ABQB: Limitation periods may not always begin when insurers say so

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Since July 2012, insurers in Alberta have been subject to a statutory requirement to give written notification to insureds/claimants of the “applicable limitation period” when one of four instances arises. The failure to do so may entitle an insured/claimant to an extension of that limitation period on application to the court.

Until recently, the Court of Queen’s Bench of Alberta had not considered the scope of that standard. Was it simply enough to reference a limitation period, with a Proof of Loss form, in response to an insured’s Notice of Claim? Master Farrington in Statt v SGI Canada Insurance Services Ltd, 2019 ABQB 828, recently answered that in the negative.

Statt v SGI Canada Insurance Services Ltd, 2019 ABQB 828

Facts

The insured homeowners submitted a Notice of Claim on November 14, 2014, to their insurer for a fire arising in their rental home two days prior. That same day, the insurer’s adjuster sent correspondence back to the insureds stating, under the heading “Proof of Loss Form”:

“In accordance with the Alberta Insurance Act, we are enclosing a blank Proof of Loss form for your record, and must advise you of the two-year limitation date applicable to your claim.”

And under the heading “Liability”:

“At this time, the file is in its preliminary stages, and liability for the loss has not been established.”

Differences arose regarding settlement of the insurance claim. In the Court’s view, the insurer took a piecemeal adjustment / change order approach, including for the scope of work for the repair of the home. The insureds and insurer also proceeded to arbitration on issues relating to coverage for losses pertaining to kitchen cabinets, and lost rent and utilities – decided in favour of the insureds. Prior to litigation, the contractor repairing the home was paid $72,000 of $201,844 for the total approved scope of work.

In January 2017, the insureds began to investigate legal action. On May 30, 2017, the insurer provided a “take it or leave it” offer to the insureds, including for amounts already owing, in exchange for a general release and in the face of a limitations argument.

The insureds filed an Originating Application in December 2017, and sought summary judgment on a number of issues, including an extension of the limitation period pursuant to section 5.3(7) of the Fair Practices Regulation.

The Court’s two-part analysis

The first aspect of the Court’s analysis considered whether the insurer satisfied the limitation period notice requirement of section 5.3 of the Fair Practices Regulation.

The insurer’s primary argument was that the two-year limitation period began to run with the correspondence sent on November 14, 2014.

In finding the insurer failed to give proper notice, the Court observed the following:

  1. In this case, the trigger(s) for compliance of the Fair Practices Regulation were either after:
    1. When the claim was not satisfactory settled, within 60 days (5.3(2)(a)); or
    2. When a claim is denied, within five business days (5.3(2)(d));
  2. At the time of the November 14, 2014 correspondence (the “initial letter”), “the parties had no idea as to what the claim was, or how much it was for, and there was no indication that there was a dispute over the claim, or that it would not be “satisfactorily settled”. There was no denial of the claim at that point.
  3. “The initial letter speaks of a “limitation period”, but it does so while forwarding a proof of claim. It is not clear in its language as to exactly what must be done within the two years, such as submitting a proof of claim or commencing an action, and it is not clear what limitation period in the Insurance Act is being referenced. The letter makes no mention of the Limitations Act, which is also relied upon by the insurer now. The letter was also written in a context where the claim was self-described as being in its ’preliminary stages‘ and liability under the policy was specifically not acknowledged.”

Issuing the initial letter almost immediately upon receiving the insureds Notice of Claim could not meet the requirements of section 5.3: “All of the triggering events in section 5.3(2) are qualified by and measured using the word “within”, which suggests that the time period begins at the happening of the event and not before.”

To satisfy section 5.3, the Court found that an insurer’s notice “should at least inform as to what needs to be done, and by when, and under which legislation … It should also be given in a way such that the timing relates to one of the triggering events in section 5.3(2) of the Regulation.”

The second part of the Court’s analysis was whether to exercise its discretion in favour of extending the limitation period as permitted by section 5.3(7) of the Fair Practices Regulation:

(7)  If an insurer fails to give notice under subsection (2) when required to do so, the Court may, on application by the claimant,

                                 (a)    Order that the applicable limitation period be extended, and

                                 (b)    Grant any other remedy that the Court considers appropriate.

The Court found that it ought to. To that end, the Court considered the following factors at para 41:

  • A substantial amount of responsibility under the contract was acknowledged by the insurer.
  • Communications between the insureds and insurer proceeded for a lengthy period without discussion of limitation periods.
  • There was arguably no outright denial moment until the “take it or leave it” offer of the insurer on May 30, 2017, to the effect of requiring the Statts to accept its offer and provide a general release, or a limitations argument would be raised.
  • The insurer took a cumbersome and piecemeal change order approach to the finalization of the scope of work, which prolonged the adjustment phase.
  • Some of the amounts claimed, such as umpire awards, were not resolved until much later in the process, and the insurer has refused to pay even those amounts without a general release.

The ongoing adjustment process created a reasonable belief for the insureds that settlement remained possible. The Court extended the limitation period “if necessary, to at least December 23, 2017, which is the day after the Originating Application was filed.”

The takeaway

While the Court considered these factors in exercising its discretion on its own accord, the underlying value was clear: Engaging an unrepresented insured in good faith is paramount; and clarity is a feature of that good faith.

If an insurer intends to rely on a limitation period defence, it must be clear and accurate about the status of an outstanding claim and be guided by the triggering event relevant to the applicable limitation period. Insurers cannot expect a limitation’s defence to overcome the hurdles of the Fair Practices Regulation if the insurer may be seen to be equivocating about the status of a claim, or ‘rubber stamping’ limitation period notifications at the first sign of a claim.

If not from an appeal, this decision is very likely to be revisited in the near future.

For more information, please contact Amjad Khadhair or another member of the Insurance group.