Khosah v Canada Life Assurance Co [2013] BCCA [temporary life insurance]

Review Class

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  Insurance Act
  
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    Know definitions section
    
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    Bilkey: s.5, 8, 10, 11, 12
    

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  Fundamental principles of insurance law
  
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  Insurer’s duty of good faith
  
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  Insured’s duty of good faith
  
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  Indemnity principle
  
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    Why is life insurance not considered indemnity insurance
    
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  What are 5 sources of insurance law?
  
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  What is an insurance policy?
  
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  What is an insurance contract?
  
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  Reasonable expectations principle
  
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  Prohibition against profiting from insurance, and what this means
  
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  Types of losses that are not fortuitous
  
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  Canadian Indemnity Co
  
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    Usefulness in telling us what is an accident for the purposes of insurance law
    
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  Progressive Homes
  
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    Illustrates how difficult describing what an accident is
    
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    Asks whether defective workmanship can be an accident
    

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  Factual expectation test
  
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  Timing for determining insurable interest
  
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  Timing w.r.t. non-indemnity insurance
  
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  Looked at examples where one person takes out insurance for benefit of herself, but also for benefit of other people (covered in Brown)
  

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  Insurance agents + brokers (i.e. intermediaries)
  
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  Bases on which insurance broker may be held liable to her or his customer
  
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  Bases on which an insurance intermediary can be held liable to an insurer
  
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  Fine’s Flowers
  
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    Be familiar with how CA described agent’s “duty of care”
    

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  What are the typical components of a CGL policy?
  
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    What does CGL mean?
    
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  What is the time most relevant for claims under a 1) claims made policy, 2) occurrence based policy
  
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  What are the types of info one can expect to find in the Declaration pages/certificate of insurance/coverage summary?
  
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  Why are punitive damages not usually indemnified by a liability policy?
  
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  Nichols
  
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  Progressive Homes
  
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  Scalera
  
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    Subtlety in being able to look beyond pleadings to examine true nature and substance of a claim
    
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  Distill from cases what the definition of the “duty to defend” is
  
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    When does the insurer’s duty to defend a third party claim against an insured arise?
    
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  Looked at conflicting arguments for question of whether there can be coverage for contract liability under a liability policy
  
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  What is an insuring agreement in the context of a liability policy?
  
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    Where do you normally look to find this in the policy?
    
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  Looked at fundamental diff between property policy and liability insurance in the sense of what role fault plays in each, or what role does it play
  
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  Examine diff between ‘bodily injury’ and ‘personal injury’ as per the CGL policy
  
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  Talked about monetary limit and where to find these in a CGL policy, and find the $$ amounts – in declaration section
  
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  Looked at payments insurer can make that are over and above the monetary limits
  
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    Costs of investigating the claim
    
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    Costs of hiring a lawyer
    
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    Costs of having an independent adjuster on the claim
    
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    Post-judgment interest
    

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  Emails
  
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    Jan 20 – Misrep
    
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    March 17 – Disability
    
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      Fidler
      
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      ***Know life insurance & disability
      
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    March 20 – Life
    
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  Go through handouts Kate provided us
  
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  Citing of authorities and Insurance Act
  
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  Looking for concepts that have been discussed in class
  

There’s a wife that is a beneficiary on her husband’s life insurance policy (individual policy). Husband leaves on a 3 month holiday and doesn’t remember to pay the premiums. Policy lapses, there’s a grace period where premiums weren’t paid, husband then falls off cliff and dies. Wife gets a friend to call the life insurance company, friend says that premiums haven’t been paid but want to reinstate the policy, the company said sure, when arrears are received, policy will be reinstated. This happens, then insurer finds out what happens and insurer refuses to pay policy.

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  What is the beneficiary’s argument?
  
