The Petitioner Insurer (“CNS”) was successful in obtaining a declaration that the Respondents (the “Demers”) were not entitled to indemnity or defence under a homeowners policy issued by CNS with respect to civil actions brought against the Demers by a neighbour who had been shot by Mr. Demers. The court held that the Demers failed to commence an action for coverage within the limitation period provided by section 22(1) of the Insurance Act, R.S.B.C. 1996, c. 226.

Canadian Northern Shield v. Demers, [2004] B.C.J. No. 650 British Columbia Supreme Court

On January 2, 1995, Mr. Demers shot his next door neighbour. As a result of the shooting, Mr. Demers was criminally charged with a number of offences including attempted murder. He was acquitted of all offences charged. The victim, Mr. Lee, brought two civil actions, one against Mr. Demers only, alleging intentional assault and battery, and the second action naming both Mr. and Mrs. Demers alleging negligence. At the time of the shooting incident, the Demers had a homeowners policy of insurance issued by CNS.

In February 1995, the first of Mr. Lee’s actions was commenced. Mr. Demers phoned his insurance broker to make enquiries about insurance coverage for the claim. On December 24, 1996, Mr. Lee filed a second Statement of Claim naming the Demers and alleging negligence. Once again, Mr. Demers called his insurance broker to discuss potential coverage for the action. Further discussions continued between Mr. Demers, his broker and an adjuster appointed by CNS up to and including discussions in July 1999. On July 6, 1999, Mr. Demers was advised that his homeowners policy would not respond to the claim. On November 24, 1999, Mr. Demers wrote to CNS demanding that CNS immediately be involved in his defence. CNS then retained counsel who wrote to Mr. Demers on January 18, 2000 indicating that CNS was taking the position that there was no coverage for the initial action alleging intentional assault.

On December 15, 2000, third party notices were filed by the Demers in both actions naming CNS as a third party. In August 2002, CNS applied in both actions to have the third party notices struck out. These applications were dismissed, as the trial judge noted that insurance coverage issues could not be determined in this form of application. As a result of this ruling, CNS commenced a petition seeking a declaration that it did not owe coverage with respect to the actions based upon expiry of the application limitation period for commencing an action under the policy.

The court reviewed the correspondence between the parties and found that the Demers had given appropriate notice of the potential claims to their insurers. The court then reviewed the issue of the proper construction and application of the limitation period set out in section 22(1) of the Insurance Act. The court noted that the commencement of this limitation period by way of a clear and unequivocal denial of coverage had been approved by the Court of Appeal in Balzer v. Sun Life Assurance Co. of Canada, 2003 BCCA 306.

In the case at bar, the court found that the Demers had been notified clearly that coverage had been denied as a result of his April 1995 telephone conversation with his broker. As well, during his further conversations with his broker and the adjuster appointed by CNS in July 1999, Mr. Demers had again been advised clearly that CNS was denying coverage. Consequently, the court concluded that the limitation period within which the Demers were required to commence action against CNS started to run, at the very latest, in July of 1999. The third party notices, which were filed in December of 2000, were, therefore, filed out of time. In the result, CNS was entitled to a declaration that the Demers were not entitled to insurance coverage or indemnity and that CNS was not obliged to undertake the defence of the Demers in either of the civil actions.

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