Derksen v 539938 Ontario Ltd [2001] SCC
Facts
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- D was company that lay cable, owned a supply truck which was covered by an auto insurance policy, a commercial general liability policy (CGL), and an excess coverage policy
- While on highway, unsecured steel plate flew off D’s truck and into bus, killing one child and injuring three others
- P claimed against D for pecuniary loss caused by negligence of its employees
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Issues
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- Whether P’s claim came within the terms of exclusion
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Rules
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- Whether an exclusion clause applies is a matter of interpretation
There is no presumption that an exclusion clause applies if one of the concurrent causes falls within it
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Analysis
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- The loss arose out of two concurrent causes
Non-auto related negligence: failure to clean up site properly by failing to store steel plate
Auto-related negligence: setting the vehicle in motion under those circumstances
- SCC found it undesirable to have a presumption denying coverage where there are two equal causes, and one cause falls within an exception
Inconsistent with principle that exclusion clauses should be interpreted narrowly and generally in favour of insured where there is ambiguity
Insurers also have opportunity to remove all ambiguity from the meaning of exclusion clauses in the event of concurrent causes
- There was coverage under the CGL policy
Exclusion clause was at play, but only w.r.t. portion of loss attributable to auto-related cause
Exclusion clause was ambiguous w.r.t. losses arising from concurrent causes, so this result consistent with general rules of construction and contra proferentum
Also consistent with reasonable expectation of parties, under circumstances that D obtained coverage, couldn’t be reasonably said that D expected there to be a gap in that coverage
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Conclusion
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- CGL policy covered portion of loss attributable to non-auto related negligence, exclusion clause only applied partially
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Claims
Has the CL been abolished w.r.t. duty to disclosure?
Outline
Review Exemplar Policy Workings
Has anyone discovered what Legal Assist coverage in the Exemplar Policy might be?
Review of the legal opinion in the Grow-Op case. Is still correct? In any event, the exam will follow a similar format: identification of the legal issues and a succinct analysis of those issues
A review of relevant provisions of Parts 1 and 2 of the Insurance Act and BC Reg. 403/2012.
Chapters 9, 10, 11 from Insurance Law in Canada. (Chpts 14, 15 for next class)
Whiten v. Pilot
Wonderful Ventures
Wells v. CNS
Claims Process
Notice of Loss
Turn to the wordings
Protocols are set out pursuant to Statutory Condition 6:
Requirements after loss
6. (1) On the happening of any loss of or damage to insured property, the insured must, if the loss or damage is covered by the contract, in addition to observing the requirements of Statutory Condition 9,
(a) immediately give notice in writing to the insurer,
(b) deliver as soon as practicable to the insurer a proof of loss in respect of the loss or damage to the insured property verified by statutory declaration. . .
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Brown, pg 9.3
“It is a condition precedent to recovery under a policy that notice requirements be met. It is therefore a ground for forfeiture of the claim if notice is not filed in time in accordance with the relevant policy or statutory provision.”
Immediately: “with all due diligence in the circumstances”
Test of reasonableness w.r.t. what ‘immediately’ means, held to standard of reasonable insurer – what did insurer ought to have known in reasonable circumstances, and what did this insurer know in the circumstances
Wording v. the Actual Practice
While the wordings require immediate notice in writing, the practice is often different
The loss
Notice usually done by email or telephone today
Knowledge by the insured: when did they know of the loss or should have known of the loss?
Transmission of that knowledge to the broker
If there is a claim to be made, the broker reports to insurer (in most cases)
The insurer assigns an adjuster (in house or independent)
The adjuster than adjusts the claim
A) notice in writing
B) a proof of loss verified by statutory declaration
C) a complete inventory
D) books of account and inventory lists
E) invoices and contracts
Insurer can insist on strict compliance with statutory condition, but insurer can be estopped if they don’t act like they’re demanding strict compliance
E.g. if insurer doesn’t demand notice in writing strictly, court unlikely to enforce this
The Insurer’s Duties
Insurer to furnish copy of application and policy
26 (1) On request, the insurer must furnish to the insured a copy of
(a) the insured's application or proposal for insurance, and
(b) the insured's policy.
(2) An insurer may charge a reasonable fee to cover its expenses in furnishing copies of a policy other than the first copy.
