COMING SOON: A NEW INSURANCE ACT

The B.C. government seems determined to keep the insurance industry busy reading and studying this year. Following the introduction of Bill 22, the Health Care Costs Recovery Act, the government has now introduced Bill 40, the Insurance Amendment Act, 2008, a 91-page document that will substantially change a number of key rules in B.C. insurance law. The Bill received 1st reading on April 30, 2008. The Bill must now proceed through the various steps of the legislative process and there are also a number of Regulations to be drafted, but you can expect the new Act to come into effect in the next few months. Also of interest is the fact that Alberta gave 1st reading to the amendments to its insurance legislation on April 30th. The aim is to have similar regimes in both provinces.

Some of the changes are worth noting at this time, although some will require a more in-depth discussion going forward.

The provisions governing Life Insurance (Part 3) and Accident and Sickness Insurance (Part 4) will be substantially revised and updated. Fire Insurance (Part 5) will be deleted entirely and the relevant provisions incorporated into General Insurance Provisions (Part 2). This is not surprising in an era when most policies are all-risk and in light of the Supreme Court of Canada’s comments in K.P. Pacific Holdings v. Guardian Insurance and Churchland v. Gore Mutual.

Limitation periods will change with two years being the norm. Once the amendments come into force reference should be made to the specific provisions governing specific types of policies. Under section 22 the limitation period under property policies will be two years after the insured knew or ought to have known the loss occurred and, in any other case, two years after the cause of action arose. With life insurance the limitation period under section 65 will be two years after proof of loss is provided or six years from the date of death. A new section 2.4 will apply section 7 of the Limitation Act, extending the limitation periods under the Insurance Act for persons under a legal disability.

A new section 2.5 will clarify the use of electronic records and communications. The appraisal process under Part 2 will be revised and become a dispute resolution process of broader application. Section 11, governing waiver, will be amended to include a provision regarding estoppel. The Statutory Conditions formerly found in the (now repealed) Fire Part of the Act are somewhat modified and transferred into the General Provisons and are to apply to "every contract" of insurance. The Statutory Conditions applying to Accident and Sickness, section 89, will also be been modified.

Insurers will want to take a look at their exclusions. A new section 28.5 provides that a coverage exclusion for loss or damage caused by a criminal or intentional act only applies to the claim of the person committing the act. Innocent co-insureds under the same policy will still have a claim, although only for their “proportionate share”. As well, a new section 28.4 prohibits coverage exclusions related to the cause of a fire or other prescribed peril unless allowed by regulation. Thus, for example, unless fire following earthquake is referenced in a regulation, it cannot be excluded.

Home warranty and deposit protection contracts will remain within the scope of the Insurance Act, but a new section 189.01 will authorize regulations applying Part 2, General Insurance Provisions, to these products. And, of course, many will be saddened to learn that section 189 governing livestock insurance, is repealed.

There are certainly some significant changes in the new legislation and much to be learned (or relearned). We will be following up with further bulletins as the legislation moves closer to actually becoming law.

Readers with questions or concerns are welcome to contact Larry Munn at 604-643-3160 and lm@cwilson.com.