The retailer's four-month delay in responding to the denial consumed approximately seventeen percent of the two-year limitation period. This lesson explains what the limitation period is, why it matters, and what dispute resolution options are available to policyholders who choose to challenge a denial.
A limitation period is a statutory deadline that defines the maximum time within which a legal action must be commenced. Once the limitation period expires, the right to bring the action is extinguished permanently, regardless of the merits of the claim. It does not matter how strong the policyholder's arguments are. It does not matter how weak the insurer's denial was. If the limitation period has passed, the court will not hear the case.
In Alberta, the general limitation period for commencing a civil action is two years from the date the claimant knew or ought to have known that the claim existed. For insurance coverage disputes, the cause of action typically arises on the date of the denial letter, because that is when the policyholder knows the insurer will not pay voluntarily. The two-year clock starts running on the date of the denial, and it does not stop for negotiations, for informal discussions between the parties, for the policyholder's delay in retaining counsel, or for the policyholder's hope that the problem will resolve itself without litigation.