First Presented at the CBA-OBA Professional Development Program: Fast Out of the Gate: An Insurance Law Primer
We have compiled a non-exhaustive list of considerations for the drafting of pleadings for first party actions between the insurer and insured:
- Identify the relief sought, for example:
a. Declaration that the insurer has a duty to duty to defend and/or duty to indemnify the insured; and/or
b. Payment/Reimbursement/Compensation for the loss under the policy;
- Describe the insurance policy, including policy number, dates it was in force, title (i.e O.A.P. 1, residential, etc.), and where relevant, whether it is an occurrence or claim based policy;
- If the plaintiff is not a named insured, state the reason why this person is considered an insured under the policy (for example, a "dependent relative" under the OPCF 44R or a person who had consent to drive the vehicle involved in the motor vehicle accident) â€" it is important to note that an insurance contract is between two parties. It is rare that an individual who is not a party to the insurance contract can sue the insurer;
- Indicate that the premium was paid (if it was);
- Provide information about the insurance product that was being purchased (i.e. coverage that included SABs, third party liability, coverage for water loss, fire loss, etc.) including purchase of peace of mind;
- Explain what happened and what is the loss;
- Quote from the insurance policy to show what clause in the policy indicates this loss was covered (do not forget to review any applicable endorsements or added coverage);
- Indicate the date that the plaintiff requested payment from the insurer;
- Indicate the date of filing the Proof of Loss, time available to insurer for payment, if applicable;
- Indicate the date of the insurer's refusal to pay or the fact that, despite the plaintiff's request, the insurer has not paid;
- Consider whether the plaintiff has additional coverage with any other insurer, such as excess insurance, umbrella insurance or overlapping policies and whether that insurance company should be added as a party to the action;
- Consider whether the denial of the insurance coverage may have been caused by the negligence of the broker who sold the insurance policy to the insured; consider whether the broker should be added as a defendant;
- Consider that some companies that provide insurance products and/or claims management are only managing these on the behalf of the insurer and should or should not be named as a defendant â€" write a letter to this company requesting additional details to avoid costs; consider commencing your action well before the limitation period to have time to amend your pleadings should the wrong defendant be named;
- Consider that some of the pleadings may open the door to an
unnecessary and embarrassing discovery that may not be wanted by
your client; make sure you speak to your client about the amount of
disclosure that may be required for this action:
a. Example 1: if it is pleaded that the plaintiff incurred credit card interest as a result of the loss, the credit card statements and contracts are relevant and will need to be produced; or
b. Example 2: advancing a spousal FLA claim for loss of companionship when there is trouble between the spouses (i.e. one spouse is having an affair or domestic violence);
- Consider whether the Statement of Claim should be drafted in
French. It is important that your client understands the claim, and
if his/her first language is French, either draft it in French or
translate it for your client if he/she does not understand English
well. Drafting in French will automatically make this a bilingual
action, so interpretation services are covered by the Province.
This is important as well.
PRACTICE TIP 2: if the relief sought by the insured is a declaration that the insurer has a duty to defend and/or duty to indemnify, the insured should consider keeping the insurer regularly updated about the proceedings in which the insured is being sued. The insured should invite the insurer to attend all mediations, settlement conferences and other proceedings.PRACTICE TIP 3: if your practice is largely based on insurance defence work, avoid starting a first party action against a client of your firm. Review the Rules of Professional Conduct, in particular Rule 3.4 and any agreements or guidelines with that insurer. As a lawyer, you want to avoid any allegations of conflict or future business issues with the insurance company.
- Plead whether the insurance policy was issued or not, was the issuance based on material misrepresentation in the application process;
- Consider whether you should admit that the plaintiff is insured under the policy. If the issue is a breach of the policy, admitting that the plaintiff is an insured may be a useful argument against a claim for bad faith (i.e. not taking an unreasonable position, not adding costs to the insured's claim, etc.). However, if the issue is that the plaintiff is not insured under the policy, specifics need to be pleaded;
- Consider whether this action premature, i.e. has a Proof of Loss been signed by the insured prior to suing, should this go to appraisal, has mediation been held if it is required beforehand, has the insurer been given sufficient information and opportunity to investigate the claim, has the insured cooperated with the insurer throughout;
- Indicate details of the insured's compliance with the policy that might be at issue, i.e. whether the premium was paid on time, whether the loss was reported within a reasonable amount of time or within the deadline set out in the contract, whether the insured has failed to act in good faith;
- Quote the insurance policy including the insuring agreements and any relevant exclusions to show why the loss is not covered.
- Plead details on how the insurer did in fact conform to the policy, requirement of good faith, etc.;
- Plead details on why there is no coverage for the loss or no duty to defend and/or to indemnify (i.e. excluded driver, breach of contract, misrepresentation of contract, fraud, etc.);
- Specify: was there a denial, when was the denial, when was the plaintiff informed of the denial, etc.;
- Be very careful when pleading fraud - it can create a claim for bad faith, and be careful to comply with Rule 25.06(8) and plead particulars;
- Consider whether the brokers should be added as a third party (if they are not already a party in the action);
- Consider whether a crossclaim is required; if not, do not do one to avoid incurring unnecessary costs.
III. Reply or amendment to Statement of Claim - Plaintiff/Insured
- You may wish to reply that there was waiver of certain conditions pleaded in the Defence, request relief from forfeiture, plead estoppel, etc.
- The insurer may also commence an action or commence a counterclaim against the insured for breach of contract, misrepresentation, fraud, etc. For example, if the insured misrepresented his pre-accident income in an accident benefits matter to obtain better income replacement benefits, the insurer can pursue an action against the insured for reimbursement of the benefits paid out.
- Once the pleadings have been drafted, and at each stage of the action, consider whether summary judgment may resolve any issue in dispute. In our experience, motions for summary judgment on first party claims are very useful, as the arguments in the motion are often legal or contractual ones and there is no genuine issue for trial.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.