Everyone is aware of the significant changes in BC’s (and Alberta’s) newly amended Insurance Act which came into force on July 1st of this year (the “New Act”), as outlined in our December 20, 2011 Insurable Interest bulletin.
However, now that the New Act has been in force for a few months and claims under the new regime are emerging, we thought it would be helpful to remind everyone of the new provisions regarding limitation periods and, in particular, the requirement for insurers to expressly warn insureds about those limitation periods under P&C policies.
Limitation Period Provisions
The New Act attempts to clarify limitation periods in order to reduce confusion for consumers and insurers and provide certainty in order to appropriately deal with insurance claims. Two (2) years is the general limitation period under the New Act. The following sections of the New Act outline the limitation periods that all insurers should be aware of:
|Type of Policy||Section||Limitation Period|
|Property Policy||S. 23||2 years from the date the insured “knew or ought to have known the loss or damage occurred”.|
|All other Part 2 policies (i.e.: liability policies)||S. 23||2 years from the date “the cause of action against the insurer arose”.|
It is important to remember that section 6 of the New Act applies section 7 of the Limitation Act to all limitation periods. Section 7 provides that the limitation period for minors does not start running until 19 years of age, and that the limitation period for persons under a legal disability does not start running until the individual is no longer under the disability.
These provisions are not retroactive and thus do not apply to contracts that were in effect on July 1, 2012. However, they will take effect once the contract is renewed or replaced.
Advising of Limitation Periods
If liability for all or part of a claim is denied, claimants must be advised of a limitation period five (5) business days after the insurer denies the claim and 10 business days after the anniversary of the insurer receiving the claim if it is still open (i.e. not settled or denied) [s. 4 Insurance Regulation].
Denial letters must be sent within 5 business days of denying a claim and the letter must reference the applicable limitation period and contain a statement that the limitation period is set out in the New Act.
A letter must be sent within 10 days of the first anniversary of the insurer receiving the claim, if it is still open.
Letters need not be sent if the insured has counsel, but the insurer may wish to send the letter in any event.
Under section 4 of the Insurance Regulation, there are consequences for non-compliance with these notice provisions. If an insurer fails to provide the required notice, the running time of the applicable limitation period is suspended from the date on which notice should have been given and ending on the earlier of the following dates:
- the date that notice is given; or
- the date that would cause the limitation period to exceed 6 years after the date the cause of action against the insurer arose.
While insurers need not redraft all policies in existence as of July 1, 2012, all new policies and policies that are renewed or replaced after that date are required to conform to the New Act.
Dates must be carefully recorded by insurers to keep track of the limitation periods. Some judgment may be required when establishing when an insured “knew or ought to have known” of a claim, in particular when damage occurs over a period of time. Limitation Notices must be issued in a timely way.
If you have any questions, please contact any member of Clark Wilson’s Insurance Group.