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When is a claim “made” under a claims made insurance policy

Unless an insurance policy expressly requires a formal demand to be made for a claim to be considered “made”, a claim will generally be made when there is a communication by a third party to the insured which would put a reasonable insured on notice that a claim will be made:
 
The authorities establish that as a general rule, for a "claim" to be made there must be some form of communication of a demand for compensation or other form of reparation by a third party upon the insured, or at least communication by the third party to the insured of a clear intention to hold the insured responsible for the damages in question…
 
The authorities distinguish between a communication of a demand or assertion of liability sufficient to trigger coverage under a claims-made policy and: (1) mere requests for information; (2) filing of a lawsuit without serving it upon the insured or otherwise advising the insured of the claim embodied in the suit; and (3) expressions of dissatisfaction that are clearly not meant to convey a demand for compensation for the damages.  These are sound distinctions.
 
The rule that a demand or assertion of liability must be communicated for a claim to be "made" leaves open the further questions, however, of what constitutes a demand or assertion of liability, and whether that demand or assertion is established on the facts.  The cases in the United States and Canada referred to above which have found a claim had not been made can be distinguished [from the facts before the Supreme Court of Canada in this case] on the basis of either or both of two factors:  (1) the wording of the policies in question, which made it clear that "claim" meant an express demand; or (2) the fact situations, which fell short of establishing that a claim  had indeed been made within the meaning of the general rule.  
The other matter which must be looked at in applying the authorities are the facts of the particular case.  What is required, unless the policy expressly so stipulates, is a form of demand or assertion of liability, not a formal demand or assertion of liability.  Under a policy such as the one in this appeal, which contains no express requirement of a formal demand or indeed any demand at all, what constitutes a claim "made" is a question to be resolved on the facts of the case.  There is no magic formula.  One must look to the reality of what the third party was communicating to the insured by words and conduct.  If the message was clear, the fact that the third party through politeness refrained from stating its demand or intention to hold the insured liable in categorical legal terms should not preclude a finding that a claim has been made.  Where the reasonable insured in all the circumstances would conclude that a third party was making a claim against him or her in the sense that if satisfactory payment or other form of reparation were not made the third party would sue, then it may be said that a claim has been made, even though a formal statement of liability and/or demand has not been tendered.
 
(Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 SCR 252, emphasis in original).
 
In Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 SCR 252 the Supreme Court of Canada found that a claim had been sufficiently made against an engineering firm after site inspections and meetings discussing the inadequate inspections by the engineers:
 
In the case on appeal, it can be convincingly argued that a reasonable person in the position of Reid Crowther surely would have inferred that the town was making a claim against it when, on September 25, the town foreman showed Reid Crowther’s on-site engineer the further damage that had been discovered, and commented that the work was typical of the job done by the general contractor on the project and approved by Reid Crowther.  This argument is even more convincing in relation to the events which occurred on September 29 -- the damage was videotaped and further comments critical of the general contractor's work and Reid Crowther's supervision were made to Reid Crowther’s representatives by the town foreman.  A claim had already been made against Reid Crowther for negligent inspection of the same project.  Reid Crowther had acknowledged its negligence in supervision of the general contractor and had paid for the previous repairs upon the demand of the town.  There could be no doubt about the town's intentions in late September as to the newly discovered damage; the town expected Reid Crowther to pay for the cost of the remedial work, as it had for other related remedial work.  Reid Crowther took this meaning; its Winnipeg office immediately communicated with its head office, which in turn immediately contacted its insurance representative.  Everyone knew what had happened at the meetings at the site ‑‑ an assertion of Reid Crowther's liability, and a demand for compensation, had in effect been made.  To borrow the words of St. Paul Fire and Marine Insurance Co. v. Guardian Insurance Co. of Canada, supra, the substance of the claim had been brought home to Reid Crowther before the policy expired.
(Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 SCR 252).
 
In Stevenson v. Simcoe & Erie General Insurance Co., [1981] I.L.R. ¶1-1434 (Alta. Q.B.) a letter expressing dissatisfaction with site supervision conducted by the insured was held to not constitute a claim, partly because the letter had not demanded compensation and had not made any threat to bring legal proceedings.  Further, the fact that the letter stated that if there were further problems with inadequate supervision the insured would lose future government work indicated that the government did not have an intention, at the time of writing the letter, to seek compensation as a remedy for the subject-matter of its complaint.
 
In Defrancesco v. Stivala, [1992] I.L.R. ¶1‑2896 (Ont. C.A.) an insurance broker had claims-made liability insurance coverage for the period September 1981 to October 5, 1982.  The broker was negligent in dealing with the obtaining of automobile insurance coverage in April 1982 for a customer, as a result of which negligence the customer's insurance was invalid.  The customer was involved in a motor vehicle accident on September 23, 1982.  On October 4, 1982, the broker was informed of the accident.   He was by then aware that there was a problem with the customer's insurance.  However, no demand for compensation had been made of him and the broker did not advise his liability insurers of the potential claim until after the expiry of the policy.  The Ontario Court of Appeal held that no claim had been made against the broker when the broker was merely informed of the error: 
 
The policy in issue was clearly a claims made policy.  It provided indemnity only if a claim was made within the policy period.  In practical terms that meant that a claim had to be made after September 23, 1982 when Stivala was involved in an accident and before October 5, 1982 when the policy expired.  No claim was made in that period.  The fact that the respondent realized that he had made an error within the policy period does not mean that a claim as contemplated by the plain wording of the contract of insurance was made at that time.
(Defrancesco v. Stivala, [1992] I.L.R. ¶1‑2896 (Ont. C.A.)).
 
If it is unclear whether a claim was made within the policy period the policy wording should be checked to determine if there is a continuity provision, and whether the policy was continued with the same insurer. If so, it may not matter exactly when the claim was made against the insured by the third party.

 

 
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.