December 16, 2009 by Canadian Underwriter
An insurer must be absolutely “clear and unequivocal” in its denial of benefits, and the word “refusal” in documents to the policyholder would probably help, a recent Ontario court decision suggests.
In Sukhdev Gill v. Economical Insurance Company, the Ontario Superior Court ruled The Economical’s mere placing of a ‘zero’ in an expense column of a document sent to a policyholder, along with an explanation that more documentation was required, did not qualify as an outright refusal to pay the benefits in question.
Gill’s husband was a passenger in a truck that he normally drove for employment purposes. He died in a single vehicle accident that occurred in the United States.
Gill submitted a claim to The Economical for death and funeral expenses in June 2006.
The Economical responded to the claim by way of a letter with attachments dated June 27, 2006. The letter had a ‘0’ in a column designated for funeral expenses, travel expenses and death benefits, along with a statement under the heading: “Reasons Why Expenses are not Payable or Being Stopped.”
The statement under the above heading read: “We have received your application and expenses, however, you must apply to worker’s comp as per the attached letter. Once we receive the WSIB assignment we will be in a position to consider your claim.”
The Economical argued the ‘0’ in the funeral expenses column was enough to indicate the expenses had been denied. But the court disagreed.
“Clearly, the materials sent by Economical are open to interpretation and therefore cannot be said to be clear and unequivocal,” the court found. “There is no reason why a covering letter could not simply indicate that the letter constitutes a refusal pursuant to the relevant legislation, with reasons given, followed by a reference to the two-year limitation period and commencement date. That would be clear and unequivocal, and fair to both parties.”