Whether an insured was prejudiced by an insured’s failure to comply with a proof of loss procedure may not be suitable for summary judgment

An application by the insurer seeking summary judgment on the grounds that there was no genuine issue for trial was dismissed. Although the insured was not in technical compliance with the proof of loss procedure, the issue of whether the insurer was prejudiced by the insureds actions remained. There were triable issues raised by the facts and the law.

Louis Jones Construction Ltd. v. Royal & Sunalliance Insurance Co. of Canada, [2009] O.J. No. 4721, November 2, 2009, Ontario Superior Court of Justice, Master C.U.C. MacLeod

The insured was the owner of a truck-mounted concrete boom truck that collapsed on a construction site. The accident was reported to the insurer, but the insured advised it was seeking recovery from the truck manufacturer and distributor. It started an action against those parties on June 29, 2005. However, it advised the insurer that, should it be unsuccessful in the claim, it would be seeking recovery under the policy.

On September 9, 2005 the insurer wrote to the insured confirming that the loss was covered by the policy and that the insurer was prepared to pay the cost of repairing the truck minus the deductible. The letter confirmed that the insurer was aware that the insured was seeking to recover the loss without recourse to the insurer. The letter also confirmed that the claim could be “re-opened for processing” anytime before the one year limitation period expired on January 5, 2006.

The insured never filed a proof of loss form, but it did start an action against the insurer on December 25, 2005. The main action against the manufacturer and distributor is scheduled for February 2010. Should the insured be unsuccessful in that action then it sought, in the action at bar, to recover from the insurer under the policy.

The insurer argued that the insured could not succeed in the action against it because it did not submit a proof of loss to initiate the claim and specifically elected to pursue remedies against the other parties in the main action. As there was never a claim advanced under the policy, there was never a denial of the claim and therefore no breach of contract on which to sue.

The insured argued that it issued a formal claim within the limitation period, by serving the Statement of Claim. Further, it argued that the insurer had, in fact, denied the claim when it issued its Statement of Defence.  The Insured argued that it would be open to the court to conclude that a breach of contract occurred when the claim was defended. Lastly, it argued that the insurer’s position concerning a failure to complete a formal proof of loss is merely a question of form over substance and that the court has liberal powers under s. 129 of the Insurance Act to relieve from forfeiture.

The court held that, although the insured was not in technical compliance with the proof of loss procedures under the policy, it was difficult to see how the insurer had been prejudiced by the insured’s actions. While the formal proof of loss might not have been filed, the insurer was immediately on notice of the loss, had all the information that would be contained in a proof of loss, and had been kept fully aware of the status of the main action. The court was not persuaded that the insured could not succeed in its arguments and, therefore, there were triable issues raised by the facts and the law. Accordingly, the summary judgment motion was dismissed.

This case was originally summarized by Natasha D. Morley and originally edited by David W. Pilley.

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