Insurers Not Obliged to Advise Insured of Appeal Deadlines

An important recent decision from the Ontario Court of Appeal highlights a vital fact for insured persons:  An insurer that has denied or discontinued benefits is under no legal obligation to advise the insured of the firm statutory deadline for appealing that decision by way of the courts.

The facts of the case involved a self-employed eavestrough installer.  He had purchased an insurance policy from the insurer, designed to cover against disability for accidents.  In 2007, he fell from a roof and suffered serious injuries, for which he claimed and received disability benefits until early 2012.

However at that point the insurer terminated the insured’s benefits, having adjudged him as no longer having a “total disability” under the definition found in the policy.  It advised him by way of letter, which also indicated that if he disagreed with the decision, he was invited to submit medical records showing he was still totally disabled.

Based on the insurer’s letter, the insured clearly understood that his benefits had been terminated.  He considered hiring a lawyer, but could not afford to do so at the time.  More than two years later, in 2015, he did finally consult a lawyer who told him of the now-expired two-year limitation period for bringing a court action. That lapsed limitation period, which began to run the moment he received the insurer’s letter, effectively prevented him from bringing appealing the insurer’s decision.

The insured nonetheless tried to launch a court claim in mid-2015, which the insurer succeeded in having dismissed for being out of time.

The insured then brought the matter before the Court of Appeal.  He argued that at the time the insurer sent him the letter terminating his benefits, it had a duty of good faith to advise him of the two-year limitation period.   Had the insured known of that deadline, he would have brought an action earlier.  The insured also claimed that in light of its own failure to advise him, the insurer could not now rely on the expired limitation period to block his legal action.

The Court of Appeal disagreed.  While conceding that the parties to an insurance policy owe each other a duty of “utmost good faith,” the insured’s expectations went beyond that.  The insured was effectively asking the court to require all insurers to disclose law-related information that was outside the policy, namely that there was an applicable limitation period that governed.

The Court also noted that – unlike in Alberta and B.C. – in Ontario there is currently no legislation requiring insurers to give insured persons written notice of the limitation period when it denies a claim; to innovate such an obligation, or to purport to read it into the existing legislation would, in the words of the court, “defeat the purpose of the statute and bring ambiguity, rather than clarity, to the process.”

See the Ontario Court of Appeal decision in Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company).