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  What if in the fact pattern, husband has paid premiums for past 30 years, and this is the first time that he’s ever forgotten to pay his premiums
  
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  Know concepts
  
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    W.r.t. insurer: insurable interest, material change in risk, material misrepresentation, coming to the risk, breach of duty of good faith (balance of power over course of policy shifts from insured to insurer)
    
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    W.r.t. insured: unfairness, waiver and estoppel
    

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  Progressive Homes: para 22-24, summary on policy interpretation
  

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  How policies are arranged
  
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  Why material misrep isn’t a huge feature in policies
  
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  Definitions of totally disabled, any occ, own occ
  
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    Don’t have to state the definition since the policy alters the definition
    
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    Look at diff fact patterns to see how they have been applied
    
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  Look at scenario where disabled who has returned to work, but symptoms reappear
  

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  Paul & Cumis
  
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  Martin
  
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    Fact pattern on accidental death likely
    
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    “death by accidental means” made definition quite broad, in later cases definitions were narrowed
    
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    Intention of insured of utmost importance
    
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  Branch
  
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    Suicide
    
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    Lapse, reinstatement and whether material misrep can be made during reinstatement
    
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  Quinn
  
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    ***Pay close attention to facts – insured’s knowledge of making material misrep
    
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    Life insurance and material misrep
    
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    Talks of a different test for materiality apart from other provinces: if a question is asked in a life insurance policy, then it is material to the contract
    
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  Creditor’s group insurance in context of life insurance policy
  
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  Know chart on the chronology of material misrep in life and disability policies
  

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  Fortuity
  
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  Loss
  
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  Indemnity principle
  
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  Duty of good faith w.r.t. misrep
  
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  Premiums, their role
  
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  Underwriting, the process
  
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  Process of negotiating group disability policy
  
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  Reasonable expectation principle
  

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  Know basic principles of how P&C policy is crafted
  

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  The Four Cornerstones:
  

2. Fortuity

3. Indemnity

4. Compensation

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  Basic Interpretation Rules: Bilkey
  
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  Basic Rule: The insured is your best friend, not an adversary
  

Looking at a policy/fact pattern

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  Is loss covered by insured peril?
  
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  Was the loss caused by peril? The concept of proximate or effective cause.
  
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  Sometimes the end result is a by-product of excluded peril
  
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    e.g. A fire is not always a fire, sometimes it is a product of a malicious act that will be excluded in some circumstances
    
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  Even if there is prima facie coverage, must see if the loss excluded? See exclusions in P&C policy
  

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  Keep in mind the distinction between excluded property and excluded perils:
  
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    Leahy v. CNS: insured tried to argue loss was covered, CA disagreed, didn’t matter if there was coverage for the peril since you had to look at the property, and the property was excluded
    
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  Liability coverage: see Bilkey.
  
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  Some exclusions—such as intentional or criminal acts—have been modified by statute:
  
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    Particularly protection for the innocent insured: s. 35 of Insurance Act
    

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  You should review all of Parts 1 and 2 of the Insurance which are only 36 sections
  
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  You should review the Statutory Conditions of which there are 14
  
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  Keep in mind the special position of the mortgage holder under the standard mortgage clause
  
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    Position of mortgage holder won’t be defeated by any act or omission by the insurer
    

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  Limitation periods.
  
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    In simple terms, 2 years from date of loss for property claims.
    
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    2 years from the date the cause of action arose for liability claims: no sooner than when the insured is sued.
    

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  Relief from forfeiture:
  

2. Also s. 13 of Insurance Act – basic question is whether forfeiture is inequitable?

3. Unjust contract provisions: s. 32 of the Insurance Act. March v. Halifax Ins., 2006 SCC 6: power to grant relief from provisions which are unjust in application or in terms of consequences. Open question is that there are few guidelines on how courts will apply any of those provisions.

4. How will the court apply these powers? - look at general principles like REP of parties and society, how can society function is there’s uncertainty/a lottery? – this can’t be right or fair. Harmon thinks that courts have enough wisdom to create a system where there is a fair degree of predictability

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  S.C. 4: Material Change in Risk
  
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    If there is material change in risk in control of insurer, policy is voidable by insurer w.r.t. portion of policy involved
    
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  Jackson v. CNS: applied longstanding principle in BC law. Materiality is a question of fact and objectively determined (Kehoe v. BC)
  
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  Only voids the part affected by the change
  
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  Would the change have influenced reasonable insurer to decline the risk or charge a higher premium?
  
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  Keep in mind contrary decisions such as Aviva v. Thomas (NB) and Sagi (Ont.) where courts imposed radically diff test. Not based on objective test of reasonable insurer, but subjective test of whether insurer would know if there was a material change. Some judges were incensed that insurer was denying coverage since insured couldn’t know what a material change is unless insurer informs them – there’s a balancing act involved
  
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    Will the law change in BC? “How would an insured know what is material unless insurer tells them?”
    
