When it comes to cancelling an insurance policy, both insurers and insureds need to complete the mandated steps; otherwise, they could potentially face a dispute as to whether or not coverage should occur.
The recent decision from Justice Warren of the British Columbia Supreme Court in McBrien v. Insurance Corporation of British Columbia, 2018 BCSC 553 reinforces the need for attention to all the details when it comes to cancelling an insurance policy.
On June 30, 2007, the plaintiffs in the action were injured in a single vehicle car accident that occurred in Port Coquitlam, British Columbia. Both plaintiffs were owners named in an owner’s certificate issued by the Insurance Corporation of British Columbia (ICBC), which entitled them to third-party liability coverage under the Insurance (Vehicle) Regulation, BC Reg. 447/83.
At the time of the accident, the vehicle that the plaintiffs were driving belonged to another individual, Lee Kreiser (Kreiser), who was a resident of Alberta. On March 6, 2007, Kreiser obtained an automobile insurance policy for his vehicle for a period of one year from ING Insurance Company of Canada (ING). After underwriters for ING reviewed Kreiser’s application, however, they determined that Kreiser was not eligible for monthly payments, despite the fact that he had already provided the necessary authorization and documentation, and would instead need to make premium payments in three separate installments. Kreiser’s premium payments were also increased, as the initial number provided to Kreiser had only been an estimated policy premium.
On March 30, 2007, ING mailed the new policy to Kreiser at the P.O. box number that he had provided on his initial application, with the policy stating that the coverage period was from March 6, 2007 to March 6, 2008, with the first payment due on April 14, 2007 (Kreiser Policy). On May 11, 2007, ING sent a letter via registered mail to Kreiser providing notice of the cancellation of his policy for non-payment of premiums. Some time later, ING attempted to confirm delivery of the notice of cancellation, and instead received a notice of service failure from Canada Post.
While the plaintiffs settled their claims, the two insurers, ICBC and ING, were left to dispute which of them was liable as the primary insurer.
In Alberta, the Insurance Act, RSA 2000, c I-3, permits an insurer to terminate a policy by registered mail, provided they give the insured 15 days’ notice, beginning on the day after the receipt of the registered notice at the post office to which it was addressed.
By contrast, in British Columbia, an automobile insurance policy could be cancelled for non-payment of premiums if the insured failed to make payment within 30 days of the ICBC mailing a written demand for payment to the insured’s last know address.
The parties’ positions
ING adopted the position that the Kreiser Policy had been cancelled in accordance with Alberta law before the accident occurred on June 30, 2007, and as such, they were not responsible as the primary insurer.
Not surprisingly, ICBC adopted the opposite position, in asserting that the Kreiser Policy remained in effect under Alberta law.
Justice Warren found that while ING had sent a cancellation notice to Kreiser by registered mail on May 11, 2007, there was no evidence the cancellation notice had been received by the post office to which it was addressed. Because it was not clear that the cancellation notice had been received at the post office, the risk inherent to the service of documents via the mail remained with the insurer, and did not move to the insured. As a result, Justice Warren concluded the Kreiser Policy was still in effect, and ING was required to provide uninsured motorist coverage, and pay tort damages and accident benefits in relation to the accident.
In Alberta, there are strict guidelines surrounding when and by what means an insurance policy may be cancelled, which makes sense, given the potential consequence that can result if a person finds themselves without insurance when they were expecting to have it. As a result, it is important that both insurers and insureds are aware of their rights and responsibilities in this area, and adhere to the guidelines carefully so as to avoid potentially costly disputes.