Manulife bound by its own policy wording.

On August 17, 2009, The BC Supreme Court held that as between the limitation period in an insurance policy and the limitation period set out in Section 22(1) of the Insurance Act of British Columbia, the limitation period in the policy prevails so long as it is not shorter than that prescribed by Section 22(1).

In Colgur v. Manufacturers Life Ins. Co., 2009 BCSC 1125, the insurance company, Manulife, applied for a dismissal of the Ms. Colgur’s claim for long-term disability .  Ms. Colgur was employed by the Royal Bank of Canada as a customer service representative. She developed laryngitis and, as a result, was told to rest her voice.  She attempted to return to work but was unable to do so.  On the advice of her employer, Ms. Colgur accepted short-term disability benefits for eight weeks. 

After her short-term disability benefits were exhausted, Ms. Colgur applied to Manulife for long-term benefits based on her doctor’s then diagnosis of “muscular tension dysphonia”.  Manulife approved her application for long-term disability benefits and told Ms. Colgur that if her medical condition prevented her from performing the duties of her own occupation, she would, in 18 months, be eligible for disability payments only if she was unable to work at any occupation for which she was qualified, or might reasonably become qualified by training, education or experience.

Ms. Colgur was eventually advised that her claim would be closed at the expiration of the 18 month period and she was no longer entitled to disability benefits.  Approximately six months after the Ms. Colgur’s benefits were cut off, she received a new diagnosis of conversion disorder and advised Manulife. Manulife rejected Ms. Colgur’’s claim for benefits based on the new diagnosis and Ms. Colgur sued.

Manulife brought this application to have Ms. Colgur’’s claim dismissed on the basis that section 22(1) of the Insurance Act requires that “every action on a contract must be commenced within one year after the furnishing of reasonably sufficient proof of a loss or claim under the contract and not after”.

In this case, the policy provisions that applied to Ms. Colgur’s claim permitted her to commence a lawsuit two years after the last day on which a proof of claim would be accepted under the terms of the policy.  Thus, the issue before the Court was which limitation period applied.  If section 22(1) of the Insurance Act applied, Ms. Colgur  had not brought her lawsuit within time, if the limitation period in the policy applied, Ms. Colgur  had brought her lawsuit within time.

The Court found that while section 3 of the Insurance Act prevents an insurer from contracting for a limitation period shorter than that provided for in the Insurance Act, there is nothing in section 3 that prevents an insurer from contracting for a period greater than that in the Insurance Act.  The Court also granted Ms. Colgur “relief from forfeiture” as she had failed to formally file a proof of loss, which the Court viewed as imperfect compliance given the circumstances of the case.  In the result, Manulife’s application was dismissed.