Our first case discusses an award for punitive damages by a jury against an insurer for the manner in which it conducted its investigation regarding an insurance claim. This case demonstrates the importance of retaining professional adjusters who will conduct an investigation in a non-partisan, unbiased and objective manner.
￼Limitations of Action Act (New Brunswick)
This month’s newsletter contains a recent case dealing with punitive damages flowing from a faulty investigation and provides an overview of the newly amended Limitations of Action Act in New Brunswick.
Nova Scotia cap case: Supreme Court of Canada dismisses the applications seeking leave to appeal on issues surrounding the validity of the "cap" legislation in Nova Scotia. Details in our next newsletter.
Kings Mutual Insurance Co. v. Ackermann, 2010 CarswellNS 285 (N.S.C.A.)
In Kings Mutual Insurance Co. v. Ackermann, 2010 CarswellNS 285 (N.S.C.A.), the insureds contacted their insurer (Kings) following damage sustained to a barn as a result of a hurricane. The hurricane was deemed to be a windstorm as defined in the contract.
Following examinations of the barn by professional engineers, conflicting views were held as to the cause of the damage.
Evidence regarding the structure’s pre-hurricane safety was obtained and revealed no deficiencies with the barn. Many reports were prepared and letters written regarding the structural integrity of the barn prior to the hurricane. This information was never followed up on and was not relied upon by the insurer when denying the claim.
The trial with a civil jury took place over eight days. The jury awarded the full amount of the coverage and punitive damages in the amount of $55,000. The jury made a specific finding of bad faith in relation to Kings' denial of coverage under the policy and found that King's conduct offended its sense of decency. Kings appealed.
The issue was whether the jury erred in awarding punitive damages.
The Court of Appeal held that if the jury’s finding of bad faith stood it would be difficult for the appeal court to overturn the award for punitive damages. It was therefore necessary to focus on the finding of bad faith.
The Court of Appeal stated that an insurer will not necessarily be in breach of its duty of good faith by incorrectly denying a claim that is eventually determined judicially to be legitimate. However, denial of a claim due to overwhelmingly inadequate handling of a claim can lead to a breach of the duty of good faith and an award of punitive damages.
The Court of Appeal held that the investigation was flawed. Further, the jury’s finding of bad faith for the coverage denial and Kings’ conduct offended its sense of decency and it was reasonable that an award for punitive damages was made by the jury . The actions of Kings were exceptional (not following up on all of the evidence relevant to a claim, withholding critical information from the adjuster engaged to investigate a claim and allowing the adjuster to present the results of his or her investigation in a partisan, biased and unobjective manner), was tantamount to ignoring relevant evidence and affected the value of its expert’s opinion. Therefore the award of punitive damages was justified. Without an award of punitive damages, there would be nothing to deter Kings from acting similarly in the future. Kings appeal was therefore denied.
￼Newly amended Limitations of Action Act (New Brunswick)
Outlined below are the sections of the new Act and the corresponding limitation periods associated with each section. The two most significant amendments to the former Act are found in section 5 of the new Act and include an ultimate limitation of 15 years (section 5(1)(b)) and the general limitation period of two years from the day on which the claim is discovered (section 5(1)(a)). As will be seen, many of the subsequent provisions adopt the two and fifteen year framework set out in section 5.
|Section 5 (General Limitation Periods)||
2 years from discoverability.
15 years from day of act or omission.
|Section 6 (Continuous Act or Omission)||Day-to-day approach to both the discovery period and the ultimate period.|
|Section 8 (Judgments)||15 years from day of judgments .|
Section 9 (Recovery of Personal Property)
Section 10 (Conversion)
|Similar to existing law but brings limitation periods within the 2 and 15 year framework. Adds protection for a purchaser in good faith.|
|Section 11 (Demand Loans)||Uses the 2 year and 15 year framework.|
|Section 12 (Secured Debt)||
Established an extended limitation period for recovering the principle of a secured debt.
15 years begins when the security is taken but is carried forward each time an acknowledgment or part payment is received.
|Section 13 (Statutory Liens)||15 year limitation period for payment obligations that are both created by statute and reinforced by a statutory lien or charge.|
|Section 14 (Contribution)||Discovery period (2 years) based on claimant's discovery of contributor's potential liability and an ultimate period which considers both the date of the act or omission that gave rise to the claim and the date of the payment, settlement or judgments the claim produces.|
|Section 15 (Knowledge)||Discoverability Rule.|
|Section 16 (Wilful Concealment)||The effect depends on whether the particular claim is subject to both a discovery period and an ultimate period or simply to a free-standing 15 year period.|
|Section 17 (Minors)||Limitation periods does not start until the minor reaches 19 years of age.|
|Section 18 (Incapacity)||
Suspends the 2 year discoverability rule and allows the claimant at least 1 year to bring the claim after s/he becomes capable of doing so.
Does not suspend any ultimate limitation period.
|Section 19 (Acknowledgment)||
Limitation period begins again if there is acknowledgment (the same principle applies to written acknowledgments of any right, title, liability or obligations and the requirement for a signature is removed).
Exceptions for admissions or statements made on a without prejudice basis.
|Section 20 (Part Payments)||
Part payments will operate to begin the limitation period a new.
Exceptions exist under s. 20(3).
|Section 21 (Claims added to proceedings)||Once a claim is brought in time, some new claims can be added to the proceedings even though the limitation periods applicable to those claims have expired.|
|Section 22 (Delay caused by Defendant)||Where a defendant's conduct causes the claimant to believe that litigation will not be necessary, this section allows the claimant 6 months to bring a claim once it emerges that the defendant is not going to do as she indicated.|