Providing the Policy

The practice of insurance litigation often revolves around complicated issues of policy interpretation and application. However, some very basic aspects of policies of insurance can result in debate. It is valuable to reflect upon these “basic” issues to avoid unnecessary legal disputes. Perhaps the most basic of all of these is an insurer’s obligation to provide the policy of insurance to its insured, complete with all terms and conditions.

PROVIDING THE POLICY

The law of insurance requires that all terms and conditions of a policy of insurance be fully set out in said policy, or else be set out in writing in a document securely attached to and properly referenced by the policy of insurance. The logical extension of this legal requirement is that the policy of insurance — containing all of the terms and conditions — is provided to the insured following issuance of the policy.

The precise legal requirements and the consequences of an insurer’s failure to comply with the applicable legal requirements vary from province to province. Stated in general terms, if an insurer fails to properly set out the terms and conditions, or fails to deliver the policy or to draw the terms and conditions to the attention of the insured, the insurer will not be permitted to rely on those terms and conditions to the detriment of the insured.

Over the years, the common law has addressed various questions relating to this obligation upon an insurer. The fact that these questions have been subject to judicial scrutiny reminds us of the importance of an insurer’s obligation to fully set out the terms and conditions within a policy of insurance and to provide these to the insured promptly.

Insurer’s onus

If an insurer wishes to rely on terms and conditions in a policy of insurance — such as exclusions or limitation periods — the insurer must be prepared to prove that the insurance policy and its contents were provided to the insured. The case of Janmohamed v. Co-Operators General Insurance Co. demonstrates that standard or habitual practices may not suffice to prove that a policy was provided to an insured. The evidence of the insurer in Janmohamed was that it was customary practice to include the policy of insurance along with the summary letter (which had clearly been sent to the insured), but this did not satisfy the court.

An insurer should thus expect to have to prove that the particular policy was in fact provided to the particular insured in question. It may not suffice for the terms and conditions to be part of the original policy upon issuance, if that original policy was not actually delivered to the insured.

Similarly, if policy terms and conditions are not provided in full to the insured, then alerting the insured to the existence of terms and conditions such as exclusions may not suffice to enable an insurer to rely upon them.

In Kompani v. Baile, even though the insured acknowledged that the existence of exclusions had been communicated by the insurer, the court determined this was not enough to substantiate that the insurance policy and its terms and conditions were provided to the insured as required by statute, such that an exclusion could be imposed upon the insured to his detriment.

On renewal

The cases of Youlden v. London Guarantee & Accident Co. and Hazan v. ING Insurance Company of Canada both provide that, upon renewal, the terms and conditions contained in the original policy may be incorporated by reference into that renewed policy, and may not need to be fully set out in the renewed policy. However, if the original policy was never delivered to the insured, incorporation by reference will not be enough to impose the terms and conditions contained therein upon the insured.

Timing of delivery

With respect to timing, an insurer need not necessarily provide the policy of insurance to the insured immediately upon issuance in order to rely on its terms and conditions. The Ontario case of International Movie Conversions Ltd. v. ITT Hartford Canada involved a policy of insurance that was belatedly provided to the insured. The policy was delivered after the insured experienced a loss that would have been limited by a statutory one-year limitation period, but well before the expiry of that limitation period.

The court held that the failure to provide the insurance policy until after the loss would not preclude the insurer from relying terms and conditions in the policy, such as exclusions and limitation periods. The court indicated, however, that its ruling might have been different had the insurance policy been provided after the expiry of the limitation period.

It should be noted that in Conversions, the court recognized other jurisdictions had arrived at a different conclusion. In Alberta and Manitoba, for example, case law holds that an insurer’s failure to deliver the policy of insurance until

after the date of loss would prohibit the insurer from relying on its terms and conditions, contrary to conclusions reached in Conversions.

CONCLUSION

It is abundantly clear from a review of the case law that an insurer must fully set out the terms and conditions in a policy of insurance and promptly provide it to the insured, arguably one of the most basic aspects of the practice of insurance. Since a policy of insurance contains essential terms and conditions that protect the insurer, such as exclusions and limitation periods, it is clearly in an insurer’s best interests to develop best practices to ensure that this obligation is not either overlooked or fulfilled haphazardly.

Furthermore, this case law review highlights the fact that the nature of this obligation may differ from province to province. Therefore, it is important for an insurer to take the time to determine exactly what the law expects in the particular jurisdiction in which any given policy of insurance arises.