Third time not a charm when disclosing limitation periods in Alberta: Insurance industry

Insurers generally agree with the Alberta insurance regulator that disclosure of limitation periods to litigate a claim should be “transparent” and “fair,” but a general industry consensus has evolved that requiring an insurance company to notify a claimant about the limitation periods three times is probably one time too many.
The Government of Alberta’s finance and enterprise ministry recently posted online industry feedback on a consultation paper around proposed changes to the province’s Insurance Act.
One of the proposed amendments to Alberta’s Insurance Act would require an insurance company to notify applicants of the limitation periods for bringing a legal action against an insurer up to three separate times.
While many insurers appear to agree with notification on the first two occasions — upon notification of a claim, and upon the denial of a claim — they say the third proposed notification time (at least 60 days, but no more than 120 days, before the limitation period expires) is contentious.
“IBC [Insurance Bureau of Canada] and RRC [Reinsurance Research Council] are supportive of the proposal to require insurers to inform policyholders of limitation periods upon notification of a claim and on denial of a claim,” the IBC says in its submission to the provincial regulator. “However, the industry cautions that the requirement for insurers to notify consumers before the limitation period expires will inevitably produce disputes from claimants that the notification was not received, thus injecting into insurance products a new layer of administrative costs associated with insurance dispute resolution activity.”
One difficulty, Aviva points out in its submission to the regulator, is that the 60- to 120-day notification period is based on when the limitation period began, which in turn is based on when the insured first discovered the loss.
“This is problematic since this moment is not necessarily known to the insurer and is potentially contentious and disputable,” Aviva says in its submission.
State Farm said in its submission that if the province intended to move forward with the third notification requirement, it should make exemptions in circumstances in which the file is settled, or if the insurer denied the claim and sent limitation wording at the time it closed the file.