One of the biggest reasons to ensure you work with an experienced lawyer on insurance-related matters is to make sure that critical deadlines such as limitation periods are not missed. Insurance companies, who are aware of limitation periods (the time after an incident in which the insured can make a claim) have the responsibility to let their customers know about the deadlines they face. As seen in a recent decision from the Alberta Court of Queen’s Bench, this obligation isn’t as easy to satisfy as one might initially think.
The matter arose from a fire at a home owned by the applicants and insured by the respondent. The fire occurred on November 12, 2014. The applicants filed their claim two days later. The respondent approved the claim and began repairs.
Things began to go sideways when a disagreement arose over the approved amount for the scope of work of the project. This resulted in the applicants filing an originating application, seeking compensation for the disputed amounts. However, this application was filed more than two years after the fire, which puts it outside the limitation period of two years. The respondent argued that the application should be dismissed since it was outside of the limitation period, while the applicants sought an extension.
Section 526 of Alberta’s Insurance Act states,
526(1) An action or proceeding against an insurer under a contract must be commenced
(a) in the case of loss or damage to insured property, not later than 2 years after the date the insured knew or ought to have known that the loss or damage occurred, and
(b) in any other case, not later than 2 years after the date that the cause of action against the insurer arose.
However, Alberta’s Fair Practices Regulation states that an insurance company must provide written notice, indicating the name of the act or regulation that defines the limitation period.
In this case, the adjuster working for the respondent provided a letter on November 14, 2014, stating,
“In accordance with the Alberta Insurance Act, we are enclosing a blank Proof of Loss form for your record, and must advise you of the two year limitation date applicable to your claim…. At this time, the file is in its preliminary stages, and liability for the loss has not been established.”
The question at the heart of the hearing was whether this letter satisfied the requirement that the Fair Practices Regulation.
The court’s analysis
The court explained the respondent, an insurance company, is very familiar with limitation periods. This creates an obligation to provide a certain amount of detail to the applicants. The court wrote,
“Lawyers and insurance professionals know what the words ‘limitation period’ mean in the context of an insurance claim. Insureds may not be as familiar with the language of the industry. The initial letter speaks of a ‘limitation period’, but it does so while forwarding a proof of claim. It is not clear in its language as to exactly what must be done within the two years, such as submitting a proof of claim or commencing an action, and it is not clear what limitation period in the Insurance Act is being referenced. The letter makes no mention of the Limitations Act, which is also relied upon by the insurer now. The letter was also written in a context where the claim was self-described as being in its ‘preliminary stages’ and liability under the policy was specifically not acknowledged.”
The court held that in this case, the limitation period could be extended, and settled the matter via summary judgment.
At HMC Lawyers, our Insurance Team has spent many years litigating insurance matters. We believe that the best advocacy for our clients is forward-thinking, and focus on avoiding risk through thoughtful and strategic representation at every stage. To discuss an insurance coverage matter or related dispute, call 1-800-480-3534 or contact us online.