Rethinking Limits

A ruling this past October by Alberta’s Court of Queen’s Bench raises some questions about the applicability of Alberta’s Fair Practices Regulation and British Columbia’s Insurance Act to corporations and commercial insurance contracts. Although there is no case law in either province holding that the regulation or act applies, until there is, insurers in both provinces would be well-advised to adopt best practices.

Insurers in Alberta and B.C. are statutorily obligated to notify claimants of potentially applicable limitation periods. An insurer’s failure to give the required notice in Alberta may result in an order from the court extending the applicable limitation period; in B.C., the result is an automatic suspension of the applicable limitation period.

In addition, given the wording of the legislation in Alberta and B.C., it is very reasonable to assume that certain enactments apply to all manner of insureds, including corporations, and all types of insurance contracts, including commercial insurance contracts. 

APPLICABLE LEGISLATION

Alberta

In Alberta, Section 5.3 of the Fair Practices Regulation, effective July 1, 2012, imposes an obligation on insurers to notify claimants of the limitation period set out in Section 3 of Alberta’s Limitations Act. In Alberta, the limitation period, in most instances, will be two years from the date on which the claimant first knew, or in the circumstances ought to have known, that it had an injury that was attributable to the conduct of the defendant, and which warranted bringing a proceeding against the defendant.

It is noteworthy that the definition of “claimant” in Section 5.3 of the Fair Practices Regulation includes more than just the insured. Pursuant to Section 5.3(1), “claimant” includes the following: a beneficiary, an insured, a person who has a claim against an insured who has initiated a claim for indemnity under an insurance policy, and certain creditors referred to in Section 579 of Alberta’s Insurance Act.

Section 5.3(2) of the Fair Practices Regulation requires insurers to give written notice, with specific reference to the Limitations Act, to claimants of the applicable limitation period within 60 days from the date a claimant notifies the insurer of a claim, or within five business days from the date the insurer denies the claimant’s claim. Pursuant to Section 5.3(7), if an insurer fails to give the claimant the notice required by Section 5.3(2), the court may, on application by the claimant, order that the applicable limitation period be extended.

British Columbia

In B.C., Section 4 of the Insurance Regulation, effective December 19, 2012, imposes a similar obligation on insurers to notify claimants of the applicable limitation period. However, in the province, the applicable limitation period refers to a limitation period established by Sections 23 (general insurance provisions), 76 (life insurance), or 104 (accident and sickness insurance) of B.C.’s Insurance Act.

As with Alberta, insurers in B.C. must give written notice, with specific reference to the provincial Insurance Act, to claimants of the applicable limitation period at the time or within five business days after an insurer denies liability for all or part of the claimant’s claim. Section 4(2) also requires insurers to give written notice to claimants of the applicable limitation period at or within 10 business days after the first anniversary of the date the insurer received notice of a claim, or of a third-party action, unless the insurer has either already provided the claimant with notice or already adjusted the loss acceptably to the claimant or settled the claim.

Unlike Alberta where the court may extend the applicable limitation period, Section 4(6) of the British Columbia act requires an insurer to provide the required notice, failing which the applicable limitation period is automatically suspended, starting on the date the insurer was required to give notice to the claimant and ending on the earlier of the date that an insurer gives notice of the limitation period to the claimant or six years after the date a claimant’s cause of action against the insurer arose.

JUDICIAL TREATMENT

The only reported decision on either Alberta’s Fair Practices Regulation or B.C.’s Insurance Regulation was issued in the October 3, 2014 ruling by Master Andrew Robertson of the Court of Queen’s Bench of Alberta in Dhillon v. Anderson. In Dhillon, the parties were involved in a motor vehicle accident in March 2011, the defendants’ insurer became aware of the claim in May 2011 (prior to the coming into force of the Fair Practices Regulation), and delivered a settlement offer to the plaintiff shortly thereafter.

The settlement offer was not immediately accepted, and the defendants’ insurer engaged in further communication with the plaintiff, including making several requests for information.

The limitation period for commencing an action against the defendants would normally have expired two years after the date of the motor vehicle accident (i.e., March 24, 2011). However, the plaintiff did not sue the defendants until October 2, 2013, after the expiry of the limitation period.

The plaintiff alleged that because he was a “claimant,” the defendants’ insurer was required to give him notice of the applicable limitation period, and that it had failed to do so. In response, the defendants’ insurer indicated its adjusters specifically told the plaintiff there was a limitation period, albeit not in writing as required by the Fair Practices Regulation.

Master Robertson held that that regulation is more than a mere procedural regulation, as it may “fundamentally affect a substantial defence that a defendant may have,” namely the expiry of a limitation period.

As such, Master Robertson concluded that in the absence of specific language to the contrary, the court was entitled to presume the Fair Practices Regulation was not intended to apply retroactively. Accordingly, the plaintiff’s action was dismissed.

PRACTICAL IMPLICATIONS

It is reasonably clear from Dhillon that Alberta insurers are not under an obligation to provide notice of limitation periods for claims that they became aware of prior to July 1, 2012. However, apart from that issue, Alberta’s Fair Practices Regulation and B.C.’s Insurance Regulation both have broad implications for the insurance industry.

Although both regulations are intended to protect consumers, a close reading of the legislation suggests that these enactments will apply to all manner of insureds and all types of insurance contracts, including corporations and commercial insurance contracts.

Section 5.3(1)(a) of Alberta’s Fair Practices Regulation defines “claimant” as “an insured” and Section 5.3(1)(b) defines an “insured” as a “person insured by a contract of insurance, whether named in the contract or not.” Although “person” is not further defined in the regulation, Section 1 of the provincial Insurance Act, includes corporations in the definition of “person.” Similarly, Section 1 of B.C.’s Insurance Act, includes corporations, unincorporated societies, and associations in its definition of “person.”

Although no case law in either Alberta or B.C. has held that Alberta’s Fair Practices Regulation and B.C.’s Insurance Regulation apply to corporations and commercial insurance contracts, there is a reasonable argument that they do.

Until the scope of these regulations are further addressed by the courts, Alberta and B.C. insurers should develop their own best practices to ensure compliance with the applicable legislation. These best practices may include the following:

•provide notice in writing to the claimant of the appl
icable limitation period (either pursuant to Alberta’s Limitation Act or pursuant to B.C.’s Insurance Act), both when a claim is first made and again when the claim is denied in part or in whole (retain a copy of the notice on file);

•notices must make specific reference to the applicable legislation and operative limitation period;

•notices should be provided to all claimants, whether or not the claimant is the insured under the insurance policy, and whether or not the claimant is a natural person, a corporation or other entity; and

•although both Alberta’s Fair Practices Regulation and B.C.’s Insurance Regulation provide that notices of limitation periods need not be sent to claimants who are represented by legal counsel, as a matter of good practice, insurers should send the notices to all claimants without regard for whether or not they are represented by legal counsel.

The authors acknowledge the contributions of students-at-law, Liam Kelly and Ian Clarke.