apparent motive to be untruthful in her evidence and was not successfully challenged during cross examination.

AXA argued that the failure to disclose this business operation at the house was a material misrepresentation on the application for insurance. AXA called evidence from an expert in insurance underwriting, Ms. Patricia Stirling, an Underwriting Manager with BCAA Insurance Corporation, who noted that additional information would have been required if the business use had been disclosed. If the business use had been acceptable, it could have been approved but with increases in premiums and higher deductibles. A second witness on the issue, a personal lines underwriting manager with AXA, also gave evidence that the information with respect to business use would have been material to the consideration of the application. In this case, the personal lines manager noted that it was unlikely that the risk would have written as aromatherapy was not an approved business.

The Court noted that Johnson was obliged to make an honest and full disclosure of the use of property to AXA. The Court found that Johnson intentionally failed to disclose to the insurance agent the use or intended use of the suite by Ms. McNamara for her aromatherapy/massage business. The Court noted that it was irrelevant whether the insured's failure to disclose was deliberate, inadvertent, overlooked, or unintended: Lafarge Canada Inc. v. Little Mountain Excavating Ltd., 2001 BCSC 218. The Court held that the failure to disclose material information was fatal to the insured's claim under the policy. AXA met the burden to show that it was acting as a reasonable or a prudent insurer in treating the non-disclosure by Johnson as material to the risk and was entitled to void the policy for this reason: see Kehoe v. British Columbia Insurance Co (1993), 28 B.C.A.C. 68. The Court specifically held that Johnson had signed the application and could not avoid the consequences of the deficiencies in his disclosure even if he had not read the application and documents, citing Lee v. Canadian Northern Shield Co., 2005 BCSC 866.

The Court went on to review the elements of arson noting that AXA needed to prove, on the balance of probabilities, that it was more likely than not that Johnson intentionally caused the fire. The elements to be considered in this analysis were:

- the fire was of an incendiary origin;
- Johnson had sufficient motive that the fire be set; and
- Johnson had the appropriate opportunity to do so.

The Court reviewed these elements and the law with respect to the burden of proof as set out by the Supreme Court of Canada in F.H. v. McDougall, 2008 SCC 53, where the Court had confirmed that there was no higher burden of proof for allegations of arson than the civil standard.

In this case, the fire causation experts gave persuasive evidence that the fire was caused by an incendiary act due to well defined multiple origins and the absence of any viable accidental cause. As well, positive test results for gasoline were found at the points of origin and a gasoline jerry can lid was located in one of the bedrooms. Johnson did not challenge the opinion of the fire causation expert with respect to the cause of the fire.

The Court rejected Johnson's evidence with respect to the possibility that another individual may have set the fire. The Court noted that Johnson agreed that he had left his doors open but stated that he had left his dog in the house to guard against burglars. However, he went on to admit that the house had been broken into over 40 times prior to the fire including many times when the dog was present. Johnson did not provide any compelling evidence that any other individual entered the house. The Court noted that there was no evidence of anyone else being at the property at the time and no suggestion that Johnson had any enemies or other persons who might have wanted to burn his house. Johnson did not argue that the fire was caused by an intruder. The Court held that there was no rational alternative to Johnson being the probable fire-setter. Though not impossible, it was too speculative to contemplate that an unknown third party would have sufficient motive and opportunity to plan this fire and go through the convoluted process of lighting gasoline in multiple suites in the circumstances of the case. Based on all the evidence, the Court concluded that Johnson had an almost exclusive opportunity to light the fire.

The Court reviewed the evidence with respect to Johnson's financial difficulties. He had failed to pay his utility bills and his ex-wife was advancing a support claim of over $200,000. He had been off work for some time as a result of an injury and was in arrears on his mortgage payment. The Court noted that financial problems were the most common motives alleged and accepted for people to commit arson of their own property, citing Abmrus v. Prudential Assurance Co. Ltd. (1989), 41 C.C.L.I. 115 (B.C.S.C.). A degree of financial strain making the acquisition of money important at the time of the fire provides evidence of motive for arson: Lally v. Safeco Insurance Co. of America (1990), 49 C.C.L.I. 83 (B.C.S.C.). On the basis of the evidence, the Court was satisfied that Johnson was in sufficient financial difficulty that he needed money at the time.

The Court concluded that it was more likely than not that Johnson had started the fire. In the result, the Court held that Johnson had started the fire and breached his insurance policy and dismissed the action.

This case was digested by Jonathan D. Meadows and edited by David W. Pilley of Harper Grey LLP.