Written by Hassan A. Khan, Associate

In the aftermath of a fire, the claims process can be confusing and difficult to understand. Most policies contain few, if any, provisions explaining exactly how the claims process works. In Eaglestone, the Court highlights the importance of effectively handling the claims process following a fire loss claim. This case provides a cautious reminder for insurers and insured in understanding the obligations required of each in the claims process, and provides a further reminder to insurers of prompt action after a loss is reported to comply with their duty of good faith and fairness.

Background

The Claimant owned property near Smithers, BC that consisted of a large home and two mobile homes situated on the land and insured by the Defendant. On November 29, 2013, an accidental fire occurred in a small shed that largely destroyed the mobile homes and their contents.

Mr. Eaglestone contacted his broker to inform them of the loss and the broker, in turn, contacted the Intact claims department. Intact retained Dwane Hillock of Northern Interior Insurance Adjusters. In the following days, Mr. Hillock attended the property to assess damages and coordinate the restoration work. Specifically, Mr. Hillock retained Bulkley Restorations (“Bulkley”) to attend at the property on an emergency basis. Mr. Hillock also provided Mr. Eaglestone with the Claims Process Letter, which amongst other items, advised the Claimant of his right to retain a contractor of his choosing.

However, Mr. Eaglestone was dissatisfied with the way Intact Insurance handled his claims. He alleged that Intact and its independent adjuster, made mistakes in the handling of the claims, including failing to use a written authorization for repair work, failing to explain the implications of the Actual Cash Value basis for adjusting claims, overlooking a claim for propane tank inspection, unilaterally reducing some of the amounts claimed, and failing to bring the statutory two-year limitation period to Mr. Eaglestone's attention.

As a result of these alleged mistakes, Mr. Eaglestone claimed that he was not fully compensated for his losses under the insurance policy.

Arguments at Trial & Analysis 

Issue #1 – Who is liable for the deficiency in the restoration work? 

The Claimant argued that it was Intact’s adjuster who invited Bulkley to attend the property, authorized the repairs, and received the repair quote exclusively. There was no written authorization provide by him for the requested work and, he argued Intact was liable for any resulting deficiencies. It is notable that the Claimant did not bring an action or sue Bulkley.

In response, Intact submitted that the contract for repair work was ultimately between the Claimant and Bulkley, and any remedy the Claimant might recover could only be against Bulkley. Intact relied on the Claims Process Letter and stated that the adjuster was an agent working on behalf of the Claimant when retaining and instructing Bulkley, and thus Intact could not be liable for any deficient work. 

The Court found that the Claimant had acquiesced to all of the work done because the Claims Process Letter was signed and understood by him. This letter explicitly outlined the Claimant's understanding that he held the responsibility to select a contractor to execute repairs, and that no repair work could be undertaken on his property without his personal authorization.

The Court held that while he acknowledged his right to retain his own contractor, he delegated this responsibility to the insurer. The Judge noted that the Claimant’s understanding that the repair work was being conducted with his implied, if not express, consent and authority, with the adjuster acting as his representative in this capacity. As a result, the Claimant's claim regarding deficiencies related to the shed repair work was entirely dismissed.

Issue #2 – Are the remaining claims barred by any two-year limitation period prescribed by the Insurance Act? 

The Claimant argued that he was not provided with any written notice of the statutory limitation period by the insurer, and thus, the claims commenced approximately four years after the date of loss were not statue barred. The Insurance Act was substantially revised effective June 1, 2012, which provided for the suspension of the two-year statutory limitation period in certain circumstances. In particular, s.4 of that Regulation,

• Made it mandatory for the insurer to give written notice of the statutory limitation period to the insurer “at the time or within five business days after the insurer denies liability for all or part of the claim”; and
• In the event the insurer fails to issue such written notice as required, the running of the statutory imitation period is suspended until the earlier of the (a) the date such notice is actually given or (b) the six-year anniversary after the insured knew or ought to have known that the loss or damage had occurred.

Neither the independent adjuster retained by Intact nor the Intact claims examiner were aware of the changes when they were handling the claims in late 2013. The Court concluded that the two-year limitation period for commencing the litigation against Intact was suspended and the claims were not statue barred as Intact had failed to comply with the updated regulations.

Issue #3 – Is Intact liable to pay for further costs incurred by the Claimant? 

The Claimant also advanced various additional claims for costs and damages for which he sought indemnification in amounts exceeding $1,000,000. The Court only allowed a modest sum of $1,239.29 consisting of costs incurred for rental heaters and inspections for furnace and propane tank. The Court held that all other claims such as loss of rental income and lost wages/revenue had no legal validity under the policies issued by Intact.

The Court explicitly stated that there was no breach of good faith in the claims handling process, despite the errors committed by Intact. Ultimately, the Court found that the errors were not motivated by any intention to act unfairly or unreasonably towards the Claimant’s claims. This was because Intact acted promptly to assist the Claimant with the loss incurred, agreed to apply one deductible instead of two deductibles that might have been applied to each policy and waived the formal Proof of Loss process to expedite the claims.

Takeaways for Insurers 

1. To mitigate the risk of assuming liability for engaging a contractor on the insured's behalf, it is advisable to issue a Claims Process Letter early in the process, ensuring that the insured fully comprehends its contents and acknowledges receipt.

2. Insurers should promptly issue their written notices of the statutory limitation periods following a reported loss to preserve their limitation defence.

3. When an insurer receives a notice of loss, prompt action is essential. If the insurer decides to deny either the entire claim or a portion thereof, it should provide a comprehensive explanation, outlining the reasons behind the decision to ensure it has complied with its duty of good faith and fairness.

Questions?

If you have any questions about this article or would like to hear about how Brownlee's insurance litigation team can represent you, please reach out to Hassan Khan at hkhan@brownleelaw.com.

Case: Eaglestone v. Intact Insurance, 2022 BCSC 2007