Study 1 The Influence of Legislation Slide 2 Introduction
Provincial Legislation The laws of each province govern insurance
contracts within the boundaries of that province Insurance Act in
common law provinces Book 5 of the Civil Code of Quebec 2 Slide 3
Common Law Provinces and Territories Insurance Act Governs insurers
and contracts for all classes of insurance Fire Insurance applies
to insurance against loss of or damage to property arising for the
peril of fire in any contract made in the province Parts of the
Insurance Act that concern fire insurance also apply to property
insurance contracts 3 Slide 4 Provisions Governing All Insurance
Contracts Property is in the province or an insurable interest of a
resident of the province Construed according to the law in the
Province if: Signed, countersigned, issued or delivered in the
province Committed to the post office Or to any carrier, agent or
messenger To be delivered or handed over to the insured or insureds
agent in the province Money payable at the office of the insurers
chief officer or agent in the province 4 Slide 5 Provisions
Governing All Insurance Contracts Upon request, the insurer must
furnish the insured with the original application No insurer can
write a policy that is conflicting with the Insurance Act of that
province IE: Fire only, no explosion Imperfect Compliance by
Insurer An act or omission of the insurer in breach of any
provision of the Insurance Act, does not render the contract
invalid 5 Slide 6 Provisions Governing All Insurance Contracts
Every policy must contain: Name of insurer Name of insured Name of
any person to whom insurance money is payable The amount, or method
of determining a premium The subject matter of insurance Indemnity
for which the insurer may become liable Event on the happening of
which liability is to increase Effective date Expiry date 6 Slide 7
Provisions Governing All Insurance Contracts Provisions for
Appraisal Each party appoint an appraiser and the two appraisers
appoint an umpire The appraisers determine the matter of
disagreement and if they fail to agree, submit their difference to
the umpire Agreement of any two parties, determines the matter Each
party pays for their own appraiser and the expense of the umpire
are divided equally 7 Slide 8 Provisions Governing All Insurance
Contracts A judge may appoint an appraiser or an umpire if: A party
fails to appoint an appraiser within seven days The appraisers fail
to agree upon an umpire within 15 days An appraiser or umpire fail
to act or become incapable of acting or dies 8 Slide 9 Provisions
Governing All Insurance Contracts Waiver of Contract Terms No
contract terms can be waived unless the waiver is stated in writing
and signed by someone of authority to do so Non-waiver: Neither
party have deemed to waive any terms of the contract by: An act
relating to appraisal Delivery and completion of proofs
Investigation or adjustment of the claim 9 Slide 10 Provisions
Governing All Insurance Contracts Non-payment of Premium Should a
loss occur, the insurer can sue for the unpaid premium or deduct it
from the loss settlement NSF Cheque: The insurer must terminate
policy as per Statutory Condition #5 (Discussed later) Proof of
Loss Forms The insurer must furnish forms: Immediately upon request
And in any event not more than 60 days after the notice of loss 10
Slide 11 Provisions Governing All Insurance Contracts When Action
May Be Brought Under Contract No action before 60 days after proof
of loss or the happening of the loss Should an insurer not provide
a proof of loss form as previously noted, the insurer loses this
protection Insurance as Collateral Security for a Mortgage No
commission or other benefit for mortgagee to arrange insurance 11
Slide 12 Provisions Governing Fire Insurance Fire = actual ignition
or visible flame Loss against fire excludes: Goods undergoing the
application of heat Riot, civil commotion, war, invasion, act of
foreign enemy, hostilities, civil war, rebellion, revolution,
insurrection, or military power Lightning excluding destruction of
or loss to electrical devices or appliances or other electrical
currents unless fire originates. Then only for loss that occurs
from fire 12 Slide 13 Provisions Governing Fire Insurance Explosion
caused by natural, coal or manufactured gas not forming part of a
gas works. Excludes explosions caused by riot, civil commotion or
other listed fire perils Radioactive contamination directly or
indirectly resulting from fire, lightning or explosion A licence to
transact fire insurance policies also allows insurer to insure the
same property against loss from other named perils. 13 Slide 14
Provisions Governing Fire Insurance Removal of Insured Property
Insurance Act extend coverage to insured property removed to
prevent further loss for seven days or until the policy expires,
whichever is less Insured is responsible to minimize loss Amount of
insurance remains unchanged Remaining amount is limited to the
difference between the stated amount of insurance less the actual
loss suffered 14 Slide 15 Provisions Governing Fire Insurance
Distribution is the splitting of a single amount of insurance to
apply to property in more than one location Two conditions: 1. The
insurer agrees to pay a claim and the amount of insurance is
reduced accordingly 2. If the amount of loss is equal to or greater
than the amount of insurance, the full amount is payable 15 Slide
16 Provisions Governing Fire Insurance If the value of insured
property is greater than the amount of insured, the insured is
underinsured No payment beyond the amount of insurance When the
property is spread amongst multiple locations, the insurance must
be split proportionately 16 Slide 17 Provisions Governing Fire
Insurance Written Applications Written applications reduce
misunderstanding Onus upon insurer to properly review application
An issued policy is deemed to reflect the application unless
differences are noted Custom applications make it easier for
insured to see what options are offered by an insurer and for the
insurer to easily see variation in coverages If insurer issues
policy of different terms than requested, the insured has two weeks
to accept or reject 17 Slide 18 Provisions Governing Fire Insurance
Written Applications Rejection of the policy renders it void from
the beginning 18 Slide 19 Provisions Governing Fire Insurance
Protection for Loss Payees The insurer can not cancel or alter the
policy without notifying any person to whom insurance money is
payable Failure to provide notice could result in the insurer
becoming liable up to the amount of insurance Insurer must give
notice of cancellation to a payee in the same manner as required
