Wednesday, August 19, 2009

Watch out for the Limitations Act

Where you suffer a loss and claim against your insurance, beware of the Limitations Act, 2002. It is not unheard of (!) for an insurance company to drag things. In such cases the insured thinks that the insurance company is "handling it". Unfortunately the insurer is -- whether accidentally or deliberately -- exploiting the belief of the insured that the insurance company is acting in good faith. The insured may, down the road, face a very unpleasant situation when a demand for the long-delayed payment is met by the insurance company denying the claim by pointing to the passage of the limitation period. (Note: The relevant section is reproduced at the bottom of this post.)

There are arguments in law which might defeat the insurance company's reliance on the Act in such cases but law must often defer to practicality: a client may not be able to contest the claim because any action to challenge the insurance company's position would have cost many times the amount due under the policy. The result? An insurance company pockets a tidy little profit by saying "you're too late!" to a claimant on a claim that they themselves have delayed. An individual or small business person should consider this very deeply and never forget it if they need to make an insurance claim. Whether the insurance company does this on purpose or merely benefits from its own incompetence is beside the point: they can and might do this to you too.

What can you do to avoid being scammed this way?

1. On any insured matter please remember that the two-year clock starts running as of the date of the damage.

2. Diarize, diarize, diarize. Mark off the six, twelve and fifteen month periods since the date of the claim, and follow up on those days.

3. Do everything in writing, preferably by email or fax. It is difficult for an insurer to take the position in court that they hadn't received a document ("we couldn't process the claim without it and they didn't send it to us so they have no case") if you can prove that they received it. (And please don't kid yourself: whether by accident or design any large organization will "lose" materials or information which help you and hurt them. Anybody who has dealt with a cable or cell phone company for example knows of this: somehow their promises to you rarely seem to make it onto your file!)

4. Watch out for sneaky handoffs. Large organizations of all kinds have learned that they can delay provision of service indefinitely if they keep you uncertain and confused over who really has responsibility for your file.

5. If they have not paid out by your fifteen month point, consult and, if necessary, retain counsel. Have the lawyer put the insurer on notice that failure to pay by a given date will result in a court action.

6. Don't bluff. Sue if necessary to preserve your rights. Once that two-year period has gone by your rights have largely disappeared.

An extract from the Limitations Act showing the basic two-year period:

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered....

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a)...

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved....

Demand obligations

(3) For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made. ...

Same

(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004. ...