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Monday Morning Case Bites for September 9, 2019

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Amanda Kostek & Christie Dewar

Condominium Corporation No 0427067 v Aviva Canada Inc, 2019 ABQB 678
Incorrect Insurance Denial | Limitation Period

This was a successful Summary Dismissal Application brought by the majority of subscribers insuring the Plaintiff’s condominium complex. The Plaintiff discovered water damage in or around June 29, 2011 as a result of construction deficiencies.  A formal denial of the claim was issued March 23, 2012.  It included a Proof of Loss and reminder of the limitation period.   The denial contained the policy wording and exclusions as of the renewal of the policy on July 1, 2011 instead of the version as of the date of the loss.  This resulted in an incorrect denial of the claim.  In November, 2012 the Plaintiff commenced an action for construction deficiencies, which did not include the insurers.  On June 7, 2017 the Plaintiff commenced an action against its insurers after the Plaintiff’s counsel had obtained the adjuster’s file, and determined that the denial was improper.

The Insurers acknowledged that the denial letter referred to the wrong policy wording, and that the claim was never investigated under the appropriate policy wording.  However, they argued that the claim was statute barred on the basis that the limitation commenced when the Insured knew or ought to have known coverage was denied.

The Court accepted that the denial was improper, and there were errors in the denial, but that it is easy to identify those errors in hindsight.  There was no doubt that at the time of the denial no one caught the error.  However, it was at the point of the denial that the Plaintiff had a responsibility to exercise due diligence.  While it was possible that a reasonable time to investigate could extend the limitation period, almost 5 years was too long:

[14]           The Insurers say that once the denial was given, the Plaintiff in consultation with its legal counsel, experienced property manager and Renfrew, its broker, ought to have considered their options rather than simply accepting Kneller’s assessment. They suggest the Denial Letter on its face was poorly structured containing irrelevant provisions for earthquake exclusion which would cause anyone to undertake further investigation. Furthermore, had the Plaintiff simply looked at the Policy sent to Kneller it was also plain on its face that the wrong policy was utilized noting the date of July 1, 2011 was at the bottom of each and every page.

[15]           These latter arguments strike me as somewhat disingenuous. Now that the error has been identified it is easier to see the things that point to the error. And one must ask if they were so blatantly obvious why didn’t the Insurers see them when the Denial Letter was issued and reacted as they say the Plaintiffs should have. The reality however is that no one recognized the error at that time. Regardless, I agree that at the point of denial the Plaintiff had a responsibility to exercise due diligence and not simply rely on the Denial Letter without more. There is no evidence that anything further was done to investigate until April 13, 2017 when the Plaintiff’s counsel received Crawford’s file.

[16]           It may be that a reasonable time to investigate would extend the limitation period beyond two years from the date of denial but vis-à-vis the Insurers it clearly expired well before the Plaintiff’s issued its claim in this action.

The claim against the Insurers was dismissed.