Canada: Insurers Obligated To Provide Notice Of Limitation Periods To Insureds

In Alberta, the Fair Practices Regulation imposes an obligation on insurers to notify claimants of a pending limitation period. Master A.R. Robertson, Q.C. of the Court of Queen's Bench of Alberta recently discussed the Fair Practices Regulation and whether the obligation to notify claimants applies retroactively. Master Robertson, Q.C. also clarified the law regarding promissory estoppel in the context of insurance claims.

APPLICABLE LEGISLATION

Section 5.3 of the Fair Practices Regulation came into force on July 1, 2012. Pursuant to section 5.3(2), insurers must give written notice to a claimant of the applicable limitation period within 60 days from the date the claimant notifies the insurer of a claim, or within five business days from the date the insurer denies the claimant's claim. Pursuant to section 5.3(7), if an insurer fails to give the claimant the notice required by section 5.3(2), the court may, on application by the claimant, order that the applicable limitation period be extended and grant any other remedy that the court considers appropriate.

BACKGROUND

In Dhillon v. Anderson(Dhillon), the parties were involved in a motor vehicle accident on March 24, 2011. The insurer became aware of the claim on May 9, 2011, and delivered a settlement offer to the plaintiff shortly afterward. The insurer claimed that the plaintiff rejected the offer, while the plaintiff claimed that he was simply not ready to settle at that time. The insurer engaged in further communication with the plaintiff, including making several requests for information. The limitation period for commencing an action would normally have expired two years after the date of the motor vehicle accident (i.e. March 24, 2013). However, the plaintiff did not file a statement of claim until October 2, 2013. The plaintiff alleged that he did not receive written notice of the limitation period from his insurer at any time.

The defendant's insurer brought an application for summary dismissal based on the expired limitation period. The plaintiff argued that the limitation period should be extended for two reasons. First, he argued that section 5.3 of the Fair Practices Regulation is merely procedural, and the insurer could have advised him of the limitation period. Second, he argued that the settlement offer and further communications with the insurer led him to believe that his claim would be settled and he would not have to sue. He contended that he relied on this belief and that the doctrine of promissory estoppel should therefore apply to extend the limitation period. 

COURT OF QUEEN'S BENCH DECISION

Master Robertson, Q.C. held that the Fair Practices Regulation is more than procedural, as it may "fundamentally affect a substantial defence that a defendant may have," namely the expiry of a limitation period. In Dhillon, it was clear that section 5.3 of the Fair Practices Regulation came into force after the insurer became aware of the claim, but before expiry of the limitation period. Master Robertson, Q.C. stated that the introduction of section 5.3 does not retroactively require insurers to provide notice of limitation periods. He noted that in many such cases it would be impossible to meet the notice requirement deadline. Absent specific language in the Fair Practices Regulation to the contrary, the court is entitled to presume that the new provisions were not intended to apply retroactively.

In addressing the promissory estoppel issue, Master Robertson, Q.C. cited well-established principles of promissory estoppel as outlined by the Supreme Court of Canada in Maracle v. Travellers Indemnity Co. of Canada (Maracle). The decision in Maracle confirmed that the party relying on the doctrine of promissory estoppel must establish that the other party has, by words or conduct, made a promise or assurance which was intended to affect their legal relationship and to be acted on. In this case, Master Robertson, Q.C. did not find any evidence suggesting that the insurer made a promise or assurance to the plaintiff. The plaintiff "simply assumed his case would be settled."

In light of the above findings, Master Robertson, Q.C. dismissed the action.

APPLICATION

It is clear from the decision in Dhillon that Alberta courts will not retroactively apply the recently added provisions of the Fair Practices Regulation. As such, insurers are not under an obligation to provide notice of limitation periods for claims that they became aware of prior to July 1, 2012.

The Alberta legislature intended for the Fair Practices Regulation to protect individual consumers from sharp business practices. Indeed, the Alberta Treasury Board and Finance Department have referred to the Fair Practices Regulation in the past as being consumer protection legislation. However, a close reading of the Fair Practices Regulation suggests that section 5.3 may apply to all manner of insureds and all types of insurance contracts, including corporations and commercial insurance contracts. Section 5.3(1)(a) defines "claimant" as "an insured" and section 5.3(1)(b) defines an "insured" as a "person insured by a contract of insurance, whether named in the contract or not." Although "person" is not further defined in the Fair Practices Regulation, the Insurance Act does include corporations in the definition of "person."

Accordingly, it is an open question as to whether Alberta courts will extend the provisions of section 5.3 of the Fair Practices Regulation to corporations and commercial insurance contracts, but there does appear to be a reasonable argument for doing so. Until the scope of the Fair Practices Regulation is substantively addressed by Alberta courts, insurers should err on the side of caution and adhere to the notice requirements in section 5.3 for all insureds in Alberta, including corporate insureds.

In addition, as a practical matter, insurers should take note of the exceptions to the notice requirement outlined in the Fair Practices Regulation:

• Notice of a limitation period is not required if, at the time notice is required, the insurer is aware that the claimant is represented by legal counsel (section 5.3(4))
• With respect to a claim by a person insured under section B of a standard automobile insurance policy, notice of a limitation period is only required in respect of a denial of a claim under one or more of those coverages under section B (section 5.3(5))
• With respect to a claim by a group person insured under a group accident and sickness policy, notice of a limitation period is not required if the claim is with respect to a coverage other than disability coverage (section 5.3(6)).

The authors acknowledge the contribution of Liam Kelley (Student-at-Law).

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