Where an insurer refuses to make payment under a policy, the limitation period runs from the date the claimant first knew, or in the circumstances ought to have known, that the insurer refused to make payment under a contract of insurance, rather than from the date of the loss. The insured’s claim is not against the person responsible for the original loss, but against the insurer who is alleged to have breached the contract of insurance by wrongfully denying payment.
Aspen Village Properties Ltd. v. Saskatchewan Government Insurance  S.J. No. 340, June 18, 2014, Saskatchewan Court of Queen’s Bench, D.P. Ball J.
The issue in this case was whether the limitation period for commencing an action to recover proceeds payable under a fire insurance policy was to be computed from the date of the fire, or from the date on which the insured discovered its claim for payment under the policy was denied by the insurer.
The insured was the owner of a club house which was destroyed in a fire in September 2011. The insured immediately informed the insurer of the loss and the insurer paid out the depreciated value of the club house in February 2012. The insurer approved the insured’s reconstruction plans in March 2013 and construction of the new club house began in late August 2013. The insurer informed the insured that it would not make any further payments under the policy in October 2013 on the basis that it was two years from the date of the fire loss and that any action was barred pursuant to the two year statutory limitation period. Construction of the new club house was far from complete.
The insured brought an application seeking a declaration that the two year limitation period did not begin to run until the insured discovered that the insurer would cease making payments under the policy.
The court agreed with the insured on the basis that insured’s claim was not made against the person responsible for the fire. Rather, the insured’s claim was against the insurer who is alleged to have breached the contract of insurance by wrongfully denying payment. According to the court, this was the only conclusion that was consistent with Section 6(1)(c) of the Limitation Act which required that the claimant knew or ought to have known that the act or omission that is the subject of the claim appeared to be that of the person against whom the claim is made.
Ultimately, the court held that the limitation period for a claim against the insurer is calculated when the claimant first knew, or in the circumstances ought to have known, that the insurer refused to make payment under a contract of insurance.
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