Recent Amendments to The Insurance Act of Manitoba
On June 14, 2012, an Act to amend The Insurance Act of Manitoba, aptly titled “The Insurance Amendment Act”, received Royal Assent. The Insurance Amendment Act introduces sweeping changes to both the form and content of The Insurance Act. As of December 2013, none of the amendments has been proclaimed, meaning that they are not yet the law in Manitoba; however, we anticipate that they will be proclaimed, at least in part, over the coming year.
The amendments include dozens of substantive changes and hundreds of stylistic changes to render the Act easier to read and understand. In this article, we focus on three of the more interesting substantive amendments.
The first amendment is the removal of Part IV of the Act, Fire Insurance. Structurally, the Act currently has a part of general application to (almost) all types of property insurance (Part III) and a part devoted to Fire Insurance (Part IV). The Insurance Amendment Act deletes Part IV but shifts its content into Part III, which remains applicable to (almost) all types of property insurance. The result is that sections of the Act which currently only apply to policies falling under Part IV will apply to virtually all property policies once the amendments are proclaimed.
This reorganization was motivated by the 2003 Supreme Court of Canada decision in K.P. Pacific v. Guardian Insurance, a case which originated in B.C., and a subsequent body of cases inspired by that decision. In K.P., the Court found that the fire statutory conditions contained in B.C.’s equivalent of Part IV did not apply to a policy which insured against “all-risks” of loss, on the basis that an “all-risk” policy was not a policy of “Fire Insurance” as defined. This meant that a different limitation period applied to the insured’s claim than had been expected. This decision had little impact in Manitoba, as all-risk policies generally include the fire statutory conditions as policy conditions. The K.P. case did, however, highlight that most provincial insurance legislation was antiquated, dating from an era when it was not uncommon for property owners to have a policy which only insured against damage by fire. The Insurance Amendment Act eliminates any distinction between “Fire Insurance” and other kinds of property insurance, recognizing that virtually all modern property policies protect against far more than fire.
A second amendment of note is designed to protect the interest of an innocent insured where the loss is caused by an intentional or criminal act of another person insured by the same policy. Currently, most policies exclude any coverage for damage and loss caused by the intentional or criminal act of one insured, even if there are other insureds who are totally innocent of fault. The classic case is the Supreme Court of Canada decision in Scott v. Wawanesa Mutual Insurance, where the insureds’ son intentionally set fire to the family home and his parents’ insurance claim was denied based on the exclusion. Scott, and the decisions following it, have been criticized as unfair.
The Insurance Amendment Act protects the innocent insured by mandating that the innocent insured is entitled to recover his or her proportionate interest in the damaged property. Unsurprisingly, this protection does not apply where the “innocent” insured abetted, colluded or consented in the act, or where the innocent insured knew or ought to have known of the “guilty” insured’s plan.
The phrase “proportionate interest” is not defined in The Insurance Amendment Act and courts in other jurisdictions have yet to interpret the phrase. It will be interesting to see whether the courts interpret “proportionate interest” by reference to strict legal interest in the property (ie. based on legal ownership) or will consider beneficial or equitable interests, such as a non-titled spouse who has contributed to the maintenance and financial obligations of the property.
In return for this protection, the amendments require the innocent insured to cooperate with the insurer in certain prescribed ways. Although the regulations describing the required cooperation have yet to be released, the corresponding regulations in Alberta point to the direction Manitoba regulations will take. In Alberta, the innocent insured must cooperate with the insurer in the investigation of the loss, including submitting to an examination under oath and producing for examination all documents relating to the loss in addition to those required under the policy.
Practically speaking, the innocent insured scenario does not arise frequently. When it does arise, the amendments will allow for the truly innocent insured to receive a measure of recovery, while denying any benefit to the guilty insured.
The final amendment highlighted here is a change to how the limitation period for claims against insurers is calculated. Currently, an insured has two years from the date the loss or damage occurs to sue an insurer who has failed to pay a claim. In a majority of cases, this date is obvious and known to the insured: if your house burns down on July 15, you will have no doubt that July 15 was the date the loss or damage occurred. However, there are circumstances where, for one reason or another, the insured does not realize that damage has occurred until well after the fact. In such cases, once the insured discovers that his property has been damaged, he may find himself with significantly less than two years within which to either settle his insurance claim or sue his insurer, or even worse, the two years may have already expired.
Manitoba law does provide a solution where a person’s right to sue has expired before a person has become aware he has a potential claim; however the process is cumbersome and expensive. The Insurance Amendment Act provides a more elegant solution: the insured now has two years from the date that he knew or ought to have known of the damage within which to sue his insurer. In other words, the limitation period begins to run not from the date the damage actually occurred but from the date the insured knew (or ought to have known) about it.
There are many more amendments than the three discussed in this article. As noted, the Act has essentially been re-written. While most of these amendments are stylistic in nature, involving formatting and word choices intended to modernize the Act, with any change in wording it is possible—perhaps even likely—that unexpected interpretations will be advanced in the years to come.
Andrew P. Loewen and Celia C.S. Fergusson practise insurance law at Fillmore Riley LLP. If you have questions regarding this article or any other insurance-related legal matter, please contact them at email@example.com or firstname.lastname@example.org