Action on life and disability insurance policy barred by one-year statutory limitation period

Insurance law – Disability insurance – Life insurance – Breach of policy – Breach of good faith – Limitation of actions – Practice – Summary judgments

Richards Estate v. Industrial Alliance Insurance and Financial Services, [2019] N.S.J. No. 42, 2019 NSSC 3, Nova Scotia Supreme Court, February 5, 2019, A.E. Smith J.

The plaintiffs, on behalf of a deceased insured’s estate, brought an action against the insurer on November 13, 2015. The plaintiffs alleged that the insurer breached the terms of the policy when it determined the insured was not eligible to continue to receive long-term disability benefits. The plaintiffs also claimed life insurance benefits pursuant to the same policy as well as damages against the insurer for bad faith. The insurer communicated its decision to end disability benefits on November 14, 2011. The insured appealed the decision on January 13, 2012 and the insurer denied the appeal on March 12, 2012. The appeal denial letter stated that “[the insurer’s] decision to decline your LTD claim remains”.

The insurer applied for summary judgment dismissing the action on the basis that it was commenced after the expiry of the limitation period.

The court held that the one year limitation period contained in the life insurance (section VIII) of the Insurance Act, R.S.N.S. 1989, c. 231 applied to the policy. The limitation clock began to run either when the appeal was brought or at the time of the appeal decision date. Regardless, the plaintiffs were out of time. The court also found that the March 12 letter communicated a clear and unambiguous denial of future long term disability benefits. The claim for life insurance benefits and the bad faith claim were not separate actionable wrongs, and therefore did not run on their own time limits. Relief from forfeiture was not available because the failure to commence an action within the prescribed time period was non-compliance, as opposed to imperfect compliance. The action against the insurer was dismissed.

This case was digested by Kora V. Paciorek, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Kora V. Paciorek at kpaciorek@harpergrey.com.

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