for the insured under Stat #5 and Stat #15 19 Slide 20 Provisions
for Fire Insurance Contracts Limitation of Liability Clause A
contract with any clause that limits recovery (coinsurance,
deductible, etc.) must have printed on it, This policy contains a
clause that may limit the amount payable. This may be in black or
red, depending on the province 20 Slide 21 Provisions for Fire
Insurance Contracts Rateable Contribution Used when more than one
policy covers the same interest at the time of loss Each insurer
pays a rateable portion of the loss based on the amounts of
insurance on each policy and what portion that amount is of the
total of all insurance limits If two policies cover the same
interest but one of them specifically insures the property, that
policy will pay first, up to its limit, and the second policy will
only pay any excess amount required over the first policys limits
Where there are deductibles, the insurers share of the loss is
determined before the deductible is applied 21 Slide 22 Provisions
for Fire Insurance Contracts Rateable Contribution Example Insurer
A - $20,000 Limit Insurer B $35,0000 Limit Loss - $3,500 Formula:
Individual Insurer Limit (x) Amount of the loss Combined limits of
all insurers 22 Slide 23 Provisions for Fire Insurance Contracts
Rateable Contribution Example Insurer A: $20,000 / $20,000 +
$35,000 (x) $3,500 = $1,272.72 Insurer B: $35,000 / $20,000 +
$35,000 (x) $3,500 = $2,227.27 23 Slide 24 Statutory Conditions
Apply to ALL Fire insurance policies Must be printed in every
policy Variations not binding on insured Binding on both parties 24
Slide 25 Statutory Conditions Misrepresentation This condition
states that the insured cannot omit or misrepresent a material fact
while making application for insurance. If a material fact is
misrepresented, the contract will be void as to the property that
is affected by the misrepresentation. Note that this condition
pertains only to the application. Changes in the risk that occur
after the policy is issued and misrepresentations made during a
claim are covered in conditions four and seven, respectively. 25
Slide 26 Statutory Conditions Property of Others Condition does not
define the word "owned" Insurer is only liable for property owned
by the insured Policy will insure interests in property of persons
other than insured if those interests are stated in the contract 26
Slide 27 Statutory Conditions Change of Interest This deals with
the types of change of interest that may be allowed under the
policy Allowable changes, keeping the coverage in effect are: Under
Bankruptcy Act; Succession; Operation of Law Death of the insured
27 Slide 28 Statutory Conditions Material Change The insured must
tell the insurance company of anything material that changes during
the policy term. 28 Slide 29 Statutory Conditions Termination This
condition states the methods that the insurance company or the
insured may cancel the contract. The insured may cancel anytime
with simple notice. The insurance company will then refund any
unused premium by the "short rate" method. (Short rate = pro rata
plus surcharge). The insurance company can cancel the policy by
written notice by registered letter or hand delivered refunding
unused premium by the pro rata method. (pro rata = in proportion).
Termination is effective 15 days if by registered mail and period
starts to count the day after the letter arrives at the receiving
post office. If the letter is hand delivered, the period is five
days from the date it is delivered. 29 Slide 30 Statutory
Conditions Requirements After Loss This lays out all insureds
requirements after a loss. This includes: Notice in writing giving
an inventory of damaged goods Describing how the loss occurred and
that it wasn't on purpose Give the names of any other insurance
Naming any other interest (liens, partners) in the property Give
details of any material changes Describe where the property was at
the time of the damage If required give a complete inventory of
undamaged goods If requested provide books of account and other
pertinent property. 30 Slide 31 Statutory Conditions Fraud Denies
recovery to an insured whose statutory declaration is fraud or
wilfully false. A false statement is not fraud if it was believed
to be true. If fraud is proven regarding only part of a given
claim, the entire claim may be denied. When there is more than one
named insured a fraudulent claim by one may be denied but the
legitimate claim submitted by others would be paid. Onus is on
insurer to prove fraud. 31 Slide 32 Statutory Conditions Who May
Give Notice and Proof The insured; An agent of the insured (if the
insured is incapacitated); or If the insured refuses, anyone who is
entitled to payment under the policy. 32 Slide 33 Statutory
Conditions Salvage The insured must take steps to protect undamaged
property. The cost of protecting the damage will be proportionately
borne by the insurance company but the insured is responsible to
ensure that these steps are taken immediately after a loss. 33
Slide 34 Statutory Conditions Entry, Control, Abandonment This
condition covers three areas of responsibility after a loss. The
insurance company has the right to enter the property immediately
after a loss to survey the damage and again after the property has
been secured to appraise the damage. The insurance company never
has the right to control or take possession of the property as
ownership still rests with the insured. The insured does not have
the right to abandon the property to the insurance company and so
is still responsible for its safekeeping. 34 Slide 35 Statutory
Conditions Appraisal This allows for arbitration if the insurance
company and the insured can't agree on the amount of the loss. The
details of how this arbitration process works is in the Act. 35
Slide 36 Statutory Conditions When Loss Payable Loss is payable 60
after receipt of proof of loss. This may be shortened by the
insurer but not made longer. 36 Slide 37 Statutory Conditions
Replacement The insurance company has the right to choose the
method of compensating the insured after a loss (rebuild, replace
or repair). The time requirement for resolving losses, other than
by cash, is stated in this condition. Within 30 days of the notice
of loss, the insurer must give notice of their chosen method of
compensation. If repair, replacement or rebuilding is chosen, the
work must start no later than 45 days after the notice of loss. 37
Slide 38 Statutory Conditions Action Any suit or action against the
insurer prescribes (runs out) in 1 year from the date of loss. 38
Slide 39 Statutory Conditions Notice This is the method that notice
may be delivered by the insured or the insurer. 39
