Ontario

Ontario: a good “abilities and circumstances” s. 5(1)(b) analysis

Lewis v. Plaskos is noteworthy for its findings regarding the plaintiff’s abilities and circumstances for the purposes of a discovery analysis.  The court doesn’t often make these findings explicitly (though it should).

The court found that plaintiff had the abilities of her experienced medical malpractice lawyer, and a reasonable experienced medical malpractice would be alert to the possibility that physician’s notes are incomplete.  It was accordingly unreasonable for the plaintiff, through her lawyer, not to consider the possibility and make the accordant inquiries:

[49]           The focus of the dispute is on sub-section 5(1)(b), Limitations Act, 2002.  In particular, the issue is whether the analysis of hospital records by Ms. McCartney has met the test of being objectively reasonable.

[50]           After the firm was retained by the plaintiffs, Ms. McCartney was assigned the task of reviewing the hospital records.  In that process, she was looking to see what was or was not done and why.  Ms. Cartney was considering who was responsible.  She knew this was a case of potential delayed diagnosis.  Those responsible were to be named as defendants in the statement of claim.

[51]           There are three preliminary matters that are of concern, namely delay, the state of the hospital records and the lack of notes by Ms. McCartney.

[52]           The hospital records were received by Ms. McCartney on or about October 14, 2011.  Thirteen months later, in November 2012, the review of those records commenced.  While Ms. McCartney was on a working maternity leave during part of that period of time, presumably meaning part-time attendance at the office and with responsibility for other files as well, the review process should have commenced much earlier.  Mr. Michael also had carriage of the file.  Other junior lawyers in the firm could have been asked to assist.

[53]           There is always a danger in waiting until the presumptive limitation period is about to expire.  The process can become rushed.  Due diligence was not met.

[54]           It is now known that Dr. Cameron failed to fully record her involvement with Ms. Lewis, particularly her consultation with Dr. Plaskos.

[55]           Litigation lawyers, particularly those involved in personal injury and medical malpractice cases, routinely review physician’s notes and hospital records.  These lawyers are aware of the dangers in conducting such review regarding illegible handwriting, abbreviated terms and incomplete recording.  The failure of physicians to fully record matters pertaining to a patient is often a topic in the litigation process, including at trial.  In the absence of records, physicians often have difficulty recalling specific events and discussions.

[56]           In my view, Ms. McCartney and Mr. Michael, both experienced medical malpractice lawyers, would have, or should have, been alert to the possibility the physician’s notes were incomplete.

[57]           The only contemporaneous note made by Ms. McCartney during her review and analysis of the hospital records was the summary previously mentioned.  The summary is incomplete, making no mention of her conclusions as now presented on this motion and lacking detail as to the analytical process undertaken.  Hence, on cross-examination, Ms. McCartney was unable to recall her state of mind when reviewing the records and the details of her thought process.  Like physicians, lawyers need to record all details of their involvement for future use.

[58]           The first step in the review process is to determine what was recorded.  When part of the record contains handwritten notes, the lawyer looks to see if such are legible.  There was a legitimate concern with Dr. Cameron’s handwriting and use of abbreviated terms.  Ms. McCartney and Mr. Michael, for example, looked at a key word and correctly concluded it to be “refused”.  “Radiol” was considered to be radiologist or radiology department.  When there is any concern as to what was written, it requires inquiry of the record keeper.

[59]           There are two conclusions Ms. McCartney made that are of critical importance.  First, she considered the phrase “will discuss with radiologist or radiology department re:  imaging” as connected to the preceding note “will check post void residual”.  Second, Ms. McCartney determined “MRI refused as normal rectal tone and no bilateral leg weakness” as Dr. Cameron declining to order an MRI.  Such are possible interpretations or conclusions but there are others that, in my view, are far more reasonable.

[60]           Just as physicians arrive at a “differential diagnosis” following examination of a patient, so too must a lawyer consider all reasonable options in their analysis of a case.

[61]           Connecting “will discuss with radiologist or radiology department re:  imaging” to “post void residual” is too restrictive.  The more reasonable interpretation is that Dr. Cameron was going to seek assistance in determining what further imaging tests were required.  At this point, Dr. Cameron was aware the lumbar x-ray, as interpreted by Dr. Plaskos, was inconclusive having regard to the nature of Ms. Lewis’ complaints.