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    It would be difficult to change regime in BC since they would need to come up with a long checklist of material changes – Harmon feels that new trend shouldn’t become the law in BC
    
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    To keep concepts grounded, should go back to four cornerstones of insurance law, these inform other area of the law in different ways
    

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  Requirements after loss: SC 9 – insured should provide notice in writing as soon as practicable. ..
  
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  Keep in mind the difference between this condition and the practice
  
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    In most cases, insurer doesn’t demand written notice, insurer may call broker which is usually sufficient
    
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  Insurer may be estopped from compliance if they don’t demand strict compliance with traditional requirements
  
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  Duty of insurer to provide forms: s. 26 and 27 of Ins. Act
  
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  Important concept that underlies all of this: the good faith duties of insurer in the claims process to the final resolution are bilateral, notwithstanding intervening litigation
  

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  SC 7: Fraud in the statutory declaration in relation to particulars required in SC 6
  
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    Sometimes may want proof in writing
    
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  Does any wilfully false statement vitiate the entire claim? Per Brown, yes. However, it must be material
  
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    A matter of exercising a certain degree of common sense
    
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  Relief from forfeiture available here as well.
  

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  SC 11: in the event of disagreement, dispute resolution process on demand.
  
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  SC 12: claim payable within 60 days of proof of loss.
  
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  See dispute resolution process in S. 12 of Ins. Act.
  
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  Requirement for insurer to advise of dispute resolution process: s. 3 of Regs.
  

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  Duty of insurer to advise of limitation periods: s. 4 of Regs.
  
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    No notice required when insured represented by counsel.
    
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  The duties of good faith: Whiten v. Pilot
  
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    Read in full and remember.
    
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  Bifurcation of bad faith claims: Wonderful Ventures
  
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    Procedural issues w.r.t. severance of underlying contractual claim from bad faith claim
    
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    Takeaway: important to retain counsel early, if insurer doesn’t do this, no solicitor client privilege to protect, so the privilege won’t trump ___, so insured will have benefit of prosecuting both claims at the same time
    
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      Law in BC is settled, not so much in ON
      

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  The importance of salvage rights: SC 9
  
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  The Great Wine Cellar Case:
  
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    Wells v. CNS: insured suffered large loss, insurer offered to pay claim and take stuff that was unwanted, insurer made whole by that/a way to resolve disputes
    

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  Subrogation
  
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  Covered by s. 36 of Insurance Act
  
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    Insurer’s rights are derivative; no better position than the insured
    
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  Once again: bilateral duties of good faith
  
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  There may be restrictions on subro: leases, implied or express covenants to insure, construction cases
  
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  At common law, no right of subro until full indemnity: National Fire v. McLaren (1886)
  
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  Modified by statute
  

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  Review principles of subrogation discussed in Zurich v. Ison TH Auto Sales
  
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    Held: insured may retain control of litigation
    
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  Consider practice tips in subrogation
  
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  Multiple Insurers; Are there multiple policies dealing with a particular loss?
  
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    Do the policies cover the same risk, same subject matter, overlapping time periods?
    
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  Proportionate contributions: s. 30 of Ins. Act
  

Multiple Insurance Issues

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  Overlapping policies
  
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  Excess coverage
  
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  Several policies
  
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  Alternative coverage
  
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  Review other insurance clauses: if they are irreconcilable, they cancel each other out: both primary
  

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  Excess coverage
  
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  The duty of the insurer to the insured and to the excess insurer
  
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  The consequences of bad faith: Shea v. MPIC (in Brown, look at index)
  
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  As a rule: insurer with greater exposure get to defend: duty to share defence costs
  

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  Claims by assignees and third parties
  
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  Keep in mind the position of the loss payee or mortgage holder
  
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  Keep in mind the ability of a third party to take direct recourse against a liability insurer in the event of a dry judgment: s. 25 of the Ins. Act
  

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  Claim arises at the time of loss, notice to insurer should be provided when the reasonable insured knew or ought to have known of the claim, so duties won’t arise until this point
  

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  Insurer can take two routes w.r.t. duty to defend/indemnify
  
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    Defend under non-waiver agreement (bilateral agreement)
    
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    Insurer can engage in unilateral action so they aren’t estopped from denying coverage
    

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  Misnomer of occurrence in context of liability policy
  
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    In liability policy, injury to third party triggers indemnity, this is the occurrence for the purposes of a liability policy