Chapter 9 – Notice and Proof of Loss

Chapter 9 – Notice and Proof of Loss

Notice of loss

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  Notice of loss must be provided to the insurer by the customer
  
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    In BC, notice of no fault claims against govt insurer must be made “promptly” and a written report must follow within 30 days of the accident
    
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  Time Limits
  
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    It is a condition precedent to recovery under police that notice requirements are met
    
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    “Immediately”: with all due diligence in the circumstances (Shera v Ocean Accident)
    
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    May depend on what is reasonable in the circumstances
    
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  When the time starts to run
  
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    Notice has to be given within a certain time frame, usually from the date of loss, or the date of the accident, or the date a claim arises
    
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  The written notice requirement
  
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    Where written notice is required, compliance is a condition precedent to recovery
    

Proof of Loss

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  Customer must, as a further condition precedent to recovery, provide evidence to establish on a BofP that a) the loss did occur, and b) the value of the loss
  
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  Time limits
  
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    Usually specified in the policy
    
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  Information that must be supplied
  
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    Depends on the policy, object of conditions requiring sufficient proof is to give insurers the means of determining whether claims are valid in both nature and amount
    
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  Manner of proof
  
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  When failure to comply may be excused
  
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    Imperfect compliance with requirements for proof may be excused on the grounds that the insurer’s conduct gives rise to estoppel or amounts to an election to treat the claim as valid notwithstanding the default
    
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  Insurer’s obligation to supply proof forms
  
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    s.25 of the Insurance Act requires insurer “immediately on receipt of a request, an in any event not later than 60 days after receipt of notice of loss” to furnish forms where proof of loss is to be made
    
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    Failure to comply with this requirement renders the defence of failure by the insured to file proof in time, inoperable
    

Matters Common to Notice and Proof

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  Where notice and proof must be sent
  
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    Provisions state that notice ‘may’ be made in manner indicated, though something less than personal delivery or registered mail is generally acceptable, especially given that many claims are now handled through independent agents, brokers or adjusters
    
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  Who may provide notice of proof
  
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    Though provisions may refer to customer, this doesn’t preclude an agent from filing the notice on the customer’s behalf
    

Misrepresented and Fraudulent Claims

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  Where there is no term covering fraud in a policy, the consequence is that the particular claim is forfeited and the insurer is entitled to avoid the contract as a whole
  
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    Follows from duty of good faith
    
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  Fraud necessary to defeat a claim may be perpetrated by omission or positive assertion
  
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    Must be willfully made and not be mere inadvertence, or an innocent mistake
    
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    Must be material to proof of the fact or extent of loss
    
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      Statement is material if it “is capable of affecting the mind of the insurer, either in the management of the claim or in deciding to pay it”
      

Relief against Forfeiture

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  Generally, imperfect compliance should relate to a statutory condition
  

Chapter 10 – Disposal of Claims

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  Amending a settlement
  
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    Customer may wish to amend settlement where loss suffered exceeds compensation paid by the insurer, or
    
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    Where property insured against theft is stolen, then recovered, or
    
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    Where insurer discovers if was under no obligation to make any payment
    
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  Actions against the insurer, appraisal and arbitration
  
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    It settlement is not reached, or has not been honoured by the expiry of the deadline for payment, customer will normally be able to bring an action against insurer to enforce claim
    
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    Restrictions may be placed on the right to bring an action depending on the policy
    
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    Statutory conditions for fire and auto insurance provide that the valuation of loss must be settled before customer can succeed against insurer in a claim
    

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  BC Limitation of Actions
  
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    Limitation period applicable to all claims for property damage or loss is two years, s. 23
    
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    Limitation period for accident and sickness insurance is 2 years after proof of claim is furnished, and 6 years after the date of death, s. 104
    

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  Duty of good faith
  
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    This duty is independent of coverage
    
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    However, w.r.t. bad faith, position is not so clear in Canada
    
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      Whereas in US, some states preclude a bad faith claim if there is no coverage, and vice versa
      
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    Perhaps if P can show a) conduct amounting to bad faith, and b) loss or harm resulting from that conduct, this may be sufficient to establish a cause of action even if there is no liability under the policy
    

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  Punitive damages
  
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    The purpose is to punish an insurer for inappropriate conduct and deter it and other insurers from repeating such conduct
    
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    Punitive damages have been awarded where the court has determined insurer’s conduct to be so harsh, vindictive, reprehensible or malicious as to offend its sense of decency
    
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    In Whiten, SCC adopted theory of proportionality for determine whether punitive damages should be awarded – there should be proportionality between amount awarded and
    
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      a) degree of blameworthiness
      
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      b) vulnerability of P and impact on his or her “peace of mind”
      
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      c) the need for deterrence
      
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      d) criminal or other civil penalties, and
      
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      e) any benefit, including profit gained by D in its conduct
      
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  Aggravated damages
  
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    Awarded for distress and humiliation caused by insurer’s conduct, that doesn’t quite amount to the harsh and vindictive methods that justify punitive damages
    
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    Aggravated damages are available without proof of financial loss or bad faith on the part of the insurer
    

Chapter 11 – Partial and Total Loss of Property: Valuation, Abandonment and Salvage

Valuation of Loss

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  Valued policies
  
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    In some contracts, post-lost valuation is set in advance for a particular property should it be lost or destroyed
    
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    The parties’ intention to create a valued policy must be clear
    
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  Other Indemnity Insurance – quantification is relatively simple
  
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    Unless contract specifies otherwise, measure of loss in property cases is “actual cash value”, i.e. cost of reinstatement less depreciation
    
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      “reinstatement” may refer to the cost of repair or the cost of complete replacement
      
