July 7, 2011 by Canadian Underwriter
B.C. has changed its Insurance Act to protect innocent co-insureds from coverage exclusions if a loss is caused by the criminal act of another person co-insured on the same policy.
Based on the wording of the law, a policy exclusion would apply to a person who:
•committed the act or omission that led to the loss or damage;
•abetted or colluded in the act or omission;
•consented to the act or omission and knew or ought to have known that the act or omission would lead to loss or damage; or
•is in a class prescribed by regulation.
The amendment says a policy exclusion would not apply to an innocent co-insured who does not fall under the above criteria. Nonetheless, the innocent co-insured may not collect “more than their proportionate interest in the lost or damaged property.”
Also, the innocent co-insured is obligated by law to cooperate with the investigation of the insurer, whether by submitting to an examination under oath and/or producing relevant documents to the insurer.
In its recent newsletter, Insurable Interest, Raman Johal of Clark Wilson LLP notes there are some ambiguities arising out of the legislative amendments.
“The regulations do not include a definition of ‘proportionate’ and there is ambiguity concerning its meaning,” Johal wrote. “Does the interest of the innocent co-insured have to be a legal interest in the property or can it include a beneficial interest of someone such as a spouse who has contributed to the maintenance or finance of the property but is not legally on title?”
Also, Johal wrote, whether someone “knew or ought to have known” about the criminal act is a matter of fact that must be fully investigated before making a decision about coverage.