Executive Summary: Key Legal and Evidentiary Issues

• The Alberta Court of King's Bench affirmed a trial award of $4,656.75 plus interest to an insured whose insurer failed to furnish proof-of-loss forms.
   
• Justice Whitling confirmed that the burden of proving compliance with section 523(1) of the Insurance Act rests on the insurer, not the insured.
   
• Exclusion of a proof-of-loss cover letter was upheld due to late disclosure and hearsay, since the adjuster who sent it did not testify.
   
• An adverse inference against the insurer for failing to call its adjuster as a witness was found to be properly drawn.
   
• Because the insurer never furnished the required forms, it could not invoke section 524 or Statutory Condition 6(2) as a defence.
   
• Jurisdictional objections based on the statutory dispute-resolution process failed since that process presupposes delivery of a proof of loss.
   

Facts of the case

Salm Ismail's 2004 Honda CRV was damaged in a Calgary motor vehicle accident on August 27, 2023, an accident in which he was not at fault. He reported the loss to his insurer, Security National Insurance Company, no later than August 29, 2023, seeking coverage for repairs, a rental car, and related expenses. Correspondence between Ismail and two of Security National's adjusters followed, but Ismail eventually had repairs done to the vehicle without the insurer's authorization and without retaining receipts. Frustrated by what he saw as unresponsiveness, Ismail sued Security National in the Alberta Court of Justice on November 14, 2023, claiming roughly $23,936 in damages, interest, and costs. Security National defended on several grounds, including that Ismail's failure to submit a completed proof of loss barred his claim and that the Alberta Court of Justice lacked jurisdiction because the dispute should have gone through the statutory dispute-resolution process instead. At trial before Assistant Chief Justice Higa on February 10, 2025, the central factual issue was whether Security National had ever sent Ismail the forms needed to prepare a proof of loss. No direct evidence showed that it had. Higa A.C.J. found in Ismail's favour, disallowed his claims for repair costs and parking tickets, and capped his damages at the pleaded property-loss value of $4,435 plus GST, totalling $4,656.75. Security National appealed.

Policy and legislative provisions at issue

The dispute centred on Alberta's direct compensation regime for property damage under section 585.1 of the Insurance Act, RSA 2000, c I-3, which lets an insured recover vehicle-damage losses directly from their own insurer. Section 523(1) requires an insurer, on request and in any event within 60 days of receiving notice of loss, to furnish the insured with proof-of-loss forms; section 523(2) provides that an insurer who neglects this obligation cannot rely on section 524 — which otherwise bars an action until proof of loss has been provided — as a defence. Statutory Conditions 3(1)(b) and 4(1)(b) require the insured to submit a proof of loss, and Statutory Condition 6(2) bars an action to recover a claim until that requirement is met. Statutory Condition 4(3) prohibits unauthorized repairs, and section 585.1(6), read with section 519(4) and Statutory Condition 4(9)–(10), requires unresolved disputes over settlement amounts to go through a dispute-resolution process, but only once a proof of loss has been delivered. Section 520 permits the Court of King's Bench to grant relief from forfeiture for imperfect compliance with proof-of-loss requirements.

Reasoning and analysis

Justice Whitling addressed each ground of appeal in turn. On the burden of proof under section 523(1), he held that the party best positioned to prove whether forms were sent is the insurer, so the trial judge correctly required Security National to prove it had furnished the forms rather than requiring Ismail to prove he had not received them. Turning to the excluded letter that Security National tried to introduce through witness Pamela Cole, Whitling J. found the trial judge had properly excluded it on two independent grounds: it was disclosed only the afternoon before trial, months past a court-ordered deadline, and the adjuster who had actually sent it, Jessica Hsu, never testified, making any evidence about it hearsay. He rejected the argument that the trial judge acted unfairly in excluding this evidence without notice, since the objection came from Ismail's counsel and Security National had a fair chance to respond. On the adverse inference drawn from Security National's failure to call Hsu, the court found the trial judge had given Security National advance notice that an inference was under consideration and an opportunity to explain the omission, which it did not do, so the inference was properly drawn. As for the section 524 defence, Whitling J. held that since Security National failed to prove it furnished the forms, section 523(2) expressly barred it from relying on section 524, and the same reasoning extended to Statutory Condition 6(2): that condition cannot be read in isolation from section 523, so an insurer that has not complied with section 523(1) cannot use Ismail's failure to submit a proof of loss as a shield under either provision. The argument that unauthorized repairs under Statutory Condition 4(3) should have barred the claim entirely failed because Security National never pleaded or argued that specific basis for dismissal at trial, having instead argued only that repair costs should be deducted, which the trial judge had already done. Finally, on jurisdiction, Whitling J. agreed that the dispute-resolution process under section 519 and section 585.1(6) could only be triggered once a proof of loss had been delivered, and since Security National's own failure to furnish forms made that impossible, the Alberta Court of Justice retained jurisdiction to hear the claim. In obiter, he noted that relief from forfeiture under section 520 lies only with the Court of King's Bench, not the Alberta Court of Justice, but declined to decide whether that jurisdiction survives on an appeal such as this one, since the point was unnecessary to the result.

Ruling and overall outcome

The Court of King's Bench dismissed Security National's appeal on every ground and affirmed the trial decision. Ismail, the successful party, retains his judgment of $4,656.75 plus interest against Security National; the amount of interest itself is not quantified in the decision.