After a long period of paying premiumsthere will come a time — although an unfortunate one — when we’ll need our insurance payout the most. As we fill out those claim formsone thought may cross our minds: can an insurance company deny my coverage?
Although it does happenthe law provides for certain grounds when an insurance policy can be denied. This includes the legal steps you can take to address the denial. In this articlewe’ll discuss these concernsand moreunder the backdrop of Canadian insurance laws.
This article can be used by personal injury lawyersor by insurance companiesas an educational piece for their clients.
What is insurance coverage in Canada?
Insurance is a contract between two parties — the insured or policyholderand the insurance company. Herethe insurer undertakes to compensate the policyholder who suffered a loss because of a covered peril. It protects the insured from financial risk resulting from this unexpected event.
To be covered by an insurance contractthere must be payment of premium fees. How much depends on the terms of coverage specified in the contract. It also depends on the type of insurance contract that the two parties entered into.
Also called insurance claimsan insurance coverage can be sourced from the different types of insurance policiessuch as:
- car or auto
- credit or loan
- disability
- liability
- life
- health
- home and mortgage
- travel
Yetthere are cases when an insurance company can validly deny their insured’s coverage. The grounds for this denial are found in the law and the policy itself.
When can an insurance company deny coverage?
An insurance company in Canada can deny a coverage or claim. Howeverit must be based on specific grounds allowed by a statute (e.g. provincial insurance law)common lawor by the policy.
The following are the most common reasons for coverage denial by insurance companies in Canada:
- non-payment of premiums
- exclusions from the insurance policy
- misrepresentations and concealment
- breach of insurance contract
- issues in filing a claim
- material changes in the insured
In any casewe’ll discuss each ground below.
As a starthere’s a video for more information on when can an insurance company deny your coverage:
If you need help for your denied insurance claim or coverageuse this directory to reach out to the best personal injury lawyers in Canada as ranked by Lexpert.
Non-payment of premiums
Each party in an insurance policy has their own obligations: the insured must pay the premiumswhile the insurer should indemnify the insured if the covered risk happens. As suchthe non-payment of premiums by the insured will cancel the insurance policy.
Payment of premiums is the most basic term on your insurance policy. It will show you how much and when premiums should be paidand any alternatives or remedies in case of non-payment.
One exception to this is when the policy is already deliveredas provided by the provincial and territorial insurance laws. In such a caseeven if there’s no payment of premiums yetthe policy will become binding between the parties.
Payments of premium to agents or brokers
What if you paid your insurance premiums to the insurer’s agent or broker? Would this qualify as a valid payment to your insurance company?
In practiceagents and brokers do not accept premium payments on behalf of the insurance company they represent.
One good tip is that if in the case of a cheque paymenteven if it’s received by the agent or brokerthe cheque should still be payable to the insurance company. Not to the agent or broker.
Excluded by the insurance policy
Going back to that principle in law on contractsan insurance policy is a contract that must contain all the terms that you and your insurer have agreed upon. If validly enteredthe policy is binding between the parties and must be complied with in good faith.
As suchthere will be enumerations in your policy of the specific risksperilsor losses excluded from coverage. An exception to this is if it’s an unjust insurance contract provisionwhich can be invalidated by a statute.
Here are some examples of exclusionsfor which an insurance company can deny your coverage:
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a specific risk or peril: your policy may exclude a specific peril or loss from its coverage; an example is when a home insurance would exclude earthquake as the cause of damagebut would include other disasterssuch as fire
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insured's negligent acts: your claim may be denied if you’re wholly or partly responsible for the damage or loss; exampleyour travel insurance policy may deny coverage if you travelled to a dangerously high-risk country
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illegal and criminal acts: when the loss occurred because it resulted from a commission of a criminal actwhether prohibited by a federal or provincial law; one example is if your insured automobile was driven by a non-licensed driveras prohibited by a specific traffic law
Exclusions under provincial and territorial insurance laws
It's important that these grounds for exclusions are provided in your insurance policy. Note that some provincial laws may also provide for similar exclusions. This means thateven if the policy did not say soyour insurance company can still deny your coverage citing these provincial laws.
The following are some of the common exclusions under provincial insurance statutes:
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a claim is unenforceable when the insured violated a lawor when the crime or violation is committed with the insured’s consent (s. 118Insurance Act of Ontario)
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a fire insurance policy includes losses caused by lightning or natural gas explosionsbut excludes coverage if it’s caused by damage to electrical devices or appliances and contamination by radioactive material (s. 34Insurance Act of BC)
These examples may also be found in other provincial Insurance Actsand most provisions would be similar. Examples. 34 of BC’s law is similar with s. 541 of Insurance Act of Alberta.
In most casesthese provisions are repeated in your policy for your reference. If you want clarificationit’s important to talk about this with your insurer and your personal injury lawyer.
