Publication
TITRE
Multi-risk Policies and the B.C. Insurance Act: the Supreme Court Rules
DATE
8 mai 2003
Insurance and Professional Liability Team
The Supreme Court of Canada has brought some clarity to the confusion surrounding the application of the British Columbia Insurance Act to broad multi-peril policies. On May 1, 2003, the highest court handed down its decisions in both KP Pacific Holdings Ltd. v. Guardian Insurance Co. of Canada1 and Churchland v. Gore Mutual Insurance Co.2
In KP Pacific, the insured's hotel was damaged by fire. More than one year after the loss occurred, but within one year of filing the proof of loss, it claimed for the loss under its all-risks insurance policy. The insurer's position was that Part 5 of the Insurance Act, the fire insurance part, applied to this all-risks policy. It followed that the limitation period was one year from the date of the loss and the insured's claim was out of time. If, on the other hand, the insured was correct and the general provisions of Part 2 of the Insurance Act applied to the policy instead of Part 5, then the limitation period would be one year from filing the proof of loss. The trial judge agreed with the insurer and dismissed the insured's claim. The Court of Appeal upheld the judgment and the insured appealed the matter to the Supreme Court of Canada.
In allowing the appeal, the Supreme Court analysed section 119 of the Insurance Act which sets out the application of Part 5. It concluded that section 119 is based on the premise of discrete policies for discrete subject matters and it does not make sense to apply it when considering the modern multi-peril policy. The Court held that the comprehensive policy "cannot be shoehorned into the Part 5 fire insurance section without contrived reconstruction and anomalous consequences. It simply does not fit." Accordingly, Part 2 of the Insurance Act applies to comprehensive policies. The limitation period is one year from filing the proof of loss and the insured's claim was not statute-barred.
The insurer made the alternative argument that even if Part 2 applies, the limitation period of one year from the loss which is specified in the contract of insurance ousts the longer limitation period in Part 2. The Court looked at section 3(a) in Part 2 of the Insurance Act, which discusses the application of Part 2, and rejected that argument. The Court held that if Part 2 applies to a contract of insurance, then the insurer is not permitted to substitute terms that are less favourable to the insured than those provided in Part 2. The different minimum standards set out in other parts of the Insurance Act can only apply if an insurance policy falls within those other parts of the Insurance Act. Otherwise, the insured is entitled to the minimum statutory protections contained in Part 2.
In Churchland v. Gore Mutual Insurance Co., the insureds suffered a loss when property was stolen from their house. They brought an action against their insurer under their multi-peril homeowners' policy. As in KP Pacific, the action was filed more than one year after the loss occurred, but less than one year after filing the amended proof of loss. According to the insurer, the fire insurance part of the Insurance Act applied and the claim was statute-barred. The insurer successfully brought a motion to dismiss the claim, but the Court of Appeal set aside the lower court's decision. For the reasons set out in KP Pacific, the Supreme Court of Canada dismissed the insurer's appeal and held that the multi-peril policy was not a policy of fire insurance. Accordingly, the applicable limitation period was one year after the furnishing of a reasonably sufficient proof of loss.
In both judgments, the Supreme Court of Canada calls upon the Legislature to amend the Insurance Act to provide specifically for comprehensive all-risks or multi-peril policies. The Insurance Act is based on the assumption that insurance policies can be divided into categories based on their exclusive or primary subject matter. However, that assumption is no longer accurate given that comprehensive policies now dominate the insurance market.
Until the Legislature heeds the high court's call for a resolution of this problem, insurers should be aware that Part 2 of the Insurance Act provides the minimum statutory protection to insureds with broad multi-risk policies. If Part 2 applies to a contract of insurance, then insurers are unable to incorporate by reference any terms that are inconsistent with the terms of Part 2 and less favourable to the insured.
- 003 SCC 25.20
- 03 SCC 26.
The purpose of this document is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Ogilvy Renault or any member of the Firm on the points of law discussed.
For further information, please contact one of the lawyers mentioned below:
Rhys Davies, Q.C. (604) 806-3845 rdavies@ogilvyrenault.com
Dana C. Duncan (604) 806-3861 dduncan@ogilvyrenault.com
Mitchell Ewankiw (604) 806-3834 mewankiw@ogilvyrenault.com
Brent R.H. Johnston (604) 806-3842 bjohnston@ogilvyrenault.com
Gregory J. Nash (604) 806-3856 gnash@ogilvyrenault.com
Randy C. Sutton (604) 806-3855 rsutton@ogilvyrenault.com
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