Relief from forfeiture under the Insurance Act

The Sovereign General Insurance Company v. Walker, 2011 ONCA 597 deals, in obiter, with relief from forfeiture under the Insurance Act:

III.      Did the motion judge err in granting relief from forfeiture?

[40]         My disposition of the second issue is sufficient to decide this appeal.  However, even if I am wrong in holding that Emshih could give notice under s. 3(a) of the policy conditions for liability coverage, I agree with the motion judge that the Walkers would, be entitled to relief from forfeiture under s. 129 of the Insurance Act. 

[41]         Section 129 provides:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

Relief from forfeiture under s. 129 applies both to statutory and policy conditions: see Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 S.C.R. 778, at paras. 10-16.

[42]         The two issues under this ground of appeal are: first, whether this is a case of imperfect compliance, as the Walkers maintain, or total non-compliance, as Sovereign maintains; and second, if this is a case of imperfect compliance, whether forfeiture of the insurance proceeds would be inequitable.

[43]         The law has treated the failure to give timely notice of a claim as imperfect compliance, not non-compliance: see Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., supra, at para. 18.  However, Sovereign submits that this principle does not apply on these facts.  It says that because Emshih was not entitled to give notice under s. 3(a) of the policy conditions for liability coverage, then in substance no notice was given, rendering this a case of non-compliance, not imperfect compliance.

[44]         It seems to me that Sovereign's position is far too rigid.  As I said earlier, the question of compliance has to be looked at in the light of the purpose of a timely notice provision.  Notice gives the insurer an opportunity to investigate the merits of a claim, negotiate a settlement, and if necessary, defend the action.  Sovereign had that opportunity.  It chose not to exercise it. 

[45]         In other words, this is not a case where the insured had no actual notice of the claim or loss - Sovereign did have actual notice and made a conscious decision not to participate in the litigation.  Even if the notice should have come from Sun Shelters, the notice from Emshih makes this a case of imperfect compliance, not non-compliance. 

[46]         As this is a case of imperfect compliance, the only remaining question under s. 129 is whether forfeiture of the insurance proceeds would be inequitable.  The motion judge held that it would be, and made two key findings of fact in support of that holding:

1.                  There was no bad faith by Sun Shelters, the Walkers or Emshih; and

2.                  Although Emshih gave Sovereign notice of the Walkers' claim over five years after the accident occurred, Sovereign suffered no prejudice from the late delivery of the notice.  In the motion judge's words: "Whether the insurer received notice six months or six years after the accident it is difficult to imagine that it would have acted any differently."

[47]         Sovereign does not challenge these findings of fact, and I have no basis to interfere with them.  On these findings, forfeiture would be inequitable.