What is the 1-Year Limitation Period in Insurance Claims?

If you’re dealing with an insurance claim, it’s pertinent to understand your limitation period to take legal action. People often tend to overlook the critical deadline of the 1-year limitation period. Please note that if you were to miss the deadline, it would cost you the chance to sue, even though you might have a legitimate claim.

What Is a Limitation Period?

Before you understand the critical deadline of the 1-year limitation period, it is essential to understand what a “limitation period” is. A limitation period is a deadline or a legal time limit within which you must start a lawsuit and file a claim. If you try to file a claim after the expiry of the period, your case may be dismissed. 

In Ontario, as set out in the Limitations Act, 2002, the general limitation period is two years. However, many insurance policies contractually shorten this period to one year.

Why a 1-Year Limitation Period?

Insurance policies often contain a clause stating that legal action must be started within one year of the date of loss or damage. This kind of provision is legally valid in many situations and frequently appears in property insurance policies, such as those covering fire, theft, or water-related damage. It’s commonly worded as: 

“No action shall be brought against the insurer unless commenced within one year after the loss or damage occurs.”

There are several reasons insurers include a shorter time limit:

• It ensures claims are addressed while evidence is still fresh.

• It encourages people to act promptly rather than letting things drag.

• It’s permitted under Ontario law, especially in commercial insurance agreements.

• In other cases, like the fire insurance claims, it is actually a requirement under Ontario’s Insurance Act.

When Does the 1-Year Period Start?

The limitation period usually begins to run from when the insured knows, or ought to know, that about:

• A loss or damage has occurred;

• The loss may be covered by the policy; and

• A legal action may be necessary, if the insurer does not pay.

Thus, the limitation period can begin before you receive your denial letter and, in some cases, even before you file your claim.

Can the Period Be Extended?

Courts interpret these limitation clauses strictly, and relying on exceptions is risky. However, a few scenarios might pause or extend the limitation period:

• If negotiations with the insurer are ongoing and you reasonably believed a lawsuit wasn’t needed yet.

• Waiver or estoppel - If the insurer made statements or took actions suggesting they would cover your loss.

If special statutory rules apply—like with accident benefits or disability insurance.

Important Considerations

• Commercial vs. Consumer Policies: The ability to shorten limitation periods is more common in commercial insurance. Consumer policies may still default to the 2-year period.

• Car Insurance: While you typically need to report an accident within 7 days, the actual time to sue is usually two years.

• All-Risks or Multi-Peril Policies: A 1-year limitation may not apply unless expressly written into the policy.

What Should You Do?

• Read your policy closely, check for any limitation clauses.

• Document important dates like when the loss occurred and when you notified the insurer.

• Act quickly, don’t assume you have two years.

• Consult a lawyer early to avoid missing crucial deadlines.

• Don’t wait for a formal denial to seek legal advice.

Final Thoughts

The 1-year limitation period can be a legal trap for the unwary. Even if your insurer seems cooperative or your claim is still under review, waiting too long could permanently bar your right to sue. Being well informed is your best protection.

If you’re facing a loss or claim and are not sure about your next steps, consult a lawyer sooner rather than later. You may have less time than you think.