Minding The Gap: A Cautionary Tale For Insurance Brokers

By Barry S. Stork | gowlings.com

The Ontario Superior Court of Justice recently allowed a motion for summary judgment against an insurance brokerage and the individual broker for failing to meet their duty of care to arrange adequate insurance coverage.1

The insured was involved in a motor vehicle accident while operating his leased vehicle. The vehicle carried $1 million in primary limits under a policy issued to the lessor. The insured alleged that he had also provided a clear mandate to his broker to ensure that there was umbrella coverage on the vehicle. Although the broker had arranged umbrella coverage with limits of $15 million, the policy language contained an exclusion for long-term leased vehicles. The umbrella insurer had advised the broker about this exclusion but the broker had failed to advise the insured. After the motor vehicle accident, the umbrella insurer relied on this exclusion to deny coverage.

As a matter of contractual interpretation, the court held that the exclusion applied and that coverage was not available. The court then turned to a broker’s duty of care and confirmed that they are obligated to advise an insured as to any gaps in coverage and to make all reasonable efforts to ensure that the insured was properly protected. The court rejected the assertion that the breach of duty had not caused the insured any damage, finding it inconceivable that the insured would not have taken alternative steps to ensure the vehicle was properly protected had it known of the gap in coverage.

Critical to the court’s analysis was an admission in the statement of defence, which indicated that the brokerage had always intended that there would be umbrella coverage. The court found that this admission was inconsistent with the position taken regarding the duty of care issue.

Insurance brokers who take an active approach in discussing any known or potential insurance gaps with their insured will minimize the likelihood of liability should their insured suffer any uninsured loss. In addition, this decision illustrates the importance of having a cohesive plan in defending insurance coverage claims. Insurance brokers (and their lawyers) should develop a cohesive and consistent defence at an early stage in an action.


1 Dustbane Products Ltd. v. Gifford Associates Insurance Brokers Inc., 2015 ONSC 1036, [2015] O.J. No. 854 (S.C.J.).

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowlings professionals will be pleased to discuss resolutions to specific legal concerns you may have.

SGI and police focusing on new drivers in June

 

SGI_logo_colour-header

Police will be watching for new drivers not following restrictions outlined in the Graduated Driver’s Licensing (GDL) and Motorcycle Graduated Driver’s Licensing (MGDL) programs throughout the month of June.

New and supervising drivers should know and follow the restrictions to stay safe. All new drivers, regardless of age, must successfully complete the applicable GDL program, before they graduate to an experienced licence.

The GDL programs help gradually move new drivers into higher risk driving situations with certain driving restrictions. Each program has three stages: Learner, Novice 1 and Novice 2.

New drivers must comply with the following restrictions in each stage of the GDL program:

  • no cellphone use while driving, not even hands-free;
  • the number of passengers is limited to the number of seatbelts;
  • cannot be a supervising driver for another driver in the GDL program; and
  • unable to obtain a commercial driver’s licence.

GDL drivers also have different passenger restrictions in each stage since distractions increase as the number of passengers increase. The GDL programs don’t focus on age, they focus on experience.

“Practice is essential,” says Ken Claffey, Driver Education Manager, Saskatoon Public Schools. “The nine-month learner stage is not just to prepare the new driver to pass a road test – it’s to prepare them to be a safe driver and stay alive on the road.”

New last summer, the following restrictions were added to the MGDL program. All new motorcycle riders:

  • must wear protective gear;
  • must display a red learner ‘L’ or green novice ‘N’ placard; and
  • may be restricted to engine size.

There is zero drug and alcohol tolerance for new drivers, regardless of their age, in both the GDL and MGDL programs. Additional restrictions specific to each stage of the GDL and MGDLprograms are outlined as well.

Claffey recommends parents start instilling road safety habits at a very early age. “If they’re taught the rules of the road as young pedestrians and cyclists, those road safety habits can help them become a safer and more aware driver when they’re older.”

Do you have a new driver in the family? A lot has changed!

If you received your licence before 2005, you wouldn’t have gone through the GDL program. If you have a new driver in the family, you can help them move through the stages safely by putting them in the driver’s seat as much as possible.

“As a supervising driver, your number one job is to pay attention to what’s happening and to coach and correct the new driver,” said Claffey. “They need to be prepared to handle any situation for when they no longer have you by their side. Are they ready to drive without you? Are you ready for that?

“Give your new driver as much seat time as possible when you are with them. The more they drive, the better they get. And remember, new drivers are impressionable and will pick up the supervising driver’s habits – whether they’re good or bad. So hang up, buckle up and follow the rules of the road.”

View more information about the GDL program, MGDL program or the Road Safety Challengeand how #wecandrivebetter.

