Ont. C.A. Finds That, In Ontario, LTD Insurer's Duty Of Good Faith Does Not Include Advising Insured Of A Limitation Period

Further to the previous Blawg posts about Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), pasted below, the Ontario Court of Appeal, in a decision written by Chief Justice Strathy, and released on May 18th, 2017, dismissed the insured's appeal from the dismissal of this LTD action as being limitation-barred.

The Court upheld the motion judge's finding that the insurer did not breach its duty of good faith by failing to inform the insured of the limitation period when it terminated his benefits. His Honour noted that "[u]nder the Limitations Act, 2002,... the limitation period began to run when the claim was 'discovered', [here, the date of the denial letter] as determined by s. 5. The insurer's duty of good faith did 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 that effect, there is no such requirement in Ontario. Whether there should be is a matter I would leave to the legislature.".

Although involving a LTD claim, subject to the specific provisions relating to Ontario SABS claims, discussed in the Court's decision, excerpted below, the Court's reasoning should be generally applicable.

The Court's Analysis reads in part:

[25] There is no doubt that parties to an insurance contract owe each other a duty of utmost good faith: Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494, at para. 55; Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595, at para. 79. [26] This court has held that this duty requires an insurer to deal with claims by its insured in good faith. See 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd's London, England (2000), 184 D.L.R. (4th) 687 (Ont. C.A.), at para. 27, leave to appeal to S.C.C. refused, [2000] S.C.C.A. No. 258:...

The relationship between an insurer and an insured is contractual in nature. The contract is one of utmost good faith. In addition to the express provisions in the policy and the statutorily mandated conditions, there is an implied obligation in every insurance contract that the insurer will deal with claims from its insured in good faith.

[27] The duty of good faith is not the same as a fiduciary duty: Plaza Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co. (1994), 18 O.R. (3d) 663 (C.A.), at p. 669. In contrast to a fiduciary duty, the insurer is not obliged to treat the insured's interests as paramount. However, the insurer must give as much consideration to the welfare of the insured as to its own interests: Bullock v. Trafalgar Insurance Co. of Canada, [1996] O.J. No. 2566 (Gen. Div.), at para. 101. This requirement is based on the recognition that the insured is typically in a vulnerable position when making a claim: Bhasin, at para. 55.

[28] The scope of the duty of good faith has not been precisely delineated or definitively settled: Barbara Billingsley, General Principles of Canadian Insurance Law, 2d ed. (Markham: LexisNexis Canada, 2014), at p. 52; Kang v. Sun Life Assurance Co. of Canada, 2013 ONCA 118, 303 O.A.C. 64, at para. 39. Although the assessment is fact-specific and will depend on the particular circumstances of each case, courts have recognized some general requirements of the duty of good faith.

[29] In 702535 Ontario Inc., at paras. 27-29, this court provided an overview of the insurer's duty of good faith to act promptly and fairly when handling claims by the insured:...

...

[30] The motion judge observed 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" (at para. 40). See, for example, Atchison v. Manufacturers Life Insurance Co., 2002 ABQB 1121, 332 A.R. 72 and Clarfield v. Crown Life Insurance Co. (2000), 50 O.R. (3d) 696 (S.C.). The issue of whether an insurer breaches its duty of good faith when it fails to inform the insured of available policy benefits is not squarely before us and we need not decide...