A “limitation” On The Insurer’s Duty Of Good Faith
By Clarence Lui and
According to the Ontario Court of Appeal in Usanovic v Penncorp Life Insurance Company, 2017 ONCA 395, an insurer’s duty of utmost good faith to its insured does not require it to disclose the existence of a limitation period. That is, unless the provincial parliament decides otherwise.
The facts of Usanovic are straightforward. The plaintiff, a self-employed eavestrough installer fell from a roof and suffered serious injuries in September 2007. He received disability benefits from the defendant insurer until November 2011, when payments were terminated. On January 12, 2012, the defendant’s lawyer wrote a letter to the plaintiff explaining that the insured’s medical information on file did not support the conclusion that he had a “total disability”, as defined under the policy. The insured then commenced the action for wrongful termination of benefits in April 2015; two years after both the termination of benefits and the date of the lawyer’s letter.
The plaintiff argued that the insurer breached its duty of good faith and fair dealing, because it was obliged to advise him of the applicable limitation period on denying or discontinuing insurance benefits. The motion judge in the court below rejected this argument, holding that the claim was barred by the two year limitation period and finding that there was no obligation in law on the defendant insurer to advise the plaintiff of the limitation period. The Court of Appeal agreed.
The Court observed that an insurer has a duty to deal with claims by its insured in good faith, by acting promptly and fairly when handling those claims. The Court acknowledged that this may arguably encompass a positive obligation on an insurer to inform the insured of available policy benefits, but resolved not to decide an issue that was not squarely before the Court.
However, in Usanovic, the Court was being asked to go beyond imposing an obligation on insurers to disclose the contents of the policy, so as to require the insurer to provide information about the limitation period, which is not contained in the policy at all. While no Court has gone so far as to impose such a duty, the legislatures in British Columbia and Alberta have introduced regimes that require the insurer to provide written notice upon denial of a claim, subject to exceptions for certain types of claims and where claimants are represented by legal counsel.
In Ontario, the legislature has not gone as far. In dismissing the appeal, the Court noted that it is not its role “to impose consumer protection measures on insurers, outside the terms of their policies, that the legislature has not seen fit to require”. The Court also characterized the plaintiff’s interpretation as one that would “judicially overrule” the provisions of the Limitations Act, 2002.
The analysis conducted by the Court of Appeal in its decision in Usanovic reveals that it is predicated on deference. For the time being, the duty of good faith does not require that insurers bear responsibility to inform its policyholders of the limitation period.
This blog entry has been placed on our website to inform readers in a general way of the authors’ view of the law at the time of its presentation. It is not intended as legal advice and no reliance may be placed on its contents. Some principles of law or procedure may have changed and may no longer be applicable since its publication. The authors and our firm disclaim any liability arising from reliance on any part of this blog entry.