Amendments to the Alberta and British Columbia Insurance Acts

EFFECTIVE JULY 1, 2012

Dentons Canada LLP

Background

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Critique of Courts• Noted prevailing Insurance Acts based on outmoded classes of

insurance

• Modern policies could not be fit under statutory provisions providing for one year limitation periods

Legislators’ objectives• Maintain and enhance consumer protection

• Ensure rights and obligations of parties were well-understood

• Modernize framework for auto, liability, property, commercial, accident, sickness and life insurance contracts

• AB and BC to harmonize amendments for greater consistency

Background

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• British Columbia – December 1, 2011 Order in Council provided that the Insurance Amendment Act 2009 and Regulations will come into force effective July 1, 2012

• Alberta – Insurance Amendment Act 2008 proclaimed July 13, 2011 with many relevant sections proclaimed in force July 1, 2012 (by Order in Council 325/2011)

Summary of Key Amendments

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• Revision of Fire Provisions • Fire exclusions restricted

• Statutory Conditions

• Limitation Periods

• Disclosure Requirements

• Proportionate Contributions

• Recovery by Innocent Persons

• Subrogation, Relief from Forfeiture, Unjust or Unreasonable Conditions

• Electronic Communications

• Insurance Cancellation

• Dispute Resolution

• Access to Documents

• Court Ordered Advance Payment

• Retroactive Effect

Revision of Fire Provisions

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Merger of Fire Insurance Part into General Insurance Provisions• In Alberta New Part 5 - in British Columbia new Part 2

• General Provisions apply to every contract except life, accident and sickness insurance, and reinsurance

• Revisions to life, accident and sickness provisions

• Insurer may not exclude fire loss coverage in a policy that otherwise would include fire coverage

• For a fire loss occurring within 30 days of property being vacant; or,

• After insurer has issued a vacancy permit for insured property (s. 5.7(4)AB)

** Some exceptions in the Acts and Regulations to the obligation to cover fire loss

Limited Exclusions for Fire Loss

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• s. 541 of the Alberta Act and the Alberta Fair Practices Amendment Regulation, s 5.7(2)(3) permit exclusions for • fire by goods undergoing any process involving application of heat, • fire caused by riot, civil commotion, war, invasion, act of a foreign enemy,

hostilities, civil war, rebellion, revolution, insurrection or military power, • fire if results in explosions, lightning causing loss to electrical devices or

appliances, • loss caused by contamination by radioactive material due to fire lightning or

explosion, fire or explosion caused by criminal or intentional act or omission of insured,

• various biological, chemical or nuclear energy hazards due to fire or explosion caused by terrorism

• In the case of commercial property, insurers may also exclude all losses fire and explosions due to terrorism.

Limited Exclusions for Fire Loss

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• s. 28.4 of the BC Act and s. 6 B.C. Reg. 213/2011 similar in principal to AB amendments with some subtle differences

Limited Exclusions for Fire Loss

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• If any additional insurance perils are written by insurers, s. 3.2 of the Miscellaneous Provisions Amendment Regulation will list them

• Triggers requirement that insurer joins general insurance ombudsman service

Statutory Conditions

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• ss. 540 and 556 (1) AB, (s. 27 (1) and 89 (a) BC)state that:a) the conditions set out in this section are statutory conditions and are deemed

to be part of every contract and must be printed in every policy under the heading “Statutory Conditions”; and,

b) no variation or omission of or addition to any statutory condition is binding on the insured.

• Exceptions: hail, surety, and by regulation, mortgage, title, credit, credit protection and travel insurance

Statutory Conditions

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• s. 540(3) states that only stat conditions 1, 6-13 must be printed on contracts against loss and damage to property

• Best practice is to follow Alberta Standard Auto Policy model

• General Conditions and Statutory Conditions in separate stand alone sections

• Regulator will apply the test of whether the insured is misled

• Depending on facts of each case, any variation can be strictly enforced against the insurer

Statutory Conditions

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• BC regulator suggests where stat conditions not required in policy by other jurisdictions, wording should be added to clearly so indicate to insured

• Example: 14. ActionEvery action or proceeding against the Insurer for the recovery of any claim shall be absolutely barred unless commenced within one year after the loss or damage occurs, unless legislation provides otherwise.