About SGI

Saskatchewan Government Insurance (SGI) is the province’s self-sustaining auto insurance fund. SGI operates 21 claims centres and five salvage centres across Saskatchewan with a head office in Regina. SGI also works with a network of over 400 motor licence issuers across the province. Customers can now do some transactions online. Look for the MySGI link under Online Services on your motor licence issuer’s website or SGI’s website.

• • •

Albertans who live in floodplains can now get overland flood insurance

By Matt McClure, Calgary Herald

Homeowners in Alberta who live in floodplains can now insure their losses from overland waters with one of the province’s largest property insurers.

Using new software that maps the risk of inundation down to the individual property level, the Co-operators said this week it is now able to price a comprehensive water damage product for those who live near a river as well as homeowners on a hill.

The additional coverage will add about another $100 a year to the annual premium for a policy that covers a two-storey structure with a finished basement and a replacement cost of about $400,000 and contents in the lowest risk areas.

For clients at extreme risk in a floodplain where the probability of flooding is greater than 5 per cent in any given year, an additional annual premium of $5,000 will buy them combined contents and building coverage of up to $150,000 in the event of high waters.

“This is about providing a product to people who need and want to buy protection, but it’s also about pricing the risk of living next to a river,” said Rob Wessling, company vice-president for product development.

“About 99 per cent of homeowners will be eligible to purchase this coverage.”

In the wake of the 2013 floods in southern Alberta, there was widespread confusion and anger amongst many homeowners when they realized the water endorsements on their policies covered them for damage from sewer backup but not overland flooding.

In the four days since the product has become available, Wessling said about 80 existing or new clients have purchased coverage.

Co-operators is not the first, nor it is likely to be the last insurer to begin offering protection from flooding to residential policyholders.

Aviva Canada also began offering an overland water endorsement this month that covers losses from the accumulation or runoff of surface waters to customers in Alberta and Ontario who already have sewer backup coverage.

Company spokeswoman Alison Steele said in a statement that flood mapping technology allows brokers to place homeowners in one of 15 zones and price their coverage based on how likely they are to be inundated.

“We do not offer coverage to customers in the very high risk zones between 13 and 15, which generally means they live in an area that is highly prone to flooding,” Steele said.

RSA Canada said in a statement Friday that it will also launch a similar product soon.

“We are developing a more comprehensive water damage solution for home insurance customers than the current market offerings,” said Kellee Irwin, the company’s western regional vice president.

“We have been closely analyzing the costs, exposures of such an offering and the related customer need for an affordable, more easily understood product.”

Canada is the only G8 nation where flood insurance is not available to homeowners. Instead, federal and provincial taxpayers have covered much of the mounting bill from weather events in recent decades through disaster assistance payments.

“There are limitations because it’s not a replacement cost program,” said Chris Ross, Alberta region vice-president with Co-operators.

“It’s meant to put you back on your feet, not make you whole.”

A 2010 study by the Institute for Catastrophic Loss Reduction identified the need for flood insurance in Canada, but said inadequate and outdated mapping plus inconsistent rules on development in vulnerable areas of some provinces were an obstacle.

“Flood insurance has many advantages over government relief programs,” the study said.

“Risk-based premiums and deductibles can provide incentives to encourage actions to reduce flood risk.”

While Alberta has passed new legislation to restrict development in flood-prone areas, the government has yet to finalize regulations.

The law also exempts communities like Drumheller and Fort McMurray where maps show much of the downtown would become part of a flowing river in a flood with a one per cent probability.

In the wake of the 2013 floods, Alberta restricted affected homeowners in floodplains from making disaster assistance claims in future disasters.

But the province balked at putting that information on land titles so purchasers of properties would be aware they would not be eligible for another government bailout if they were inundated again.

 

Sylvie Paquette appointed Chair of the Board for Insurance Bureau of Canada

TORONTO, June 2, 2015 /CNW/ – Insurance Bureau of Canada (IBC) is pleased to announce the election, by its Board of Directors, of Sylvie Paquette as Chair. Ms. Paquette is President and Chief Operating Officer of Desjardins General Insurance Group (DGIG).  Ms. Paquette has served on the IBC Board since 2010.

Kenn Lalonde, Executive Vice President, Insurance, TD Bank Group and President and CEO, TD Insurance, has been elected as IBC’s  Deputy Chair.

“The pace of change in Canada’s private property and casualty insurance industry continues to increase. The market and consumers both demand more from insurers, and they require it more rapidly than ever before. I look forward to working with IBC and its other member companies to ensure that our strategic priorities meet the needs of Canadians,” said Ms. Paquette. “Together we will continue to put consumers first to ensure an environment in which consumers and government trust, value and support the private P&C insurance industry.”

