In late 2005, the B.C. Government began a process to review and re-write the Insurance Act. After consulting with stakeholders, the public, and other provincial governments, and after publishing a discussion paper in 2007, the proposed new Insurance Act was finally unveiled on April 30, 2008 when Bill 40, the Insurance Amendment Act 2008, was introduced for first reading. That new Act never became law as the Act did not receive Royal Assent before that particular legislative session came to an end.
All was not lost. On September 15, 2009, the Insurance Amendment Act, S.B.C. 2009, c. 16 was introduced, and this version of the Insurance Act, which was almost identical to its 2008 predecessor, virtually sailed through first, second and third reading and ultimately received Royal Assent on October 29, 2009.
The saga drew towards a close when in December 2011, the BC Government passed Order in Council No. 589, B.C. Reg. 213/2011 proclaiming that the Insurance Amendment Act 2009 would finally go into effect on July 1, 2012.
Of the numerous changes that the new Act will bring, arguably the ten that will have the most significance to property and casualty insurers in B.C. are as follows:
1. Restructuring of the Act: The current act was drafted in the 1920’s. At that time, it was thought property insurance could be categorized in two ways: fire insurance and everything else. Under the current Act, fire insurance is governed by Part 5, whereas all other forms of property insurance are governed by a general set of provisions in Part 2. The Supreme Court of Canada recently criticized this category-based approach and urged revision of the Act to reflect the fact that most contemporary property insurance is issued on an all-risks basis.1 The new Act will heed the Court’s criticism and eliminate the category-based approach to property insurance. Consequently, virtually all forms of property and casualty insurance will be governed by a substantially revamped Part 2. For instance, the new Part 2 will institute a single limitation period for all property and casualty claims, and will also provide one set of statutory conditions applicable to all property and casualty claims.
K.P. Pacific Holdings v. Guardian Insurance Co., 2003 SCC 25 at paras. 3-5 and Churchland v. Gore Mutual Insurance Co., 2003 SCC 26 at para. 4.
2. Two year limitation period: Under a revised section 22(1), the new Act will provide a two year limitation period respecting most property and casualty claims. In the case of loss or damage to property, an action against an insurer will need to be commenced within two years from the date the insured “knew or ought to have known the loss or damage occurred”. In all other cases, an insured must commence an action within two years “after the date the cause of action against the insurer arose”. Arguably, in the case of an insured seeking coverage for defence and indemnity under a liability policy, this will mean the insured must commence a coverage action within two years from the date of being notified of the insurer’s denial.
3. Postponement of limitation period: Section 2.4 of the new Act will make the two year limitation period for bringing an action against an insurer subject to the postponement provision in section 7 of the Limitation Act. If the insured is a minor, the limitation period will not commence until the minor reaches the age of 19. If the insured is under a legal disability, the limitation period will be postponed until the insured is no longer disabled.
4. Coverage for innocent co-insured: Section 28.6 of the new Act enables an innocent insured to have coverage, even where the criminal act of a co-insured caused the loss. Thus, if one spouse intentionally sets fire to the marital home insured in the names of both spouses, coverage will be preserved for the innocent co-insured. This new “innocent co-insured” provision was a public policy priority for the BC Legislature and thus was brought into force in June 2011 by B.C. Reg. 115/2011, more than one year before the rest of the new provisions of the Act go into effect.
5. Electronic delivery of documents: Section 2.5 of the new Act will enable insurers to use e-mail to deliver documents.
6. Dispute resolution process: The new Act will expand the current appraisal process in section 9 of the Act. The new process will allow for resolution of valuation disputes regarding damaged property, the nature and extent of required repairs or replacement, the adequacy of repairs or replacement carried out, and the amount of loss or damage. The dispute resolution process will be similar to the current appraisal process in that each side will appoint a representative, and the two representatives will appoint a single umpire.
7. Expansion of relief from forfeiture provision: Section 10 of the new Act will broaden the current relief from forfeiture provision to provide that section 24 of the Law and Equity Act is also applicable to insurance contracts. Section 24 is a general equitable provision that gives the court the discretion to relieve against all penalties and forfeitures.
8. Subrogation: Section 130 of the current Act contains a subrogation provision which allows for the net proceeds from a subrogated recovery to be split between insurer and insured on a pro-rata basis. However, this provision only applies to fire insurance claims. Accordingly, unless the insurance policy in question provides to the contrary, subrogation in non-fire claims is governed by the common law which does not allow for a pro-rata sharing, but rather requires that the insured be fully indemnified for its loss before any proceeds go to the insurer. The subrogation provision will be re-enacted as section 28.7 of the new Act. The practical effect of this is that the pro-rata sharing scheme will apply to all subrogated claims.
9. Restriction on exclusions in the event of loss by fire: Sections 122 and 129 of the current Act place restrictions on what risks can be excluded from a fire insurance policy. Despite these provisions, and depending on the particular policy wording, there can be situations where there is no coverage for a fire loss where the fire follows an otherwise excluded risk, such as an earthquake or vandalism. In the new Act, sections 122 and 129 will be replaced by section 28.4 which will enable the Legislature to make Regulations at a later date to identify the permissible exclusions. It is worth noting that in March 2007, the B.C. Ministry of Finance published a discussion paper which contained several proposals for permissible exclusions. For instance, it was proposed that earthquakes be added to the list of permissible exclusions, whereas terrorism should be removed.
10. Complaint resolution process: A consequential amendment to the Financial Institutions Act will require insurers to establish a process for dealing with customer complaints. Insurers will be required to designate one or more persons to implement and operate the process, and will be required to publish the established procedure online.
The “old” Insurance Act as it will apply until July 1, 2012 can be found at:
http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/96226_00
The “new” Insurance Amendment Act which sets out the new provisions that go into effect on July 1, 2012 can be found at:
http://www.leg.bc.ca/39th1st/3rd_read/gov06-3.htm
