It was fully six years ago when the Supreme Court of Canada in KP Pacific Holdings Ltd. v. Guardian Insurance  1 S.C.R. 433 declared that BC’s Insurance Act was “outmoded” and producing “unproductive, wasteful litigation about technicalities”. KP Pacific acknowledged that the modern day “all-risk” homeowners policy could not be “shoehorned” into the Fire Part of the BC Insurance Act and urged,
“It is our hope that legislatures will rectify this situation by amending the Insurance Act to provide specifically for comprehensive [all-risk] policies. In an insurance era dominated by comprehensive [all-risk] policies, it is imperative that Canada’s Insurance Acts specifically and unambiguously address how these statutes are to operate and the rules by which comprehensive policies are to be governed.”
After last year’s Insurance Amendment Act 2008 died on the order paper, the government has taken another kick at the can and has recently introduced Bill 6, the Insurance Amendment Act 2009 (the “Act”), which, like last years version, will substantially change a number of key rules in BC insurance law. The Bill received first reading on September 15th, and must now proceed through the various steps of the legislative process as well as have numerous Regulations drafted. The new BC regime will likely be in force in 2-3 months so insurers, adjusters, and brokers will need to get up to speed quite quickly.
The changes will require a more in-depth discussion going forward but some of the highlights include:
- In general 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). The General Insurance Provisions are to apply to “every contract” albeit with certain exceptions.
- Limitation periods will change with two years being the norm and in particular:
- Under section 22 the limitation period under property policies will be two years after the insured knew or ought to have known the loss or damage occurred and, in any other case, two years after the cause of action against the insurer arose.
- With life insurance the limitation period under section 65 will be two years after proof of claim is furnished or six years from the date of death or in the case of insurance money payable on a periodic basis, the date the insurer fails to make a periodic payment.
- Section 7 of the Limitation Act will apply to limitation periods under the Act and have the effect of extending those limitation periods for persons under a legal disability.
- The relief from forfeiture provisions are revised for “readability” and clarify that section 24 of the Law and Equity Act, which authorizes the court to relieve against forfeitures and penalties, applies in addition to the existing relief provision in the Insurance Act.
- 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 (i.e. some Statutory Conditions will apply to liability insurance). The Statutory Conditions applying to Accident and Sickness, section 89, have also been modified.
- Section 28.3 addresses “unjust contract provisions” and provides that any term or condition, that is or may be material to the risk, is not binding on the insured if it is held to be unjust or unreasonable. This is going to spawn a lot of coverage litigation.
- A new section 28.5 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.
- A new section 28.6 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” , however that might be determined.
- Section 37 and 95 provide for an application to the court for termination or reduction of life insurance or accident and sickness insurance respectively if the applicant believes that their life or well being is at risk by the life insurance remaining in place.
- 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.
Very similar amendments in Alberta received Royal Assent in November 2008. At that time many of the changes prescribed by that province’s Insurance Amendment Act came into force but certain others required the further step of proclamation at a later date.
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.