First Party Claims: Special Considerations - Part 5 Of 7

First Presented at the CBA-OBA Professional Development Program: Fast Out of the Gate: An Insurance Law Primer

Statutory conditions contained within the policy, relief from forfeiture, and limitation period issues, are examples of special considerations when dealing with first party claims.

1. Statutory Conditions

   Statutory conditions are conditions set forth in a policy that must be met by the insurer and insured. Reading statutory conditions within the Insurance Act of Ontario, and the regulations passed thereunder could admittedly be sleep-inducing. However, these provisions, and the insurance contract itself, require familiarity and careful attention, as they could have significant implications on a claim.

   First, statutory conditions shall be deemed to be part of every contract in force in Ontario and shall be printed on every policy, in accordance with section 148 (1) of the Insurance Act of Ontario, R.S.O. 1990, c. I.8, as amended. No variation or addition to any statutory condition is binding on an insured.

   Section 8 of OAP 1 of the Ontario Automobile Policy (OAP 1), contains statutory conditions that must be included in an automobile policy. These conditions highlight the rights and responsibilities of the insured and insurer.

   Some examples of statutory conditions are:

   (a) Appraisal

   Insured claimants often prematurely sue their insurer, before proceeding with necessary steps. One such example where this may arise is the appraisal requirement pursuant to statutory condition 11 of section 148 of the Insurance Act.

   The appraisal process can be found in section 128 of the Insurance Act. Aninsured and the insurer are to each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.

   An insurer could stay an insured's action if appraisal mechanisms under the Insurance Act are not used properly.

   In Greer v. Co-operators General Insurance Co.,1 the Court granted the Co-operators' motion to stay the plaintiff's action and Co-operators obtained an order appointing an appraiser and requiring the plaintiff to comply with the requirements of section 148 of the Insurance Act.

   However, a stay could be denied where there are questions other than valuation which remain at issue between the parties and that are not properly the subject of the appraisal process contemplated by the Insurance Act. This occurred in a fire loss claim, Bnei Akiva Schools v. Sovereign General Insurance Co.,2 where coverage for the losses was not admitted. The Court distinguished Bnei from Greer, since in Greer only valuation of the plaintiff's losses was disputed and coverage for losses was admitted.

   (b) Material Change

   What happens when circumstances change once the policy is already in place? Depending on the importance of this change, it may be deemed a 'material change in circumstances'. Many policies contain a definition of a 'material change' and it is important to note that definitions are not always remain uniform. For instance, in an insurance policy for Long Term Disability coverage, a 'material change in circumstances' may include a change in an insured's medical condition, such as a new diagnosis or a change in severity of an existing illness.

   Most policies will stipulate that such 'material changes' must be reported to the insurer as soon as possible or the policy will be avoided.

   (c) Proof of Loss

   A key statutory condition is the completion and delivery of the Proof of Loss.

   Section...