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Relief from forfeiture of British Columbia Insurance Claims

Relief from forfeiture is a legal doctrine that provides that where there has been imperfect compliance with a contractual or statutory requirement the court may nevertheless forgive that non-compliance and allow the claim to proceed.
 
Two statutes contain provisions relevant to relief from forfeiture under insurance contracts in British Columbia: the Insurance Act, RSBC 2012, c. 1 and the Law and Equity Act, RSBC 1996, c. 253.
 
The Insurance Act provides that the court may relieve from forfeiture for noncompliance where it would be inequitable that the insurance should be forfeited: 
 
Without limiting section 24 of the Law and Equity Act, if
(a) there has been
(i)   imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or another matter or thing required to be done or omitted by the insured with respect to the loss, and
(ii)   a consequent forfeiture or avoidance of the insurance in whole or in part, or
(b) there has been a termination of the policy by a notice that was not received by the insured because of the insured's absence from the address to which the notice was addressed,
and the court considers it inequitable that the insurance should be forfeited or avoided on that ground or terminated, the court, on terms it considers just, may
(c) relieve against the forfeiture or avoidance, or
(d) if the application for relief is made within 90 days of the date of the mailing of the notice of termination, relieve against the termination.
(Insurance Act, RSBC 2012, c. 1, s. 13).
 
The above provision expressly states that it does not limit the application of the Law and Equity Act provision that deals with relief from forfeiture. The relevant Law and Equity Act provision provides as follows:
 
The court may relieve against all penalties and forfeitures, and in granting the relief may impose any terms as to costs, expenses, damages, compensations and all other matters that the court thinks fit.
(Law and Equity Act, RSBC 1996, c. 253, s. 24).
 
The ability of the court to grant relief from forfeiture applies to noncompliance with both statutory and contractual requirements. In Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778 Falk Bros. Industries Ltd. defaulted in payment to Elance Steel Fabricating Co. Ltd. and so Elance claimed under a bond issued by the Canadian Surety Company on account of the debt due and owing. Elance gave notice of its claim 28 days after expiry of the 120-day period for notice specified in the bond. The Supreme Court of Canada considered whether the court had jurisdiction to grant relief from forfeiture in light of the following statutory provision:
 
Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.
(The Saskatchewan Insurance Act, R.S.S. 1978, c. S-26, s. 109).
 
The insurer (i.e. the bond issuer) argued that the provision only granted the court the power to relieve against non-compliance with statutory provisions, and not the power to relieve against non-compliance with contractual provisions, but the Supreme Court of Canada rejected that argument. Relying in part on The Interpretation Act, R.S.S. 1978, c. I-11 provision (s. 11) stating that remedial sections should be given a broad interpretation the court found that the relief from forfeiture should be available in respect of both contractual and statutory provisions:
 
In summary, the rules of statutory construction and precedent favour interpreting s. 109 as extending to non-statutory terms of insurance policies.  There is no reason to depart from the interpretation of such clauses which has been uniformly adopted across the country.  I conclude that s. 109 should be read as empowering the court to grant relief from forfeiture for breaches of terms of insurance contracts other than statutory conditions.
(Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778).
 
The court went on to hold that although late giving of notice may be forgiven failure to commence a court action by the contractual limitation period will generally be fatal to the right to proceed with a claim:
 
Should failure to give notice of claim within the time prescribed by the bond be considered as imperfect compliance, against which the court may relieve in appropriate cases, or is it non-compliance, in which case the court has no power under s. 109 to grant relief? The distinction between imperfect compliance and non-compliance is akin to the distinction between breach of a term of the contract and breach of a condition precedent. If the breach is of a condition, that is, it amounts to non-compliance, no relief under s. 109 is available.
 
The case law has generally treated failure to give notice of claim in a timely fashion as imperfect compliance whereas failure to institute an action within the prescribed time period has been viewed as non-compliance, or breach of a condition precedent. Thus, courts have generally been willing to consider granting relief from forfeiture where notice of claim has been delayed…
 
On the other hand, cases in which failure to meet a time requirement has been held to be non-compliance rather than imperfect compliance have largely been cases in which the time period was for the commencement of an action rather than for the giving of notice…
 
(Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778).
 
The Falk Bros. case has been applied outside of the bonding context. For example, it was applied to forgive late giving of notice to a liability insurer in a personal injury claim:
 
The law has treated the failure to give timely notice of a claim as imperfect compliance, not non-compliance: see Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., supra, at para. 18….
 
…As I said earlier, the question of compliance has to be looked at in the light of the purpose of a timely notice provision. Notice gives the insurer an opportunity to investigate the merits of a claim, negotiate a settlement and, if necessary, defend the action. Sovereign had that opportunity. It chose not to exercise it.
 
In other words, this is not a case where the insured had no actual notice of the claim or loss -- Sovereign did have actual notice and made a conscious decision not to participate in the litigation. Even if the notice should have come from Sun Shelters, the notice from Emshih makes this a case of imperfect compliance, not non-compliance.
The motion judge did not err in holding that Emshih's notice to Sovereign was "notice" in accordance with s. 3(a) of the policy conditions for liability coverage. Nor did he err in holding that, in the alternative, the Walkers would be entitled to relief from forfeiture.
 
(The Sovereign General Insurance Company v. Walker, 2011 ONCA 597 at para. 43 – 45 and 49).
 
Although late notice may be forgiven by a court relying on the relief from forfeiture provisions insureds should not take a relaxed approach to notice and plan to rely on relief from forfeiture. Not only is that risky (the court may not grant relief from forfeiture!) but also the cost of litigation obtain a court order relieving the insured from forfeiture could be very expensive.
 
Insureds should certainly not expect to be granted forgiveness under relief from forfeiture provisions for missing a court filing deadline (i.e. a limitation period) because the Supreme Court of Canada has clearly indicated that relief from forfeiture will not be allowed in those circumstances. 

 

 
This book was written by Michael Dew, a Vancouver lawyer who practices civil litigation, including representing persons who have been denied coverage under property insurance policies, or liability insurance policies. If you have been denied insurance coverage and require assistance with making a claim against your insurer call Michael at 604 895 3160.