Legislation Protecting Innocent Co-Insureds Is Now a Reality in New Brunswick
Bill 30 – An Act to Amend the Insurance Act (the “Bill”) was introduced to the New Brunswick Legislature by the Honourable Cathy Rogers on December 16, 2017. The amendments were proposed in order to prevent insurance companies from denying coverage to innocent co-insureds for property damage caused by an abusive partner and to enhance the protection of assets for victims of intimate partner violence.
The Bill was introduced as an initiative to remove or decrease barriers partners face when trying to stay safe when there is abuse in the relationship and in response to public and industry reaction following the decision of Justice Morgan of the Ontario Superior Court of Justice in Soczek v. Allstate, 2017 ONSC 2262.
The Bill had its first reading on December 6, 2017 and second reading on December 8, 2017. During its second reading, the Bill was supported by all political parties. The Bill was sent to Committee for review on January 10, 2018. At Committee, the Bill was again supported by all political parties. The third reading of Bill 30 occurred on February 2, 2018 followed by Royal Assent on March 16, 2018.
The amendments to the Insurance Act are similar, but not identical, to those proposed by what was then Ontario’s Bill 125 (now section 129.1 of the Ontario Insurance Act (Schedule 21, Stronger, Fairer Ontario Act (Budget Measures), 2017 (Bill 177)) and existing legislation in Alberta and British Columbia.
The operative provision reads as follows:
“116.1(1) If a contract contains a term or condition excluding coverage for loss or damage to property caused by a criminal or intentional act or omission of an insured or any other person, the exclusion applies only to the claim of a person
- whose act or omission caused the loss or damage,
- who abetted or colluded in the act or omission,
- (i) consented to the act or omission, and
- (ii) knew or ought to have known that the act or omission would cause the loss or damage, or
- who is not a natural person.”
The amendments will limit an innocent co-insured’s recovery of damages. The innocent insured will be only entitled to recover their proportionate interest in the loss or damage to the property. Subsection 116.1(3) explicitly requires anyone making a claim under subsection (1) to cooperate with the insurer’s investigation of the loss, which includes submitting to an examination under oath and producing relevant documents.
It is noted that the legislation differs somewhat from that in place in Western Canada, specifically Alberta and British Columbia, in that the amendments to the Insurance Act specifically incorporate the requirement that the innocent co-insured cooperate with the insurer in respect of the investigation of the loss, including submitting to an examination under oath if requested by the insurer, and to production of any documents required by the contract and any documents in the innocent co-insured’s possession or control, that relate to the loss. In the Western provinces, these requirements are provided for by regulation rather than in the legislation itself.
New Brunswick is the first province in Atlantic Canada to enact legislation to protect an innocent co-insured from damage or destruction to property intentionally caused by a co-insured.
Potential issues that may arise as a result of legislating protections for innocent co-insureds include:
- How is the innocent co-insured’s proportionate interest in the property determined? (ss. 116.1(2)).In determining the innocent co-insured’s proportionate interest can we draw on other areas of law where the extent of a person’s interest is routinely determined (i.e. family law)?
- The provision is limited to “loss or damage to property”, but bodily injury could result from the same wrongful conduct by the co-insured.If an innocent co-insured is sued by an injured third party for bodily injury, there may not be a defence available to the innocent co-insured.This will depend in a large part on the actual wording of the insurance policy in question.
- Can an insurer who has indemnified an innocent co-insured for his or her proportionate interest in the property then subrogate against the insured who committed the wrongful act?
- What are the potential impacts of the provisions relative to the duty to defend third party liability cases? Will an insurer have to defend an innocent co-insured where third party losses are caused by the co-insured’s actions?