A recent Ontario Superior Court decision offers a stark reminder of how late reporting of a claim can extinguish insurance coverage entirely, even where the insurer’s technical duty to defend was otherwise arguable.
The facts
Metropolitan Toronto Condominium Corporation No. 1255 (hereinafter “1255”) sought a declaration that Intact Insurance had a duty to defend it against a lawsuit alleging it had impeded construction of a neighbouring commercial unit.
Intact resisted on two grounds:
- an intentional-acts exclusion, and
- late notice of the claim.
Rather than notifying its insurer, 1255’s board concluded on the advice of its property manager that the claim was excluded from coverage and chose to defend the action itself.
It was only after a new board was elected and a director questioned that decision that 1255 notified Intact — nearly three years and eight months after the amended claim was issued.
By then, pleadings were closed, documents exchanged, discoveries and mediation completed, and the matter set down for trial.
Why the delay was fatal
The court did not need to resolve the coverage exclusion dispute at all, because the delay alone defeated the claim.
Relief from forfeiture, the equitable remedy that can excuse late notice, is available only for imperfect compliance, is granted sparingly, and requires the insured to prove
- its own conduct was reasonable,
- the breach was not grave, and
- no disproportionate forfeiture resulted.
1255 failed on all counts.
The court treated prejudice to the insurer as the central issue. There is a presumption of prejudice arising from delay in giving notice, and by the time Intact learned of the claim, discoveries, mediation and a pre-trial conference had already occurred, expert evidence could no longer realistically be prepared, and limitation periods against other potential defendants had expired.
The lost opportunity to participate in mediation was itself treated as creating a strong presumption of prejudice, since early insurer involvement can lead to settlement.
A bare assertion from a board member that the claim had been “defended judiciously” was not enough to rebut that presumption. The onus to prove no prejudice rests squarely on the insured, and generic, unelaborated statements will not discharge it.
On the conduct factor, the court held it was not reasonable for an insured to deliberately withhold notice based on its own coverage analysis, and then expect to notify the insurer late, without consequence, if it later changed its mind. A well-resourced corporation with access to counsel and a broker had every opportunity to give notice much sooner.
Even on the proportionality factor — comparing the coverage lost to the harm caused — the court found no disparity warranting relief, noting the difficulty of quantifying Intact’s prejudice does not favour the insured; it is an inevitable consequence of very late notice.
1255’s imperfect compliance with the notice condition, combined with its failure to prove an absence of prejudice, meant Intact owed no duty to defend, and the application was dismissed.
Key takeaways for Insureds: Report Claims Promptly
- Under an occurrence-based policy, late notice is treated as “imperfect compliance” (potentially excusable) rather than “non-compliance” (fatal outright) — but that only opens the door to relief from forfeiture; it does not guarantee it.
- Delay triggers a presumption of prejudice to the insurer, and the burden falls on the insured to rebut it with real evidence, not conclusory statements.
- An insurer’s eventual “off-coverage” position does not automatically neutralize the prejudice from delay; earlier notice could have allowed the coverage dispute to be resolved much sooner, before critical litigation steps occurred.
- Self-assessing coverage and unilaterally deciding not to report is risky: an insured’s own view that a policy excludes a claim does not excuse delay if that view later changes.
The decision emphasizes a practical point for any insured, including condominium corporations managing third-party liability exposure: notify the insurer promptly once a claim arises, even where coverage looks doubtful, and let the coverage dispute be resolved on its own track rather than after years of unilateral defence.