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    Generally, if the cost of making repairs to property is less than the cost of replacing it, then the former is used as the measure of loss
    
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    Where damage to the insured property is so extensive that the cost of repairs is greater than the cost of buying a substitute, as long as a substitute is available, the latter will be the measure of recovery (“market value”)
    
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    Where destroyed or severely damaged property is unique or rare, and there is no market to buy a substitute, may be feasible to replace the property, and “cost of making a substitute” is the measure of loss
    
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    Where it is inappropriate to repair or replace property that has been damaged or destroyed, measure of loss will be “diminution in value” of the property
    
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    Where insured property is income producing, one way to measure reduction in value to customer is to use factors such as “loss of commercial value”
    

Total Loss, Abandonment and Salvage

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  When some property is severely damaged, if it is cheaper to pay the full value of the damaged item than to restore it to former state, insurance will likely “write it off”
  
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    If customer receives full compensation and retains whatever remains of the property, they would gain more than an indemnity
    
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    In this situation, insurance law enables insurer to gain title to the remaining property, or “salvage”
    
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  Unless parties have agreed otherwise, insurers right to salvage arises only when it has paid for a total loss
  
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    Does this rule apply here, after total loss, less than full indemnity is paid only because of a deductible clause – No, given the general principle that payment of full loss is necessary for the insurer to have salvage rights, courts have held that when deductible is applied, insurer may not take salvage because full payment was not made
    

TopHat Questions

Misrepresentation

If a policy lapses, and then is reinstated, what date counts for the running of the 2 year incontestibility period?

 aDate policy was issued. bDate policy lapsed. cDate policy was reinstated.

In the "life" of an insurance policy, when is a material misrepresentation committed?

 aApplication bUnderwriting cAfter policy is issued dUpon the insured loss occurring eApplication & underwriting

Over the life of an insurance policy, when is the material misrepresentation discovered by the insurance company?

 aApplication bUnderwriting cAfter policy is issued dUpon a loss occurring eAfter loss has occurred and during 2 year contestibility period

Which of the following does Carter v Boehm stand for?

 aA misrepresentation must be fraudulent for insurance company to void the policy.

 bThe insurer's ability to void the insurance policy for material misrepresentation arises out of the duty of utmost good faith.

 cThe insurer cannot rely on material misrepresentation or omission where the insurer should have been aware of the information.

Can an insurer void an insurance policy if the applicant was not aware that the information (misrepresented or omitted) was material to the insurance company?

 aYes bNo

A common situation is for a broker to complete an insurance application on behalf of the insured. If the broker fills in inaccurate information, and the insured merely signed the application form, can the insured avoid an insurer voiding his/her policy for misrepresentation.

 aYes. bNo.

How has the common law test for voiding a policy for material misrepresentation been modified by the Insurance Act [RSBC 2012], c. 1?

 aIt hasn't been changed. bAn insurer must prove fraudulent statements and omissions in order to void the policy. cTo rely on an omission to void the policy, the insurer must prove fraud.

The insurer has how long from the date the policy was issued to void the policy for material misrepresentation?

 a1 year b2 years c5 years

Which one of the following is not a purpose of indemnity?

 aTo compensate the insured for the amount of a loss. bTo put the insured in the position he/she was before the loss. cTo reduce the amount of financial hardship incurred by the insured as a result of a loss. dTo provide a profit to the insured.

Which of the following is NOT a principle of policy interpretation?

 aCourts should interpret policies consistent with reasonable expectations of party. bCourts should read the contract as a whole to determine the meaning of a provision. cCourts may consider the broader commercial context in which the policy is situated. dCourts should avoid interpretations of the policy which results in unfairness to one of the parties.

Policy Interpretation

True or false - The reasonable expectations of the parties should be invoked, even in the face of unambiguous policy provisions, to ensure a construction of the policy which is fair to both parties.

 aTrue bFalse

True or False - Courts should strive to ensure similar insurance policies are construed consistently?

 aTrue bFalse

Once an insurer proves that an exclusion clause is deemed applicable, who now has the evidentiary burden?

 aInsured - that the loss falls within an exception to the exclusion. bInsurance company - as part of its burden to prove the exclusion; there is no exception to the exclusion.

Who has the onus to prove, on a balance of probabilities, that the insured is eligible under the policy, and the loss was caused by an insured peril?

 aThe Insured bThe Insurance Company

Which of the following questions is NOT one of the threshold questions (re claims-made vs occurrence-based) you should be asking when analyzing an insured's coverage for a loss?

 aWhen looking at the date of the events alleged in the lawsuit, did ANY of the events occur within the policy period? bWhen was the claim (the subject of the lawsuit) first made against the insured? cWhen did the insured first give notice of the claim to the insurance company? dIf the lawsuit is not brought until after the expiration of the policy period, did the insured report a potential claim within the policy period? eWhether the claimant submitted a proof of loss.

Which is the weakness of a claims-made policy which an occurrence-based policy addresses?

 aWith an occurrence based policy, the insured does not have a duty to report a claim until years after the loss. bOccurrence-based policies can be used in 1st party policies (i.e., property claims). cOccurrence-based policies provide an insured with coverage for an event which occurs during the policy period, but is only discovered by a 3rd party years later.

Which ONE of the following is FALSE in relation to Claims-Made policies?

 aInsured must report any claim brought against it during the policy period (or within the time period set forth in the policy for reporting claims).

 bThe third party must make the claim against the insured during the policy period

cThe insured has a duty to report potential claims, i.e., any act or omission that might reasonable be expected to form the basis of an actual claim later.
 dA claims-made policy must, by definition, be a third party policy.

eAn insurer may deny a claim even if the insured reports a potential claim during the policy period, IF the third party does not initate a claim until years later.

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