Insurer to furnish forms
27 (1) Immediately on receipt of a request, and in any event no later than 60 days after receiving a notice of loss, an insurer must furnish to the insured or person to whom insurance money is payable forms on which the proof of loss required under the contract may be made.
(2) If an insurer does not comply with subsection (1), section 23 (2) is not available to the insurer as a defence to an action brought for the recovery of insurance money payable under the contract.
(3) If, within 30 days after a notice of loss is given, the insurer has adjusted the loss acceptably to the person to whom the insurance money is payable, the insurer need not comply with subsection (1).
(4) An insurer, by reason only that the insurer furnishes forms on which to make the proof of loss, must not be taken to have admitted that a valid contract is in force or that the loss in question falls within the insurance provided by the contract.
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Further Duties of the Insurer
The insurer must be prompt in handling and assessing the loss
The insurer must give as much consideration to the welfare of the insured as it gives to its own interests
The insurer cannot do anything to injure the rights of the insured to receive the benefits under the policy
Can’t do anything unreasonably without a proper basis to do so
The insurer must undertake an adequate and proper evaluation of a claim
In insured is entitled to correct information, a fair interpretation of the policy and prompt payment of a claim when it has merit
Scrutiny and challenge of a doubtful claim is permitted, but the insurer may not treat the insured as an adversary whose interest may be disregarded
Latter is a key concept, bilateral duties of good faith don’t cease with the commencement of litigation, but continue to the conclusion of the dispute via Bullock v. Trafalgar Insurance (1996) 64 ACWS (3d) 670. (Ont. Ct. Gen. Div.)
Who may provide notice?
The position of the mortgage holder or loss payee
Assignees
Personal representatives: the executor
Agents
Who may give notice and proof
8. Notice of loss under Statutory Condition 6 (1) (a) may be given and the proof of loss under Statutory Condition 6 (1) (b) may be made
(a) by the agent of the insured, if
(i) the insured is absent or unable to give the notice or make the proof, and
(ii) the absence or inability is satisfactorily accounted for, or
(b) by a person to whom any part of the insurance money is payable, if the insured refuses to do so
or in the circumstances described in clause (a) of this condition.
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Importance of Proofs of Loss
Triggers subrogation rights
Misrepresented or fraudulent claims
Insurer will carry out due diligence
Fraud
Will want proof of loss verified by statutory condition
7. Any fraud or wilfully false statement in a statutory declaration in relation to the particulars required under Statutory Condition 6 invalidates the claim of the person who made the declaration.
Any false statement will vitiate the entire claim, but does the statement have to be material? – ambiguous, some authorities say statement must be relevant
Relief from Forfeiture
Court may relieve against forfeiture and termination
13 Without limiting section 24 of the Law and Equity Act, if
(a) there has been
(i) imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or another matter or thing required to be done or omitted by the insured with respect to the loss, and
(ii) a consequent forfeiture or avoidance of the insurance in whole or in part, or
(b) there has been a termination of the policy by a notice that was not received by the insured because of the insured's absence from the address to which the notice was addressed, and the court considers it inequitable that the insurance should be forfeited or avoided on that ground or terminated, the court, on terms it considers just, may
(c) relieve against the forfeiture or avoidance, or
(d) if the application for relief is made within 90 days of the date of the mailing of the notice of termination, relieve against the termination.
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Law and Equity Act
24 The court may relieve against all penalties and forfeitures, and in granting the relief may impose any terms as to costs, expenses, damages, compensations and all other matters that the court thinks fit.
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Historically, this Act didn’t apply to insurance contracts
Disposal of Claims
In case of disagreement
11. (1) In the event of disagreement as to the value of the insured property, the value of the property saved, the nature and extent of the repairs or replacements required or, if made, their adequacy, or the amount of the loss or damage, those questions must be determined using the applicable dispute resolution process set out in the Insurance Act, whether or not the insured's right to recover under the contract is disputed, and independently of all other questions.
(2) There is no right to a dispute resolution process under this condition until
(a) a specific demand is made for it in writing, and
(b) the proof of loss has been delivered to the insurer.
When loss payable
12. Unless the contract provides for a shorter period, the loss is payable within 60 days after the proof of loss is completed in accordance with Statutory Condition 6 and delivered to the insurer.
This can be stayed pending completion of dispute resolution process, since you have to know what is owed
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Dispute resolution process is separate and distinct to admitting there is coverage
Former sorts out the potential value
Dispute Resolution Process
Dispute resolution
12 (1) In this section, "representative" means a dispute resolution representative appointed under subsection (4).
