Canadian Underwriter

What the court said when property owners refused to submit a Final Proof of Loss

April 20, 2021   by David Gambrill

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Westland Insurance Company was within its rights to assume a contentious, two-year insurance claim had been resolved when two Victoria, B.C., property owners refused to submit a “Final Proof of Loss” form that had been filled out for them to sign, the B.C. Appeal Court has found.

Westland paid the property owners $224,325 for a wind damage claim resulting from a 2016 storm. One year later, after the property owners refused to send back the Final Proof of Loss form, the insurer learned by chance that the property owners had launched a civil suit against Westland for not covering damage to the deck.

Immediately upon learning about the civil claim, Westland demanded that the matter be resolved through the dispute resolution process, a demand that the property owners took to court.

The matter made it all the way up to the B.C. Court of Appeal. There, the property owners contended, among other things, that the insurer should have notified them of the dispute resolution mechanism earlier during the claim process, when it was obvious that the parties had several points of disagreement.

The Appeal Court was left to figure out at what point a “dispute” can be said to arise between the insured and the insurer.

Ultimately, the B.C. Appeal Court found in favour of the insurance company in Westland Insurance Company Limited v. Pounden, released on Apr. 16.

“Although [Westland] sent [the property owners] a completed ‘Final Proof of Loss’ for signature in April 2018, the [property owners] did not execute and return that form,” the Appeal Court found. “The [Chambers] judge found that the intentional non-delivery of a proof of loss ‘should not be permitted to frustrate the dispute resolution process.’”

The claim arose in March 2016, when a tree fell during a windstorm in Victoria, B.C., and damaged the home of John and Virginia Pounden. That same day, they reported the damage to their insurer, Westland, which opened a claim and appointed an adjuster.

The adjustment phase of the claim lasted for almost two years. Throughout that time, the Poundens and Westland disagreed over many issues; among them, they could not agree on whether damage to the deck was covered.

In April 2017, the adjuster sent a letter to the Poundens confirming Westland’s stance that it would not be “addressing any repairs or costs associated with the deck.” Both a contractor and an engineer believed that the condition of the deck was unrelated to the windstorm. The letter from the adjuster described the deck as “seriously rotted and in a state of collapse.”

The adjuster sent the Poundens two letters; in both instances, he provided a blank Proof of Loss statement. He told the Poundens each time that they did not have to fill out the blank document, because Westland would send a Final Proof of Loss statement for them to sign once the claim was finalized.

On Apr. 11, 2018, the adjuster sent a letter to the Poundens stating that Westland understood “all aspects of [the Poundens’] claim to be complete” and it was “closing [their] claim.” The letter attached a Proof of Loss marked “Final.” The Final Proof of Loss put the net claim at $224,325.65, which the insurer paid. The form included signature lines for the appellants.

The Poundens never sent it back.

Instead, unbeknownst to Westland, the Poundens filed a notice of civil claim on Mar. 12, 2018, against both the insurer and one of the construction companies that completed repairs to their home. They alleged that Westland breached their insurance contract by denying coverage for repairs to the Poundens’ deck.

The substance of these allegations has not been proven in court. The Court of Appeal was dealing only with the matter of whether they would be adjudicated in the dispute resolution process.

Westland only found out about the Poundens’ civil claim by accident, almost one year after it had sent the property owners the Final Proof of Loss. Once Westland realized there was still a dispute to be resolved, it filed a response to the notice of civil claim and, 11 days later, on Apr. 9, 2019, it issued a written demand for dispute resolution.

A Chambers judge found the Poundens were obligated by law to appoint a representative to participate in the dispute resolution process. But the Poundens appealed, arguing that Westland should have told them about the availability of dispute resolution at the first sign of disagreement during the adjustment process, not so late in the game, when their civil claim had been filed.

The B.C. Appeal Court upheld the lower court ruling of the Chambers judge.

“The protocol proposed by the [Poundens], that [Westland’s] notice [of the dispute resolution process] must be provided whenever any kind of disagreement arises between an insured and the insurer, would be ‘impractical and wasteful’ and contrary to the purpose of the dispute resolution process,” the Appeal Court ruled, citing the decision of the Chambers judge.

“Returning the ‘Final Proof of Loss’ was within the [Poundens’] exclusive control; they had a duty to communicate with [Westland] on that issue [under the Insurance Law]; and the [Chambers] judge found as a fact that [Westland] relied on the non-return and silence in believing that the insurance claim was at an end.”

The Appeal Court also sided with the Chambers judge in stating that the insureds “should not be permitted to frustrate the dispute resolution process by their refusal to provide a Proof of Loss, which they were required to do under the contract.”


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