A recent decision by the Ontario Court of Appeal ruled that, in the absence of a statutory requirement, an insurer has no obligation to advise the insured about the running of a limitation period as part of its duty of good faith.
The Court held the decision in Usanovic v. Penncorp Life Insurance Company, 2017 ONCA 395.
In the case, the insured was an eavestrough installer who accidentally fell from a roof while working, severely injuring himself. For his work-related injuries, he received disability benefits from his insurer until November 2011, when the insurer terminated them. At this point, the insurer reasoned that the insured no longer suffered from a “total disability” as described under the policy.
The insurer’s lawyer sent a letter to the insured on January 12, 2012, notifying him that because he had not been paid benefits for 24 months, he was no longer eligible to receive them until he could produce medical records in support a claim for “total disability”.
The insured, however, did not provide the medical records requested.
Instead, the insured contacted a lawyer of his own in early 2015 and filed a claim against the insurer in April 2015 – three years after the termination of his benefits and the date the insurer’s lawyer wrote to him.
Mondaq reported that the motion judge dismissed the insured’s claim as statute-barred. The insured appealed, maintaining that the insurer’s failure to advise him of the limitation period precluded it from relying on a limitations defense. He further submitted that the insurer’s common law duty of good faith and fair dealing should require the insurer in such circumstances to inform him of the running and existence of the limitation period.
The Ontario Court of Appeal ultimately rejected the insured’s argument and dismissed his appeal.
The Court argued that although the parties in an insurance contract owe one another a duty of good faith, it does not amount to a fiduciary duty – the insurer has no obligation to consider “the insured’s interests as paramount.”
On the other hand, the Court recognized that the insurer’s duty of good faith includes a responsibility to “act both promptly and fairly when investigating, assessing and attempting to resolve claims made by its insureds”.
Notably, the Court found that in British Columbia and Alberta, the Legislatures have imposed a duty on insurers to notify the insured of the limitation period, subject to certain exceptions; Ontario has no such legislation, so far.
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