Delay reporting at your own peril

Where the wording of a policy makes clear that the making and reporting of a claim are the triggering events for coverage, the failure to comply with a notice provision constitutes non-compliance with an essential condition of coverage and there can be no relief from forfeiture.

Insurance law – Liability insurance – Directors and officers – Breach of policy – Non-compliance – Interpretation of policy – Relief against forfeiture- Duties and liabilities of insured- Practice – Appeals.

Furtado v. Lloyd’s Underwriters, [2024] O.J. No. 3312, Ontario Court of Appeal, July 22, 2024, P.D. Lauwers, K.M. van Rensburg and J.A. Thorburn JJ.A.

The insured was told in May 2019, during the policy period, to attend the securities regulator’s offices with relevant documents as they were investigating business activities of the company for which the insured was the directing mind. The policy period ended on October 25, 2019 and throughout May to October 25, 2019, the insured was not permitted by law to, and did not, advise the insurer of the investigation. However, on December 10, 2019, the legislation was amended to allow subjects of investigations to notify their insurers about the investigation on certain terms. The insured was specifically advised of this by the regulator starting on February 16, 2021. The Court rejected the insured’s argument that he did not have to notify the insurer after the policy ended and he was advised of the change in law.

Coverage under the policy was only triggered if the claim was first made against the insured during the policy period or discovery period and if it was reported in writing to the insurer within 30 days after the expiry of the policy period. Additionally, if a circumstance which may reasonably be expected by the insured to give rise to a claim was reported within the policy period, any future claim arising from that circumstance would be considered to be a claim first made against the insured at the time written notice of the circumstance was first given to the insurer. The policy has a suspension clause which suspended the notice provisions “whilst communication or notification is prohibited by confidentiality orders imposed by law enforcement agencies or [the regulator]”.

The court held that where the wording of a claims-made and reported policy makes clear that the making and reporting of a claim are the triggering events for coverage, the failure to comply with a notice provision constitutes non-compliance with an essential condition of coverage and there can be no relief from forfeiture. To decide otherwise would be to distort the plain meaning of the contract and require the insurer to provide coverage for an event outside the scope of the policy which it had not agreed to cover and for which it had received no remuneration.

The insured’s failure to report the circumstance to the insurer when the law permitted him to do so and when he was informed of his ability to do so meant that any claim arising from the circumstances could not be treated as reported within the policy period. This was a condition precedent to coverage. As the claims were never covered, relief from forfeiture was not available as it would be tantamount to extending coverage under the policy which was not what the parties had bargained for.  

This case was digested by Dionne H. Liu and edited by Steven W. Abramson of Harper Grey LLP.  If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].