Insurance Contracts CP - Law Reform Commission

(i) consented to the act or omission, and
(ii) knew or ought to have known that the act or omission would cause the loss or
damage
8.41 The clause goes on to require the courts to award at most, that persons proportionate interest.
While this provision is intended to benefit vulnerable insureds, the section would allow that interest to be
further reduced if there was any prospect that the wrongdoer could benefit, directly or indirectly, form the
recovery of the insurance monies awarded to that innocent party.
(2) Nothing in subsection (1) allows a person whose property is insured under the contract to
recover more than their proportionate interest in the lost or damaged property.
8.42 The amendment was enacted as section 28.6 of the Insurance Act 2009. It is modelled on
similar legislation enacted in the Provice of Alberta. The British Columbia Ministry of Finance published a
February 2010 Discussion Paper which proposed to phase in the reform, requiring further legislative
refinement by delegated legislation. In order to give effect to a legislative desire to protect innocent
persons who are ―in abusive relationships‖, corporate entities will not be able to mount a claim. So as to
meet reservations about this reform from the insurance industry, it was propsed that a claimant under
section 28.6 should submit to an examination under oath on the request of the insurer. Submissions
were also sought on the broader question of whether, in the words of the Consulation Paper:
―the regulation should also specifically require that the claimant co-operate with the insurer in
its investigation of the loss and provide all relevant information and documents in addition to
those required by the contract. Since these duties may apply to other insurance claims as well,
setting them out here could raise the implication that they apply only in these circumstances.
As well, there are concerns that concepts like ―cooperate‖ might be too general and vague to
be effectively, and fairly, administered.‖
8.43 Section 28.6 along with new regulations which addressed the concerns raised in the
Consultation Paper was brought into force on June 16 th , 2011 76 . These regulations require a claimant to
co-operate with the insurer in respect of the investigation of the loss. Such co-operation includes, but is
not limited to, submitting to an examination under oath and producing documents specified by the insurer
that relate to the loss.The Commission consider that a procedure such as that enacted in British
Columbia provides a more flexible mechanism than that found in the current English and Irish approach
while not being as market insensitive as that of South Africa where the common law is seen as penal in
nature. The British Columbia reforms suggest a direct and speedy mechanism which is preferable to
requiring the applicant seeking to recover on the policy to show duress, undue influence or non est
factum in litigation against the insurer.
8.44 In the Law Commission‘s Issues Paper 6, the ―modern approach‖, as found in the various
common law jurisdictions identified therein, is criticised as being result oriented rather than proceeding on
the basis of what the contract means, as viewed at the formation of the contract: the ―modern approach
works backwards. The courts decide what result they wish to reach in the circumstances, and then they
characterise the policy as joint or composite accordingly.‖ 77
8.45 This observation does not seem to be entirely fair or accurate. The same can be said of the
blanket application of the forfeiture rule of law. Judges have in a joint policies context developed a
forfeiture solution to a public policy question – moral hazard – that operates mechanically against
innocent insureds. The Commission believes that a more flexible solution is necessary.
8.46 The Commission does agree that in relation to misrepresentations made at formation of the
contract that a fraudulent misrepresentation made by one co-insured on a joint policy should be binding
on all other co-insureds. The Law Commissions take this position in their Issues Paper 7. The
Commission also agrees with the Law Commissions that a distinction is to be drawn between wrongful
acts at formation and wrongful acts after the contract has been formed:
76
77
BC Reg 115/2011
Issues Paper 7, para 5.46.
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