Insurance Deductibles: Without Proper Notice, They Aren’t Payable
It is no secret that insurers are motivated to find ways to deny part or all of a claim. While such denials can be firmly grounded and properly made, other times, the denial may be based on a tenuous interpretation of the facts, law and policy wording or just plain wrongfully made.
In the case of PCL Constructors Westcoast Inc. v Royal & Sun Alliance Insurance Company of Canada, 2019 BCSC 822 (CanLII) the Plaintiff made a claim concerning a course of construction insurance policy. The central issue before the court was whether or not the insurance contract was subject to a $250,000 deductible. The Defendant insurer had paid out the Plaintiff’s claim, less $250,000 for the deductible. The Plaintiff’s position was that there was no deductible as the Defendant’s policy did not comply with s. 31 of the Insurance Act, S.B.C. 2012, c. 1 which reads:
31 A contract containing
(a)a deductible clause…
must have printed or stamped on its first page in conspicuous bold type the words “This policy contains a clause which may limit the amount payable” and, unless these words are so printed or stamped, the clause is not binding on the insured.
The Court found and the Defendant conceded that the subject policy did not comply with s. 31; however, the Defendant argued that it would be inequitable for the deductible to not apply as the Plaintiff knew that the policy was intended to contain a deductible. The Defendant’s claims included prayers for rectification (the court amending a contract to include terms intended by the parties), promissory estoppel (a party may be precluded from acting in breach of a legally enforceable promise) and a duty of honest contractual performance (a party must not capriciously perform a contract).
The Court held that there is judicial history for s. 31 being applied strictly as against insurers. On this basis, it went on to find that it didn’t matter of whether the Plaintiff was aware of a deductible since the policy itself did not comply with the strict requirements of s. 31.
The court rejected the notion that the equitable principles of rectification or promissory estoppel could be utilized to overcome a failure by the Defendant to comply with a mandatory statutory requirement enacted for the benefit of insureds. As the duty of honest contractual performance was similarly based in notions of equity, any arguments based on that duty failed as well.
In the result, the Court declared that the deductible did not apply and ordered the insurer to pay the deductible amount it had previously held back on its payout to the Plaintiff.
PCL Constructors Westcoast Inc. v Royal & Sun Alliance Insurance Company of Canada is acts as a reminder that insurance contracts must be fastidiously drafted to comply with a number of strict statutory requirements. The Insurance Act is a remedial piece of legislation that encourages courts to find favour with insured where disputes about coverage arise. Parties who are denied coverage or full coverage do not need to accept such denial at face value and often such denials are based in incorrect facts, incorrect law or incorrect interpretations of the subject policy.
If you have been denied coverage under an insurance policy, it may be well worth the time and effort to seek a legal opinion on whether such denial was properly made. Similarly, counsel may assist in putting together a demand that properly owed coverage be provided or otherwise appealing a claim for such coverage.