A new decision from the Alberta Court of Queen's Bench provides a caution to insureds to double check the accuracy of a denial of coverage. Failure to investigate a denial made in error may mean a plaintiff is out of luck if it tries to bring a claim after the expiry of two years from the date of denial.
The Plaintiff Condominium Corporation (Condo Corp) brought a claim arising from the denial of a claim for water damage to a condominium known as the Palisades Park Villas in Edmonton (Property). In this case, the various insurers, who were subscribers to the Condo Corp's policy of insurance, applied for summary dismissal of the claim on the basis that it was brought after the limitation period expired.
Water damage to the Property was discovered on June 29, 2011. On December 8, 2011, the Condo Corp's property manager contacted the insurance adjuster. Over the next few days, the adjuster received documentation in relation to the damage from the property manager. The Condo Corp's broker provided a Notice of Loss to the adjuster. The adjuster advised Aviva, the lead subscriber, of the claim. Aviva instructed the adjuster to deny the claim.
A formal denial was issued on March 23, 2012. However, the denial contained wording and exclusions from a renewal of the relevant insurance policy that took effect on July 1, 2011, after the date of loss. A careful reading would have revealed that the denial was based upon an error.
Having realized this a number of years after the fact, the Condo Corp filed its Statement of Claim on June 7, 2017. The insurers raised a limitations defence and declined to reconsider its disallowance in the context of the policy wording that was in effect on the date of loss.
The Condo Corp argued that the limitation period could not begin to run because the denial was based on a misrepresentation. Master Smart could not agree with this argument, saying "at the point of denial, the Plaintiff had a responsibility to exercise due diligence and not simply rely on the Denial Letter without more" (at para 15).
However, Master Smart left open the possibility that "a reasonable time to investigate would extend the limitation period beyond two years from the date of denial" (at para 16). In his view, the limitation period would run "from the discovery of the error" in the Denial Letter, and would include "a reasonable time for investigation (if any) from the date of the Denial Letter" (at para 18). However, in this case, even allowing an extraordinary period to investigate, such as a full year, the claim ought to have been issued much earlier than it was.
The Condo Corp also sought to rely on the equitable remedy of relief from forfeiture. However, Master Smart found the Plaintiff was "making a distinction without a difference when seeking this relief amounting to an extension of the limitation period that could not otherwise be granted" (at para 19).
Ultimately, the Court was satisfied that summary dismissal was appropriate. While it was "undeniable" that errors occurred, there was no authority to support that the errors postponed the running of the limitation period.
Property owners ought to review denials of coverage carefully to ensure they do not allow the limitation period to run out because of an inadvertent error. Insurers ought to be sure to double check the accuracy of any denial of coverage, as this case indicates that "a reasonable time to investigate" may extend the limitation period beyond two years from the date of denial.
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