Fortuity - Canadian Insurance News and Trends - August 2025

On March 27, 2025, the Supreme Court of Canada dismissed an Insured’s application for leave to appeal a decision by the Ontario Court of Appeal, Furtado v. Lloyd’s Underwriters, 2024 ONCA 579 [Furtado], which found that the Insured had not complied with the notice requirement in a claims-made and reported policy, and that relief from forfeiture was not available.

Furtado is a helpful reminder that relief from forfeiture is only available if the coverage under the Policy is already triggered, and an insured then forfeits coverage because its failure to comply with a condition or term of the Policy, as opposed to situations where coverage is not triggered at all. In a nutshell, this is the distinction between incomplete compliance with a condition or term of a policy, and non-compliance with a condition precedent.

Furtado provides this reminder in the context of notice requirements in claims-made and reported policies, and explains why Stuart v. Hutchins, 40 O.R. (3d) 321 (C.A.) [Stuart], the often cited case on relief from forfeiture not being available for breach of notice requirements in claims-made and reported policies, remains good law despite the broader approach espoused in Kozel v. The Personal Insurance Company, 2014 ONCA 130 [Kozel].

Furtado involved an investigation and proceedings commenced by the Ontario Securities Commission (“OSC”) with respect to Go-To Development Holdings Inc. (“Go-To”), a company for which Mr. Furtado was a director or officer (collectively, the “Insured”). The Policy in Furtado was a Directors and Officers insurance policy, and included a provision which set out when notice of a Claim was required (the “Notice Provision”). The Notice Provision also set out when notice of a circumstance that could reasonably give rise to a Claim (the “Circumstances”) was required in order for a subsequent Claim to be deemed to have been made and notified during the Policy term in which the Circumstances were notified. The Policy also included a Suspension Clause, which suspended the requirement to notify if that notification was prohibited.

The important dates in this case include:

• May 2019, when the OSC summonsed Mr. Furtado for an examination at the OSC’s offices and was told to produce documents pursuant to s. 11 of the Securities Act, R.S.O. 1990, c. S.5 (the “Act”). The parties agree that this amounted to Circumstances. At the time, the Act prohibited Mr. Furtado from disclosing this information, thus triggering the Suspension Clause.
• December 2019, the Act was changed, allowing disclosure of the Circumstances to the Insurer.
• February 2021, Mr. Furtado was specifically informed he could advise his Insurer of the Circumstances.
• By March 2022, the OSC commenced receivership application and enforcement proceedings. These were considered to be Claims under the Policy.
• No notification was provided to the Insurer of the Circumstances, until the Claims were first reported to the Insurer in February and March 2022.As a result, the Insurer denied coverage.

In this case, there were a series of consecutive policy periods from October 6, 2016 to November 10, 2021 (the “Policy Period”). 

As the Claims were made outside of the Policy Period, in March 2022, there was no coverage based on when the Claims were made and reported. However, as the Circumstances had arisen during the Policy Period, the question was whether the Insured had forfeited coverage by failing to provide timely notice of the Circumstances since it did not notify of the Circumstances until February 2022.

The Ontario Court of Appeal emphasized that in claims-made and reported policies, there were two requirements to trigger coverage, which are that the claim is both made and reported during the Policy Period. Pursuant to the express wording of the Policy, this also applied to Circumstances so that if an Insured became aware of Circumstances during the Policy Period and reports that to the Insurer during the Policy Period, then any Claim that is subsequently made will be deemed to have been made and reported during the Policy Period. 

What this meant is that if the Insurer was notified of the May 2019 Circumstances during that Policy Period, then the subsequent March 2022 Claims would be deemed to have been made and reported during the Policy Period as well. However, in this case, the Insurer was not notified of the Circumstances until February 2022, after the Policy Period had expired.  The Ontario Court of Appeal had to consider the Suspension Clause, which initially prohibited the Insured from notifying the Insurer of the Circumstances.  The Court of Appeal found that as of February 2021, the Insured was made aware that it could notify the Insurer of the Circumstances, yet the Insured did not notify of the Circumstances until a year later, after the Policy Period had expired. As such, the Insured had breached the Notice Provision.

Due to the breach, the next issue was whether the Insured could be relieved from forfeiture.  For relief from forfeiture to be available to an Insured, the breach must be imperfect compliance. If, on the other hand, it is non-compliance with a condition precedent to coverage, then relief from forfeiture is not available.

As set out in Stuart, for claims-made and reported policies, it is a condition precedent for coverage that a claim be both made and reported during the policy period because coverage is not triggered until that occurs. For notification of circumstances that could give rise to a claim, the requirement for that notice to be during the policy period is often found in notice provisions which are outside of the insuring agreement in the policy, such was the case in Stuart and Furtado. In this case, the wording required a Circumstance be reported during the Policy Period to give the Insured the benefit of backdating a subsequent Claim to the date of reporting the Circumstance. Thus, failure to provide notice of the Circumstance during the Policy Period is a condition precedent for coverage for the Claim because coverage is not triggered for a Claim that falls outside the Policy Period unless notification of the Circumstance is provided during the Policy Period.

In Furtado, the Court distinguished Kozel, where the Ontario Court of Appeal relieved the insured from forfeiture despite the insured driving without authorization because she had failed to renew her license. In Kozel, the Ontario Court of Appeal set out that Stuart should be applied narrowly because there was nothing in the policy that expressly set out that insurance coverage was conditioned on the insured being authorized to drive. Instead, coverage in Kozel was triggered based on the timing of the occurrence. As the occurrence occurred during the policy period in Kozel, coverage was triggered, albeit forfeited for the insured’s failure to renew her license. That is, the distinction between Stuart and Furtado on one hand, and Kozel on the other hand, is that in Stuart and Furtado, coverage was not triggered due to failure to report the Circumstances within the policy period; whereas, in Kozel, the coverage was triggered, but the Insured had failed to do something, which resulted in the triggered coverage being forfeited. 

The distinction was succinctly set out in Furtado:

[78]      Accordingly, there can be no relief from forfeiture where there is an obligation on the insured to satisfy claims-made and reported conditions before the obligation to provide coverage arises. This is different from occurrence policies where the breach of a condition affects a pre-existing obligation on the part of the insurer to provide coverage.

…

[98]… Mr. Furtado did not lose the benefit of coverage; he never met the requirements for coverage in the first place as he only reported the Claims in 2022.

While Furtado addresses when relief of forfeiture is available in the claims-made and reported policy context, it reiterates the requirement that an Insured must have coverage to forfeit before it can be relieved from that forfeiture. If breach of the Policy means coverage is not triggered, then it is non-compliance with a condition precedent to coverage, and the equitable remedy of relief from forfeiture is unavailable.