• The regulators state 14 cannot be included in the statutory conditions

• But did not agree whether such a clause could be included elsewhere

• The regulator will provide informal guidance as to the suitability of the proposed wording before implementation

Statutory Conditions

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• We recommend for policies in AB and BC a separate page be attached to the policy that states:

“These Statutory Conditions apply where the insured is domiciled or where the insured property is located in Alberta or British Columbia”

• For policies issued outside of AB and BC we recommend a page with bold writing that states:

“These Statutory Conditions apply to policyholders and policies covering risks in jurisdictions other than Alberta and British Columbia”

Statutory Conditions

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Would this clause satisfy the regulators?• “Terms of this Policy which are in conflict with the statutes of the province

where the Named Insured is domiciled or where the insured property is located are hereby amended to conform to such statutes. Such conformity shall in no way limit the insurance provided by this policy.”

• The regulators were divided• Suggested insurers could submit wording and circumstances where a clause

could be used• They would jointly consider the request

Limitation Periods

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• Must now add in policy this limitation of actions wording: • Every action or proceeding against an insurer for the recovery of insurance

money payable under the contract is absolutely barred unless commenced within the time set out in the Insurance Act (BC s.8 (1) AB s. 558 (2))

• Best practice suggests place this wording just ahead of Statutory Conditions• We recommend also adding a heading : “Limitation of Actions”

Limitation Periods

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• ss. 526(1) AB provides time for commencing action against insurer• if property, within 2 years from date insured knew or ought to have known that

loss or damage occurred; or • in any other case, within 2 years from the date the cause of action arose

(except auto and hail) • (AB auto s. 558(1), life s. 677(1) accident and sickness s.708(1)• (BC ss. 22(1), 34, 35, 65 and 91.1.)

• In case of life insurance, the limitation is 2 years after s. 62 (AB s. 674)

evidence presented or 6 years from death whichever is earlier • limitation periods are suspended for persons under a disability within

Limitations Act• claimant has burden of proving limitation period suspended (s. 5 AB, s. 7 BC)

• insurers can provide lengthier limitation periods (s. 593 AB)

Full Disclosure Requirements

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• Fair Practices Amendment Regulation AR128/2001, s.5.1(1) (2) requires after July 1, 2012

• Plaintiff lawyer to give notice of its retainer within 30 days of filing action arising from MVA

• Then Insurer must disclose:• within 30 days existence of auto policy AND POLICY LIMITS

• Insurer may still dispute liability and amount of limits, and such information not to be disclosed to judge or jury before judgment given

Full Disclosure Requirements

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• s. 5.3 Insurer must provide claimant with written notice of applicable limitation period within• 60 days from date notice of claim given to insurer• 60 days of insured first receiving notice that insured claiming indemnity for

claim by third party against insured• 60 days of insured first aware that claimant commenced action under s. 579 of

Act• within 5 business days of denial of claimant’s claim

• If claimant represented by legal counsel, then insurer need not provide notice of limitation period

Full Disclosure Requirements

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• s. 5.2 requires insurer give written notice to the insured within • 10 days after insurer determines a dispute has arisen between the insurer and

insured; or,• 70 days after insured has submitted a proof of loss, if insurer has not yet

decided on the validity or amount payable in respect of the claim

Full Disclosure Requirements

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• Failure to comply in Alberta allows claimant to seek relief in court to extend limitation period or any other remedy court deems fit

• Alberta legislators intended each case be determined on its own facts and such determination occurs only if the claimant applies to court

Full Disclosure Requirements

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BC differs:

• BC Reg. 213/2011 requires insurer give written notice to a claimant of the limitation perioda) at the time or within 5 business days after the insurer denies liability for all or

part of the claim, and b) at or within the 10 business days after the first anniversary of the date the

insurer receives a notice **Unless the insurer has already adjusted the loss acceptably to the claimant or settled the claim, or already complied with (b) above, a notice must contain a statement that the limitation period is set out in the Act(not required for accident and sickness insurance)

Full Disclosure Requirements

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• In BC if the notice not given, limitation period suspended for period between the date it should have been given and was given; or 6 years from the date the cause of action arose – whichever is earlier

• BC does not allow a trial judge any discretion over suspension of the limitation period

• s. 3.3 (AB) sets out confidential or commercial information within a group life, accident and sickness insurance policy, an insurer may withhold when insured requests a copy of the policy wordings (s. 8 BC)

Proportionate Contributions – s. 28.1 (1)

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• If more than one contract covering the loss, insurers each liable to insured for rateable proportion of the loss, unless insurers otherwise expressly agreed in writing.

