When an insured receives clear and unambiguous notice that he or she has been denied disability insurance benefits, the one-year limitation period contained in the policy is triggered. The Insurer is not required to give notice to the Insured that the limitation period has commenced, and the limitation period is not postponed by an appeal of the Insurer’s decision by the Insured.

Pekarek v. Manufacturers Life Insurance Co., [2006] B.C.J. No. 1142, British Columbia Court of Appeal

Ms. Pekarek was insured under a disability insurance policy issued by Manufacturers Life Insurance Co. (“Manufacturers”). On December 16, 1993, she applied for long term disability benefits. On June 1, 1994, Manufacturers wrote to Ms. Pekarek and advised her that her doctor reported that she would be ready to return to work on December 1, 1994, and that her benefits would be terminated thereafter. In August of 1994, Ms. Pekarek provided a note to Manufacturers from her doctor indicating that she was incapable of returning to full-time work until December. Manufacturers followed-up with the doctors, requesting more information. On October 12, 1994 Manufacturers advised the Plaintiff that it was denying her appeal to provide ongoing disability benefits and that her file would remain closed. In July of 2000, Ms. Pekarek filed a Writ of Summons for a Declaration of Entitlement to Benefits. Manufacturers brought a Summary Trial Application to have the matter dismissed due to the expiration of the limitation period. The application was dismissed on the basis that the one-year limitation period commenced on October 12, 1994, and that the action was out of time.

On appeal, Ms. Pekarek argued that she was not given clear and unequivocal notice of the denial of her benefits and the commencement of the limitation period. In Dachner Investments Ltd. v. Laurentian Pacific Insurance Co. (1988), 22 B.C.L.R. (2d) 254, the British Columbia Court of Appeal noted that:

…where a policy of insurance stipulates that the time within which an action may be commenced runs from the time when the cause of action accrues, the limitation period will commence to run from the time when the insured has notice of a clear and unequivocal denial of coverage by the insurer.

Thackray J.A., for the Court, noted that although in Dachner Investments Ltd. the Court reflected that if an Insurer wished to avoid the possibility of misunderstanding “in its [denial of benefits] letter it can expressly draw attention to the limitation period”, this was only a suggestion, and falls short of the proposition that an Insurer is obliged to advise an Insured that their limitation period has commenced.

The Court of Appeal noted that Manufacturers made it clear to Ms. Pekarek that there had been a denial of her insurance coverage. The fact that Manufacturers reviewed additional medical evidence did not postpone the running of the limitation period. In addition, the fact that Manufacturers did not advise Ms. Pekarek that the limitation period had commenced did not estop them from invoking the limitation period against her. The Court of Appeal noted that the same reasoning as was applied by this Court in Esau v. Co-operators Life Insurance Company applied in this case.

Hall J.A., concurred with Thackray J.A.’s opinion, and followed-up on the comments of Levine J.A. in Esau v. Co-operators Life Insurance Company, noting that it would be useful for the legislature to consider amending the legislation to parallel the discoverability principle codified in ss. 6 and 7 of the Limitation Act, R.S.B.C., 1996, c. 266. This would enable a Court dealing with such cases to bring into consideration the type of reasoning found in Novak v. Bond, [1999] 1 S.C.R. 808. Hall J.A. went on to note that while this might diminish, to some degree, the rigorous certitude manifested under the current legislative regime, such legislation could afford a greater amount of flexibility to a Court to grant relief, where appropriate, in cases of possible hardship. A unanimous Court dismissed the appeal.

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