Insurers Must Advise Insured Persons of Rights When Refusing Benefits

When an insurance company denies accident benefits to an insured person, the insurer must advise the insured person of his or her right to dispute the denial and of the most important points in the process.    A recent court decision has confirmed that if an insurer falls short of this requirement, it will not be able to rely on the limitation period that begins with that denial.

In Yifru v. Certas Direct Insurance Company, Certas Insurance denied Ms. Yifru’s claim for non-earner benefits on June 23, 2003.   Certas advised Ms. Yifru that she could dispute the decision by applying for mediation within two years of the denial.  However, it did not advise her that she had any further options if she and Certas failed to settle her claim at mediation.

Ms. Yirfu did not apply for mediation until four years after the insurer’s denial.  The parties did not settle at mediation and Ms. Yirfu commenced a lawsuit against Certas.  Certas brought a motion for summary judgment to dismiss the action on the basis that the limitation period had expired.

Justice Allen cited the following passage from the Supreme Court of Canada decision of Smith v. Co-operators General Insurance:

In my opinion, the insurer is required under s. 71 [the predecessor provision to s. 49] to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, the mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process.  Without this basic information, it cannot be said that a valid refusal has been given.

Justice Allen held that Certas’ refusal did not meet the expectations of the Smith v. Co-operators decision since it failed to set out the most important steps in the process.  She noted that the legislature has required insurers to properly inform consumers of their rights in the insurance context.  This includes setting out all the steps of the process, along with the descriptions and the implications of each step.  The insurer must also provide clear warnings about limitation periods.  Since Certas did not meet this standard, Justice Allen dismissed its motion and held that the limitation period had not expired.

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