How to sue an insurance company: Canadian laws to know

This article will discuss the different considerations on how to sue an insurance company, such as its various grounds and the regulators governing insurers
How to sue an insurance company: Canadian laws to know

Do you think that you’ve been unjustly treated by your insurer? Before pursuing a case for tort, negligence, or liability against them, it’s important to learn about the different legal considerations on how to sue an insurance company in Canada.

How to sue an insurance company in Canada?

Knowing how to sue an insurance company or an insurer in Canada requires a prior knowledge of the following:

  1. The alternative ways – other than suing – that you can resort to in resolving a dispute with your insurance company
  2. The legal considerations when you’ve finally decided to sue your insurance company

Since there’s no substitute for a good legal counsel, talk to a professional liability lawyer regarding these factors as applied in your case. As a general overview, these are briefly discussed below:

(1) Alternative dispute resolution

Before you sue an insurance company for your denied claims or for any other reasons, you may want to first use the following alternative methods.

Upon the first denial by your insurance company, immediately talk to your lawyer who may advise you on how to address your insurance company through these methods.

The point being is that you may want to exhaust all administrative methods first, along with your lawyer, before proceeding with litigation.

Ask for some explanation

You may want to call again your broker, agent, representative, or claims adjuster for an explanation on your denied approval or low claims approval. There might be some misunderstanding about the insurance policy that you’ve bought, or some misappreciation of the facts of your case.

File an internal complaint or appeal

Upon rejection by your claims adjuster, you may also file a complaint or appeal with the internal process of your insurance company. The process may be provided in your insurance policy itself, or you may ask your insurance broker or agent for this.

Here, a senior officer, a board or a panel, or your adjuster’s claims supervisor or manager may hear your case again who may render a new decision. In addition, your insurer may also have its customer ombudsman, as required by law, who is tasked to hear consumer complaints.

File a complaint with the insurance regulator

If internal procedures are ineffective, you may file a complaint with your insurance company’s regulator.

Under the different provincial or federal laws, an insurance company may either be provincially or federally regulated. They may be governed by the following regulators:

  • Federally regulated: Financial Consumer Agency of Canada as empowered by the Insurance Companies Act
  • Provincially regulated:
    • Ontario: Financial Services Regulatory Authority
    • Québec: Autorité des marchés financiers
    • British Columbia: Financial Institutions Commission
    • Alberta: Superintendent of Insurance
    • New Brunswick: Insurance Division of Financial and Consumer Services Commission
    • among other insurance regulators in other provinces and territories

These insurance regulators cover both life and non-life insurance companies (e.g., automobile, property, and liability insurance).

Watch this video for an actual case of a denial of an insurance claim:

When these alternatives mentioned above fail, hire a professional liability lawyer to file a case against your insurance company. If you’re located in Toronto, talk to the best professional liability lawyers in Ontario as ranked by Lexpert.

(2) Suing an insurance company

Knowing how to sue an insurance company includes understanding the different causes of action. When proven, this will entitle you to relief or remedies granted by law, such as compensation for damages.

The following causes of action may or may not be related, depending on your case. For example, a breach of an insurance policy may also be related to your insurer’s bad faith.

As applied in these causes of action, you must be able to at least prove that:

  • You've suffered a certain amount of damages (either quantifiable or for pain and suffering), and
  • The damage you’ve suffered can be attributed to the acts of your insurer, agent, or broker.

This must be coupled with documentary or testimonial evidence. Consult with your lawyer on how to establish these causes of action and the necessary pieces of evidence that you need to prepare.

Breach of Insurance Policy

Breach of insurance policy, or breach of contract in other words, occurs when the insurer (or even the insured) violated any of the terms of the insurance policy or insurance contract.

However, one must be careful since your insurer may also assert that you’ve also breached the policy or contract. To properly interpret your policy or contract, have it read by your professional liability lawyer.

Your insurance policy may also provide for specific remedies in case your insurer breaches its terms and conditions.

Insurance companies acting in Bad Faith

Generally, insurers or insurance companies are obliged to transact with the insured or its clients in good faith. When this duty has been breached, the insured or the client will have a cause of action against the insurance company.

Some examples of this breach are:

  • Failing to promptly investigate the insurance claim
  • Denial of insurance claims without reasonable grounds
  • Withholding insurance coverage without any contractual basis
  • Paying the insured way below on what is stipulated on the insurance policy
  • Settlement with the client for an amount below the stipulation on the insurance policy

Breach of Standard of Care

Insurance companies are expected to exercise a certain degree of standard of care or expertise in dealing with its clients.

It may be based on the code of conduct of the industry or other statutory requirements. It may also be grounded in the negligence of the insurer.

This standard covers the insurer’s agents, brokers, claims adjusters, or any other employee.

Some instances when there’s a breach of standard of care on the part of the insurer are:

  • Failing to properly assess the client’s business to cover its needs vis-à-vis the appropriate coverage to be offered
  • Making misrepresentations to its clients regarding the insurance policy and its benefits
  • Failing to adequately inform or advice its clients on insurance coverage or gaps in the coverage, i.e., limitations or exclusions of the insurance policy

Are insurance companies federally regulated in Canada?

An insurer or an insurance company may either be federally or provincially regulated. Thus, regulation of insurers is shared between the federal and provincial or territorial governments.

It will be federally regulated:

  • if it’s incorporated under Canada’s Insurance Company Act, or
  • if it’s a foreign insurance company doing business in Canada

The federal government is mainly concerned over the solvency or the “financial soundness” of these insurance companies.

On the other hand, the provincial and territorial governments govern the:

  • licensing of insurers to conduct business within their jurisdiction
  • marketing of insurance products
  • form and content of insurance policies or contracts
  • regulation and licensing of agents, brokers, and claims adjusters

However, regulation of provincial and territorial governments applies whether an insurer is incorporated federally or provincially.

Learn more about how to sue an insurance company by hiring the Lexpert-Ranked best professional liability lawyer in Canada. You may also drop your questions in the comment section below.