(to the tune of “Jingle Bells” with apologies)
Dashing is a kind
Lagging far behind
here comes the Government,
With changes to the Act
It’s time to change your tack
Santa’s brought some special clauses in his Santa sack
The Government’s got it done,
Amendments to the Insurance Act,
Effective July One,
Changes are now required
to your policy words,
Best get your counsel hired,
lest you look absurd.
Ok, sorry for that, but we thought we might combine our annual xmas poem with a bulletin. And you do need to know that at long last BC (along with Alberta) has now issued the regulations that support the amendments to the BC (and Alberta) Insurance Act coming into force July 1 2012. Some significant changes are coming and the wordings of both property and liability policies will have to be modified.
It was back in 2003 that a lawyer’s negligence case (missed limitation period) resulted in a Supreme Court of Canada decision declaring that BC’s Insurance Act was “outmoded”, “incapable of coherently addressing the modern multi-peril policy”, and resulted in “unproductive, wasteful litigation about technicalities” (KP Pacific Holdings v. Guardian Insurance).
The case dealt with the limitation period applicable to the coverage enforcement action under an all risk property policy. The Court held that such a policy could not be “shoe-horned” into the Fire Part of the Insurance Act and instead applied the longer limitation period stipulated by the General Provisions (Part 2) of the Act. It specifically urged the legislatures across the country to “rectify this situation”.
In 2009 the BC Legislature finally got around to amending the Insurance Act. These amendments included some pretty significant changes, including such things as:
- Eliminating the “Fire Part” of the Act altogether and instead expanding the “General Provisions” part of the Act so as to apply to virtually all types of property and liability insurance;
- Importing the requirement of Statutory Conditions for both property and liability policies;
- Importing “proportionate contributions” as between overlapping policies;
- Imposing a base two (2) year limitation period for coverage enforcement lawsuits against the insurer;
- Enacting a (rather worrisome) “unjust contract provision” preventing coverage denials where they are considered either unjust or unreasonable in the circumstances of any given case;
- Introducing the concept of “innocent persons” to whom the “criminal or intentional act” exclusion would not be applicable and who would be allowed to recover their “proportionate interest” in lost or damaged property;
- Mandating coverage for all fire losses except those permitted to be excluded by regulations; and
- Allowing electronic delivery of certain insurance records or documents.
Some of the amendments to the Act contemplated terms, conditions or exceptions to be clarified by government regulation. It has taken almost three (3) years for those regulations to be enacted by the BC Government, but they were finally issued at the beginning of December 2011 as a little Christmas present for the industry. The whole regime (amendments plus regulations) will take effect July 1, 2012, by which time insurers will have to revise policy wordings to reflect the necessary changes.
The new regulations include the following changes to BC’s property and casualty insurance regime:
- With only some limited exceptions, all insurers who are authorized to conduct business in BC must be a member of the General Insurance OmbudService for the purpose of addressing “insurer complaints”;
- The current fifty (50) separate classes of insurance are being reduced to twenty (20) so as to harmonize insurance classification with the federal regime;
- Only “natural persons” (human beings) will have the benefit of the “innocent co-insured” provision in the Act and in order to obtain such protection, such insureds must cooperate with the loss investigation, submit to examinations under oath and produce requested documents;
- Insurers must provide the insured with written notice of the dispute resolution process (appraisal) under the Act within ten (10) days after a dispute has arisen or within seventy (70) days after submission of a Proof of Loss if no coverage/payment determination has been made;
- Insurers must provide written notification to a claimant of the limitation period applicable to any coverage enforcement action within as little as five (5) business days of any claim denial and failure to comply with such notice provisions operate to suspend that limitation period;
- The statutory conditions are excluded for certain classes of insurance but will still be applicable to most property and all liability coverages;
- Fire coverage is mandatory for any fire loss occurring while the insured property is vacant for up to thirty (30) days;
- Exclusions for fire following earthquake are not permitted;
- Arson can be a fire coverage exclusion but it is subject to the “innocent co-insured” provision; and
- Notice of termination of a contract pursuant to a statutory condition or for non-payment of premium cannot be delivered electronically.
Obviously, several of these changes will require “tweaking” of policy wording, whether with respect to statutory conditions, limitation periods or the narrowing of exclusions. Mind you, even though the Supreme Court of Canada ruled in 2003 that the one (1) year limitation found in the fire statutory conditions did not apply to coverage enforcement actions under the modern “all-risk” policy, virtually no insurers changed their wording to reflect that decision. Presumably there will be a little more interest in amending wording this time around given that the changes are effectively mandated by legislation.
Essentially the same changes are being made in Alberta as well. That particular province has been somewhat swifter in both amending its Act and issuing the supporting regulations, but Alberta’s changes also do not come into effect until July 1, 2012.
Readers who have any questions about legislative amendments or who would like to receive copies of the new regulations are welcome to contact Nigel Kent at firstname.lastname@example.org or any other member of Clark Wilson’s Insurance practice group.
In the meantime, we extend to you and yours our very best wishes for a wonderful Holiday Season and a happy and prosperous New Year. Hopefully Santa will surprise you with something other than amendments to the Insurance Act.