(2) This section applies to disputes between an insurer and an insured about a matter that under Statutory Condition 11 set out in section 29, or another condition of the contract, must be determined using this dispute resolution process.
(3) Either the insured or the insurer may demand in writing the other's participation in a dispute resolution process after proof of loss has been delivered to the insurer.
(4) Within 7 days after receiving or giving a demand under subsection (3), the insured and the insurer must each appoint a dispute resolution representative and, within 15 days after their appointment, the 2 representatives must appoint an umpire.
(5) A person may not be appointed as a representative if the person is
(a) the insured or the insurer, or
(b) an employee of the insured or the insurer.
(6) The representatives must
(a) determine the matters in dispute by agreement, and
(b) if they fail to agree, submit their differences to the umpire,
and the written determination of any 2 of them determines the matters. . .
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Usually dispute resolution will be determinative, can be used creatively
E.g. high rise building in construction collapses on baker’s building and destroys the latter, Hayden says recovery is certain under law of nuisance, trespass… etc. This becomes a dispute over amount. Claim is for $1mill, only coverage for $500k. Since dispute is over valuation, Hayden suggested using dispute resolution process instead of trial.
Further Obligations of Insurer
Notice of dispute resolution process
3 (1) An insurer must give written notice to an insured of the availability of the dispute resolution process under section 12 of the Act
(a) within 10 days after the insurer determines that the insurer and insured have a dispute to which section 12 of the Act applies, or
(b) within 70 days after the insured submits a proof of loss, if at that time the insurer has not yet made a decision in respect of a matter to which section 12 of the Act applies.
(2) A notice under subsection (1) must include a copy of section 12 of the Act.
Notification of limitation period (Regs)
4 (1) In this section:
"applicable statutory limitation period" means the limitation period established for a contract by section 23, 76 or 104 of the Act that applies in respect of the contract;
"business day" means a day other than Saturday or a holiday;
"claimant" includes a judgment creditor referred to in section 25 [third person right of action against insurer] of the Act.
(2) An insurer must give written notice to a claimant of the applicable statutory limitation period
(a) at the time or within 5 business days after the insurer denies liability for all or part of the claim, and
(b) at or within 10 business days after the first anniversary of the date the insurer receives notice of a claim or of an action under section 25 of the Act, unless the insurer has already
(i) adjusted the loss acceptably to the claimant or settled the claim, or
(ii) provided notice to that claimant under paragraph (a).
(3) A notice under subsection (2) must contain a statement that the limitation period is set out in the Act.
(4) An insurer is not required to give notices under subsection (2) to a claimant who is represented by legal counsel.
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When does insurer have to give notice?
Claim payable within 60 days of loss, insurer may not have made a decision to pay within this period, so insurer would look at s.4(2)
Setting Aside Settlements (obvs can)
Co-op General Insurance Company v. Billett, 1988 CanLII 2877 (BCCA)
The fraudulent insured was found out after the insurer paid him his claim
Legal cause of action was for money had and received, money paid out under mistake of fact, applied to set aside settlement and issued garnishing order on judgment
D came to a bad end
Restrictions on the Right to Sue and Limitations
Limitation of actions
23 (1) An action or proceeding against an insurer in relation to 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 the loss or damage occurred, and
(b) in any other case, not later than 2 years after the date the cause of action against the insurer arose.
(2) An action must not be brought for the recovery of money payable under a contract of insurance until the expiration of 60 days after proof, in accordance with the contract
(a) of the loss, or
(b) of the happening of the event on which the insurance money is to become payable,
or of such shorter period as may be set by the contract of insurance.
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Limitations
Limitation Periods
Under the General Insurance Provisions, the limitation period will now be uniform and will be, in the case of loss or damage to the insured property, not less than 2 years after the date the insured knew or ought to have known the loss or damage occurred, and, in any other case, not later than 2 years after the date the cause of action against the insurer arose. In simple terms, for property claims, the limitation date is 2 years from when the insured knew the loss or damage occurred. For liability claims, the limitation date will be 2 years from when the cause of action against the insurer arose.
The limitation date for property claims should lead to greater certainty in most claims. Problems may still arise in determining the limitation date for liability claims.
Further, s. 7 of the Limitation Act will apply generally which extends the time for minors and those under a disability.
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