Ms. Paquette has been with Desjardins since 1984. Prior to being appointed President  & COO of DGIG in 2008, she held a number of progressive leadership positions in the organization.

“Sylvie brings an immense amount of knowledge and experience to this role. We look forward to working with her on key issues that will help consumers and strengthen Canada’s private P&C insurance industry,” said Don Forgeron, President and CEO, IBC. “She is passionate about educating consumers and governments about the key issues facing our industry. Her leadership will help us advance our strategic priorities, including promoting sustainable and affordable auto insurance systems across the country and helping protect Canadians from the impact of severe weather.”

Ms. Paquette has a degree in actuarial science from Université Laval and is a Fellow of the Canadian Institute of Actuaries and the Casualty Actuarial Society. She is on the board of directors of several P&C insurance industry organizations and is recognized for her community involvement.

About Insurance Bureau of Canada
Insurance Bureau of Canada (IBC) is the national industry association representing Canada’s private home, auto and business insurers. Its member companies make up 90% of the property and casualty (P&C) insurance market inCanada. For more than 50 years, IBC has worked with governments across the country to help make affordable home, auto and business insurance available for all Canadians. IBC supports the vision of consumers and governments trusting, valuing and supporting the private P&C insurance industry. It champions key issues and helps educate consumers on how best to protect their homes, cars, businesses and properties.

P&C insurance touches the lives of nearly every Canadian and plays a critical role in keeping businesses safe and the Canadian economy strong. It employs more than 118,000 Canadians, pays $6.7 billion in taxes and has a total premium base of $48 billion.

For media releases and more information, visit IBC’s Media Centre at www.ibc.ca. Follow IBC on Twitter@InsuranceBureau or like us on Facebook. If you have a question about home, auto or business insurance, contact IBC’s Consumer Information Centre at 1-844-2ask-IBC.

If you require more information, IBC spokespeople are available to discuss the details in this media release.

 

SOURCE Insurance Bureau of Canada

Canada’s insurance regulators sign Memorandum of Understanding to share industry conduct information

TORONTO, June 1, 2015 /CNW/ – Four members of the Canadian Council of Insurance Regulators have signed a memorandum of understanding (MOU) that sets out the terms for cooperation and exchange of information across provincial and territorial jurisdictions simpler and more effective, announced Chair Patrick Déry today.

The remaining CCIR members are expected to join their counterparts in British Columbia, Alberta, Ontario and Quebec and sign on to this new MOU in the coming months.

“CCIR members represent every province and territory, and it’s in all our interests to work more closely to ensure that we can cooperate and share information on Solvency Supervision and Market Conduct  of Regulated Entities,” said Patrick Déry.  “As a result, today we are signing a comprehensive MOU that will formalize information sharing and address issues like risk surveillance, consistent handling of consumer complaints, commercial practices and protection of confidential information.”

The CCIR signatories have agreed to share information needed to coordinate regulation of insurance companies that carry on business in more than one province of territory. The MOU also provides specific protocols for sharing of confidential information.

All provinces and territories conduct investigations into consumer complaints about insurance practices. But the MOU will also allow jurisdictions to share in broader market and risk analysis.

About the CCIR:

The Canadian Council of Insurance Regulators is a national association of insurance regulators that traces its roots back to 1914. The mandate of the CCIR is to support an efficient and effective insurance regulatory system in Canada to serve the public interest.

SOURCE Canadian Council of Insurance Regulators (CCIR)

For further information: Media Contact: Greg Dickson, (For English media – Vancouver), 604 660-3905; Sylvain Théberge, (For Francophone media – Quebec City), 514 940-2176

Recent Developments: Disability Insurance Policies & Limitation Periods In Nova Scotia

Two recent Nova Scotia decisions have clarified the issue of limitation periods in disability insurance policies and “rolling” limitation periods.

THORTON V. RBC GENERAL INSURANCE COMPANY, 2014 NSSC 215

In 1998, Unum denied Thornton’s application for disability benefits under a group policy issued by Unum (which RBC later assumed responsibility for). In January, 2008, Thornton started an action against Unum as the disability insurer who provided benefits to employees of Volvo Canada. However, the pleadings were never served.

Fast forward to 2012; Thornton filed an amended pleading, replacing Unum with RBC because RBC had assumed Unum’s liability for the disability benefits. RBC filed a motion for summary judgment, arguing (in part) that the applicable limitation period had expired.

Justice Michael Wood referred to cases from Ontario and New Brunswick considering insurance policies for which the limitation period was said to run from the date on which the cause of action arose. In interpreting such policies, some cases had found that there was a “rolling” limitation period, which started afresh each time a monthly payment was not made as the cause of action arose each time a payment was not made.

