Property Insurance limitation periods interpreted

//Property Insurance limitation periods interpreted

Property Insurance limitation periods interpreted

In the November 13, 2012 decision of Boyce v. Co-operators General Insurance, 2012 ONSC 6381 (CanLII),, Justice Quigley of the Ontario Superior Court of Justice addressed the important issue of the “Statutory Fire Conditions” listed in homeowner’s and property insurance policies.

One of the issues in this action was whether the PART IV Fire Insurance Statutory Conditions, specifically the limitation period provision of bringing an action within one year, applies to multi-peril policies in Ontario.

The Plaintiffs made a claim on their commercial property insurance policy following a complaint of a “foul odour”. The claim was denied by the defendants. An action was brought within two years, but after the one year mark.

The Defendant’s brought a summary judgment motion claiming that the action was barred pursuant to the 1 year limitation period listed in the Statutory Conditions.

In what I believe to be an accurate following of the Supreme Court of Canada’s decision in KP Pacific Holdings Ltd. v. Guardian Insurance Company of Canada, 2003, 1 S.C.R. 433, Justice Quigley concluded that the one year limitation period in the statutory conditions does not apply to multi-peril insurance policies in Ontario. As a result, the defendant insurance company lost their motion for summary judgment.

Justice Quigley concluded:

“[37] I find that the facts and the law with respect to this case fall squarely within the ambit of KP Pacific Holdings. As the legislation in Ontario uses substantially the same wording as the legislation in British Columbia referred to in KP Pacific Holdings, it appears clear that a multi-peril policy, such as the one issued to the Plaintiffs, cannot be considered fire insurance. The peril of fire is an “incidental peril” to the coverage provided and therefore excluded from the application of Part IV (Fire Insurance) of the Insurance Act by virtue of s. 143(1)(c) of the Insurance Act.  (emphasis added)

[38] It is also important to note that the B.C. legislation expressly contemplated that the fire insurance provisions could include insurance against “other risks” whereas the Ontario legislation has no such provision. Even with the B.C. legislation contemplating the inclusion of “other risks”, the Supreme Court in KP Pacific Holdings determined that the modern multi-peril policy still cannot be considered fire insurance.

[39]As such, it appears that the policy issued to the Plaintiffs cannot be construed as “fire insurance” to trigger the one year limitation period contained in s. 148(14) of the Insurance Act.

[40] As s. 148(14) of the Insurance Act is inapplicable to the within action, it appears clear that the applicable limitation period is two years unless the limitation period has been varied by agreement pursuant to s. 22 of the Limitations Act, 2002.

In obiter, Justice Quigley also negatively commented on the common practice of including the “statutory conditions” in the insurance policies. He stated:

[47] Not only is the required language missing from the “Statutory Conditions,” I have serious reservations as to whether the “Statutory Conditions” should form a part of the policy at all. The issue of whether attaching “Statutory Conditions” to a multi-peril policy is sufficient to find that the provisions have been contractually adopted has been called into question. See Co-operators v, Burry [2007] N.J. No. 277 (NLCA). The practice of inserting provisions into a policy of insurance and labeling them “statutory conditions” when the statutory conditions contained in s.148 of the Insurance Act do not apply to multi-peril policies at all should be further evaluated. It is difficult to see how a policy holder can be said to have truly “agreed” to these provisions when they are directed to believe, at least partially, that they are mandated by statute. To the contrary, the statute provides for a longer limitation period. This is particularly of concern in light of the insurer’s overriding duty of good faith to its insureds.

It is my opinion that this is an excellent decision for Plaintiffs fighting the uphill battle against insurance companies. Unfortunately, I expect that the Defendant will appeal. At the very least, the pivotal issue with respect to limitation periods in property insurance policies will finally be addressed by an appellate Court in Ontario in consideration of the Supreme Court of Canada’s 2003 judgment of K.P. Pacific.

For further questions or comments please contact:

Ari J. Singer

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By | 2012-11-16T17:42:48+00:00 November 16th, 2012|General|0 Comments

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