Suicide in life insurance policies
One contentious exclusion in a life insurance policy is when the insured died because they took their own life.
Usually called the suicide clause in a policyit may provide that a claim is denied only if the insured committed suicide within a given period. This is the rule under the provincial and territorial insurance statutes.
This period is usually two years from the signing of the policy or from its last reinstatement. While this is provided by lawit’s still important to be familiar with your policyespecially about its suicide clause.
Misrepresentations and concealment
Another provision in provincial and territorial insurance laws that allows denial of insurance coverage is when the insured misrepresented or concealed a material fact. This is also called the insured’s duty to disclose.
This provision on misrepresentation and concealment is a statutory conditionwhich must be included in your insurance policy. If not writtenit is still deemed included in your policy.
Below are some rules about misrepresentations and concealment:
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duty to disclose applies even before the policy is entered intoand continues until its termination or when the loss occurred
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not all information must be disclosed; only those which are material to the insurance company are covered by this duty to disclose
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materiality is a question of fact; an information is material if it affects the insurer’s decision in granting the policycalculating the premiumsor in estimating the risks involved
Contestability periods
Cases of misrepresentation or concealment on the part of the insured are limited by what the law calls the contestability period. In a life or health insurance policythis is the only period where the insurer can contest any incomplete or incorrect information given by the insured.
After this periodthe insurer is barred from denying the coverage of the insured on the grounds of misrepresentation or concealment. This works as an exception to the rule on the duty to disclose.
Most provincial and territorial insurance laws provide for a two-year incontestability period. Howeversome cases would not be governed by contestability periodssuch as in cases of fraud by the insured.
Breach of insurance contract
Breach of contract is a catch-all ground for an insurance company to deny your coverage or claim. This includes non-payment of premiumsmisrepresentationsconcealmentand engaging in criminal acts.
This is why it’s important to thoroughly read and understand your policybecause this piece of paper will tell you everything. If there’s an unclear provisionyou can have it interpreted by a personal injury or insurance dispute lawyers.
Unjust insurance contract provisions
One of the protections provided by law is the prohibition of an insurance coverage denial based on an unjust insurance contract provision.
A provision is unjust or unreasonable if:
- it is not a prescribed exclusion
- it is assailed in court
- the court declares it to be unjust or unreasonable
This is another importance of judicially appealing a denialsince there are legal remedies that are provided by the law to the denied insured.
Issues in filing a claim
Aside from the fact that the loss is excluded by your insurance policythere are other issues that will allow your insurer to deny the coverage when you file a claim.
Some examples of issues when filing an insurance claim include:
- missing documents (e.g. billsevidence)
- filed after a given deadline
- non-inclusion of all claimed damages
Material changes in the insured
After the insurance policy has become effectiveand until it is cancelled by you or your insureryou must inform your insurer of any material changes in your situation.
Usuallyinformation that needs to be relayed is stated in your policy. Materiality of information is also related to the prohibition against misrepresentation or concealment.
In home insurancefor instanceyou must inform the insurer of any material change on the building insured.
This is important because it will affect your policy and your insurer’s ability to cover the loss. Otherwiseit may also fall as misrepresentation on your part as the policyholder.
What are the steps to take if your insurance claim is denied?
Another tip when it comes to a denied insurance claim is to not easily give up. With the help of your personal injury lawyeryour next step is to appeal the denial before your insurer. They would have a specific process on how to challenge a denied claimincluding the period to file it.
If your claim is still deniedor if there’s bad faith on the part of your insurerthen suing your insurance company may be your next choice. Talking to your lawyer on this potential lawsuit is important.
Here’s a video that shows how a personal injury lawyer can help you when your insurance claim is denied:
This directory of the Largest Law Firms in Canada can also help you when you’re looking for the top-ranking personal injury firms to handle your case.
Reviewing the policy for the grounds of claim denial
Howeverthere are several factors in the application of these grounds in every case of insurance claims. The most important step is to look at the insurance policy itself.
Although the forms may be uniformly used by most insurerseach contract or policy will still differ from each other:
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firsteach policy’s terms will depend on the kind of policy (e.g.lifepolicy)
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secondthe insured may have negotiated with the insurerwhich changed its terms from the standard one
Can an insurance company deny coverage: the what’s and how’s
One thing’s for sure: your insurance company cannot deny your coverage without citing any legal groundwhether based on a statute or your policy. If there’s bad faith on the part of your insurerCanadian law provides alternatives on what do next. In all of theseit’s important to reach out to the proper legal professionalssuch as personal injury lawyersto help you regardless of the stage of insurance claim you’re now at.
Learn more about the rules on when an insurance company can deny coverage by reaching out to the Lexpert-ranked best personal injury law firms in Canada.