If only you had told me!

In Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), Court of Appeal has confirmed that an insurer’s duty of good faith does not require it to give notice of the limitation period to its insured.  While the legislatures of some provinces have imposed a statutory obligation to this effect on insurers, Ontario has not.  Whether it should is a matter for the legislature.

We wrote about the lower court decision here.

This was the plaintiff’s argument on appeal:

[20]      The appellant submits, however, that the insurer’s failure to inform him of the limitation period precludes it from relying on the limitation period to defend his claim. He submits that the insurer’s common law duty of good faith and fair dealing should require it to inform the insured of the existence of the limitation period.

[21]      The appellant concedes that there is no statutory obligation to this effect in Ontario. He submits, however, that this obligation flows from the insurer’s duty to give the same consideration to the insured’s interest as it does to its own interests and can be imposed through the development of the common law and need not be based on statute.

Justice Strathy rejected this argument:

[45]      The Ontario legislature might have gone further than it has, for example, by adopting the approach taken in Alberta or British Columbia. It presumably chose not to do so and, in my respectful view, the court should not impose consumer protection measures on insurers, outside the terms of their policies, that the legislature has not seen fit to require. A properly crafted regime, such as those in effect in Alberta and British Columbia, would not only have to specify the requirement to give notice, but also the consequences of failing to do so.

[46]      The consequences of the appellant’s proposed expansion of the duty of good faith are significant. The appellant’s interpretation would effectively judicially overrule the provisions of the Limitations Act, 2002 by making notice given by an insurer to an insured the trigger for the limitation period, rather than discoverability of the underlying claim. This would defeat the purpose of the statute and bring ambiguity, rather than clarity, to the process.

In Usanovic v. La Capitale Life Insurance Company, the plaintiff argued that the defendant insurer owed him a duty of good faith that included an obligation to provide him with notice of the limitation period.

Justice Broad rejected this argument in a well-reasoned decision.  After reviewing the jurisprudence, he concluded that no such obligation exists:

[40]           It would appear that, at its highest, the obligation of good faith and fair dealing arguably carries with it a positive obligation on an insurer to inform its insured of the nature of the benefits available under the policy. There is a marked difference, however, between imposing on an insurer a positive obligation to advise with respect to rights and benefits internal to the policy and the imposition of an obligation to advise with respect to the application of law external to the policy, such as pursuant to the Limitations Act.

[41]           In my view the court should be circumspect in extending the common law to impose positive obligations of general application on parties, particularly where the implications of so doing are unknown. The law of insurance is broadly occupied by legislation and in my view it should be left to the legislature to regulate, if it deems it necessary and appropriate, the nature and extent of information which must be given by insurers to their insureds upon denial of benefits, including the existence and details of applicable limitation periods.

[42]           I find that there was no obligation in law on the defendant to advise the plaintiff of the applicable limitation period in the Limitations Act.

The decision also includes a good overview of the jurisprudence considering whether a denial of benefits is clear and unequivocal.  See paras. 20-28.