In Furtado v. Lloyd's Underwriters 2024 ONCA 579, the Ontario Court of Appeal determined whether a policy holder was allowed coverage for claims made pursuant to the company's directors and officers policy.
The applicant, Go-To Developments Holdings Inc. had a director and liability policy from Lloyd's Underwriters with a policy term of October 6, 2018 to October 25, 2019.
Background
In May 2019, the insured was required to provide various documents to the Ontario Securities Commission's office. The Commission was investigating the actions of the business, and the insured was ordered to produce various documents pursuant to s. 11 of the Securities Act. The investigation into the insured was extensive and carried on until 2021. In December 2021, the Commission brought a receivership application and enforcement proceeding against the insured and Go-To.
Crucially, the insured did not notify Lloyd's of the investigation until February 2022.
Lloyd's challenged the lack of notice and argued that in a claims-made policy, they must be notified as a term of the policy. The insured's position was that the delayed notification to the insurer did not create any prejudice. Further, the insured attempted to rely on relief from forfeiture.
At trial, the Court rejected the insured's position and found in favour of Lloyd's.
Decision
At trial, it was determined that coverage applied only where the claim made against the insured was during the policy term. Further, the claim had to be reported in writing within 30 days of the policy expiry. A caveat was that if there was an event that was reported during the policy term that could give rise to a future claim, then this would be deemed as a ‘claim first made' by the insured.
At paragraph 59 of the appeal decision the Court confirmed as follows:
[59] The triggering event for occurrence policies is whether the occurrence took place within the policy period, not whether notice of the claim was given during the policy period. Occurrence policies therefore provide coverage for incidents that took place during the policy period, regardless of when the claim is brought: see e.g., Reid Crowther, at pp. 260, 262-63. For example, where an accident occurs within the policy period, the damage or loss is covered regardless of when the claim is brought.
As such, because the insured did not comply with the notice term of the policy, coverage could not be allowed, nor was there any relief from forfeiture. To decide otherwise “…would be to distort the plain meaning of the contract and require the insurer to provide coverage for an event outside the scope of the policy which it had not agreed to cover and for which it had received no remuneration” (para. 80).
In relation to the relief for forfeiture, the Court held that grating this relief would undermine the intention of the policy. It was a condition precedent that to allow coverage, the insured was required to report any claims in order to trigger coverage.
The appeal was dismissed.
Key Takeaways
The decision in Furtado emphasizes the importance of insureds being aware of the reporting terms within their policy. If there is even the potential of a claim being advanced, insured's should be prompt in notifying their insurer to avoid an outcome like in Furtado and a potential lack of coverage.
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