• Regulators offer no guidance as to how these clauses apply to excess liability coverage covering same loss– eg.• umbrella and a CGL, • CGL and Wrap Up; or, • first party property coverage and coverage on CGL for “your work”

• Leaves disputing insurers to seek recourse to the courts

• Court rulings to date have not provided clear guidelines

• Courts permit insurers to contractually limit their obligation as they see fit

• Regulators agree insurers are under no obligation to amend its “Other Insurance” clauses as a result of these amendments

• But will apply test whether an insurer’s omission would create confusion in the mind of an insured as to its legal rights or obligations

Recovery by Innocent Persons

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• Insurers may not exclude coverage for innocent co-insureds who • did not participate or consent to criminal or intentional acts or omissions by

insureds or person with an insurable interest

Restrictions• Exclusion applies only to individuals

• the innocent co-insured must cooperate and provide additional documents relating to the loss• (s. 541 of the Alberta Act and the Alberta Fair Practices Amendment Regulation, s 5.; s.

28.4 of the BC Act and s. 6 of the B.C. Reg. 213/2011 ss. 5.9(1) and (2) AR 128/2011)

Recovery by Innocent Persons

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• These amendments require changes to policy wording

• Regulators desire wording that expressly advises innocent co-insured has additional statutory protection

Subrogation

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• Now right of insurer to subrogate (formally limited to auto in s. 651) extends to all insurance contracts except life, accident and sickness and reinsurance (s. 546 AB)

• When insured entitled to more than only deductible and parties cannot agree on how to manage the action, either party can apply for directions

Relief from Forfeiture; Unjust provisions

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• Relief from forfeiture- if court considers forfeiture inequitable because of breach of statutory condition or condition or term of contract, by insured or claimant, court may relieve against forfeiture (s. 520 AB) (s. 24 Law and Equity Act-BC)

• Insured may seek relief from contractual term or condition material to risk regarding use, condition, location or maintenance of the insured property (s. 28.3 BC)

• Regulator indicates permissible to add wording to indicate reference should be made to the Insurance Amendment Act and Regulations

Electronic Communications

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• s. 547 allows for the transmission in electronic form of records, contracts or declarations

• When sent electronically, they are deemed to have been sent by registered mail within the meaning of Act

• Exceptions

• s. 5.4 of Fair Practices Regulation lists instances where the parties may not use electronic communications, e.g. insurer’s notice terminating a contract or insured change of beneficiary

Cancellation of Insurance

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• Previously insurers could terminate a policy “forthwith” by providing written notice by registered mail as soon as the insured did not comply with the promise to pay

• Now, insurer may terminate only in accordance with statutory or policy condition (s. 522 (3) AB)

• If no express statutory condition on this issue, the right to terminate immediately via registered mail still in force

Cancellation of Insurance

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• Act provides the following Insurer’s cancellation obligations:• either 15 days notice via registered mail (starting from day notice delivered to

the insured’s postal address); or, • 5 days written notice via personal delivery to Insured

• Ability to terminate through registered mail preserved for life insurance and reinsurance claims**If insurable loss occurs within notice time frame the Insured still covered under the policy

• (ss. 4, 5(1)(a)(b), 35, 37.1, 47.1 BC)

Dispute Resolution Process (DRP)

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• s. 519 – process more extensive than former s. 514

• strengthened consumer protection,

• Representative cannot be employee of insurer or insured

• Process for case where umpire not agreed on

• Insurer must give written notice of the availability of the DRP: a) within 10 days after insurer determines there is a dispute to which the DRP

applies; or,b) within 70 days after the insured submits a proof of loss, if at that time the

insurer has not yet made a decision with respect to a matter to which the DRP applies

Access to Documents

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• s. 642 (4) – insurer required to provide insured or claimant, on request, a copy of the entire contract and any written statements or other records provided to insurer as evidence of insurability

• s. 642 (5) and (6) – list of documents and insurer is required to provide in the cases of a group insurance and creditors group insurance

• s. 642 (9) – claimants access to documents only extends to information relevant to the claim or denial of the claim under the contract

Court Ordered Advance Payment

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• s. 5.6 permit a claimant involved in a personal injury claim to apply for a court order for an advance payment (s. 581 AB)

• Court may make order under s. 581 where satisfied: • as a result of the injuries, the claimant is unable to pay for the necessities of

life; or, • the payment is otherwise appropriate

• Except advance payments not payable when liability in dispute

Retroactive Effect

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• Amendments respecting enforcement of right respecting Creditor’s Group Insurance for Life and Accident and Sickness policies are RETROACTIVE in effect

• (s.672 (5) AB (38) Transitional Provisions of AB Regulation s. 15 BC Reg 213/2011)

The preceding presentation contains examples of the kinds of issues companies dealing with insurance could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.

Dentons Canada LLP

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Questions?Shelley Miller, Q.C. Jennifer Halloran+1 780 423 7212 +1 416 862 3426shelley.miller@dentons.com jennifer.halloran@dentons.com

Dentons Canada LLP2900 Manulife Place10180 – 101 StEdmonton, AB T5J 3V5

Dentons Canada LLP

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