The policy before Justice Wood provided that an insured could not start a legal action more than three years after the time proof of claim was required, which was stated to be no more than 90 days after the end of the elimination period. The elimination period was defined in the policy as 180 days following the first day of disability.

The language of the policy, therefore, did not create a rolling limitation period. Justice Wood held that policies that trigger the beginning of the limitation period with a defined date which does not recur every month do not create a rolling limitation period. In order to trigger the beginning of the limitation period for such policies, it is necessary to have a clear and unequivocal denial of benefits.

Justice Wood found there was a clear and unambiguous denial of Thornton’s request for disability benefits in June 1998, which commenced the three year limitation period and, therefore, the proceedings had to be started no later than 2002.

Finally, the Nova Scotia Limitation of Actions Act gives the Court discretion to extend a limitation period for up to four years. However, even if granted, the four-year extension up to 2006 would not be sufficient to save the action which had been commenced in 2008. Justice Wood found that Thornton’s claim was barred by the expiry of the limitation period eight years prior and dismissed Thornton’s action.

APPLYING THORNTON

Following Thornton, RBC brought a motion for summary judgment in Thompson v. RBC Life Insurance Company, 2014 NSSC 434. RBC sought to dismiss Thompson’s claims under a group disability insurance policy on the basis the limitation period in the policy had expired. The policy stated that a claimant could start a legal action “up to 1 year from the time the proof of claim is required”. Proof of claim had to be provided at the latest 1 year and 90 days after the beginning of disability. In Thompson’s case, proof of claim was absolutely required by December 8, 2004, and therefore the latest her claim could be started was December 8, 2005.

The first issue before Justice Jamie Campbell was when benefits had been clearly denied. Thompson’s claim was initially denied in January 2004. She appealed and RBC again denied her claim in June 2004. In November 2004, Thompson provided new medical information to RBC and her claim was reopened. Finally, on November 17, 2005, RBC wrote to Thompson denying her claim yet again.

Each time RBC had denied Thompson’s claim they had informed her that their determination was “final” – although she had a right to appeal each time. Despite this, Justice Campbell held that the word “final” had “not been used and disregarded with such frequency that it can reasonably be said to have lost its meaning”.

Thompson had understood the denial was “final” in 2005 but was unaware she could bring a claim against RBC without having to pay a lawyer upfront (she didn’t know about contingency fee arrangements until 2008). She retained a lawyer in 2008, and then retained a different lawyer in April 2011, and the action against RBC was finally commenced on May 22, 2011 – nearly six years after the denial. Justice Campbell commented that Thompson had known full well she had a legal right to bring a claim against RBC and a person cannot avoid a limitation period by ignoring it or not noticing it.

Following Justice Wood’s decision in Thornton, Justice Campbell held that a clear denial had occurred on November 17, 2005 and Thompson’s claim had been filed well beyond the one year from November 17, 2005 and well beyond the four-year extension period (see above).

The second issue before Justice Campbell was Thompson’s argument that the limitations language in the policy was “unintelligible” and therefore the limitation period should be 6 years as set out in the Limitations of Actions Act. The policy read:

WHAT ARE THE TIME LIMITS FOR LEGAL PROCEEDINGS?

You can start legal action regarding your claim 60 days after proof of claim has been given and up to 1 year from the time proof of claim is required.

Thompson argued that the time limitation in the policy was “permissive not mandatory” because of the word “can”. Thompson attempted to distinguish Thornton by arguing the policy in Thornton had read “cannot start any legal action…more than 3 years after the time proof of claim is required”.

Justice Campbell held that accepting Thompson’s interpretation would render the provision meaningless, and her argument ignored the words “TIME LIMITS” and “up to”. He concluded the policy’s limitation period was clear, it had been missed, and dismissed Thompson’s claim.

LESSONS LEARNED

The limitation period will depend on the specific language of the policy. The case does not decide whether there is a rolling limitation for Section B claims or whether in fact a Nova Scotia Court will accept the concept of rolling limitation periods in disability policies but does clarify when there will not be a rolling limitation.

Some policies which provide for periodic payments may be interpreted to create a rolling limitation period, which starts anew each month that the benefit allegedly payable is not paid. Other policies define the limitation period with reference to a defined date, which does not recur every month, and, therefore, do not create a rolling limitation period.

In order to trigger the limitation period for such policies, the insurer must clearly and unequivocally deny benefits to the insured. Finally, a review of the limitations language in your policies may be necessary to ensure it is understandable and a defined date is calculable.

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.

Article by Patricia Mitchell, Tyana R. Caplan and Michelle Chai

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