This is an interlocutory decision relating to a claim for a loss due to flooding. The Plaintiff is the adult son of the named insured. The Defendant insurer brought an Application to strike the Plaintiff’s claim on the basis that he had no privity to the insurance contract. The Plaintiff brought a cross-Application for a declaration that he can continue the action in his own name, or for an order allowing him to amend his pleadings to substitute his father. The court denied the Application to strike, denied the Plaintiff’s right to continue the action in his own name, and allowed the amendment despite its being brought out of time under a statutory limitation period.

Fenrich v. Wawanesa Mutual Insurance Co., [2004] A.J. No. 458, Alberta Court of Queen’s Bench

The Plaintiff was the adult son of a homeowner with a valid homeowners policy, and was living at his parents’ home at the time of the loss. A broken water main near the parents’ house caused water damage to the son’s property in the garage. It was not disputed that the son was an “Insured” under the policy, and the insurer paid an amount in respect of the parents’ loss and the son’s. The son disputed the amount and commenced an action.

The Defendant insurer applied to strike the claim on the basis of a “Declaration” in the policy which required that only the persons named in the Declaration could bring suit against the insurer. Only the parents were named. The Plaintiff sought a declaration that he did have the right to sue, and relied on recent judgments expanding the rights of privity to third party beneficiaries to a contract. In the alternative he sought an Order amending his pleadings to add the father as a Plaintiff.

The Insurer argued that the amendment was out of time by virtue of the statutory limitation period in the Alberta Insurance Act which, although it applied to fire insurance, was incorporated into the policy by a sentence reading “…all of the Statutory Conditions and the Additional Conditions apply with respect to all of the perils insured by this policy”. The court rejected this argument, and applied the decision of the Supreme Court of Canada in KP Pacific Holdings Ltd. v. Guardian Insurance Co. of Canada,[2003] S.C.J. No. 24 where the court held that similar provision in the BC Act did not apply to all-risk policies. The amendment was allowed. With respect to the privity issue, the court agreed that recent decisions did expand the doctrine of privity with a “principled exception” which allowed suit by third party beneficiaries to a contract where all named parties intended there to be a benefit of the type claimed; however the Declaration in the policy in this case clearly outlined that the named parties intended the son to benefit, but not to have the right to sue. He could not maintain the action in his own name.

To stay current with the new case law and emerging legal issues in this area, subscribe here.