[62]           Dr. Cameron’s note is all recorded under the time of 18:00 hours.  Ms. McCartney incorrectly assumed this represented one event.  But there are gaps in the recording and, having regards to the words used, it is more likely the record should have been seen as several separate recordings.

[63]           In this regard, the words “MRI refused” invites the question “by whom”.  Ms. McCartney’s conclusion that Dr. Cameron refused her own request is not reasonable.  It is contrary to normal use of English language and, as it follows the note “will discuss with radiologist …” with a gap in between, leads to the inference someone else is involved.  At a minimum, there are a number of possible interpretations and each must be pursued.  Indeed, Ms. McCartney acknowledged in cross-examination that one possible interpretation was that the MRI had been refused by someone else, but such a possibility did not occur to her at the time of her review.  It should have.

[64]           The failure to order an MRI in a timely fashion is central to the plaintiffs’ case.  Ms. McCartney knew that Dr. Plaskos was involved in interpreting an x-ray of Ms. Lewis on January 2, 2011, as had been requested by Dr. Reesor.  Ms. McCartney also knew that emergency department physicians will sometimes consult a radiologist as to what imaging to order or for an urgent MRI.  These factors, and others previously addressed, meant Ms. McCartney had to consider all reasonable scenarios.  Instead, she arrived at a conclusion without examining reasonable alternatives.  Her analysis, in result, was incomplete.

[65]           I conclude the analysis of hospital records by Ms. McCartney was not objectively reasonable, particularly having regard to her abilities and experience as a medical malpractice lawyer.

[66]           The cause of action occurred on January 2, 2011.  The limitation issue is with discoverability and so the presumptive limitation date of January 2, 2013 does not apply.

[67]           The statement of claim was issued on October 7, 2014.  Was it discoverable prior to October 7, 2012?  I conclude it was.  The medical records were received in October 2011.  A diligent review would have led to further inquiry.  The potential claim against Dr. Plaskos, in my view, was discoverable by December 31, 2011 and certainly long before October 7, 2012.

[68]           In result, I conclude the limitation period had expired prior to the statement of claim being issued.  The claim against Dr. Plaskos is statute-barred by operation of Section 5, Limitations Act, 2002.  The claim against him must be dismissed.  I so order.

 

Ontario: Court of Appeal says that the Limitations Act applies to claims, not causes of action

Justice Strathy’s decision in Apotex Inc. v. Nordion (Canada) Inc. is one of the most important limitations decisions from the Court of Appeal since the Limitations Act came into force.  It’s the first decision to make explicit that the Limitations Act doesn’t apply to causes of action, but to “claims” (as defined in s. 1 of the Limitations Act).

This distinction is most often missed by Ontario courts., which generally treat the cause of action and the “claim” as interchangeable for limitations purposes.  I have written about this issue extensively (see this, for example), including the problems that result.

Justice Strathy noted one of those problems.  Because damage is always an element of the “claim” but not of any cause of action based on conduct that is actionable per se, they accrue differently.  A breach of contract is the most common example:

[84]   Before the reform of limitations law brought about by the LA 2002, the previous statute, the Limitations Act, R.S.O. 1990, c. L.15, looked to when the cause of action arose (an expression not used in the LA 2002) to determine the commencement of the limitation period. The “cause of action” for breach of contract accrued on the date of the breach and the limitation period began to run on that date: see Graeme Mew, Debra Rolph & Daniel Zacks, The Law of Limitations, 3d ed. (Toronto: LexisNexis, 2016) at §9.6; Robert Simpson Co. Ltd. et al v. Foundation Co. of Canada Ltd. et al (1982), 1982 CanLII 1750 (ON CA), 36 O.R. (2d) 97 (C.A.), at p. 105; Schwebel v. Telekes, 1967 CanLII 163 (ON CA), [1967] 1 O.R. 541 (C.A.), at p. 544.

[85]   This was the case whether or not damages had yet been incurred. Damages are not an essential element of the cause of action for breach of contract: Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239 (CanLII), 140 O.R. (3d) 81, at para. 32.

[86]   Under the LA 2002, the limitation period for breach of contract does not necessarily run from the date of the breach. As I have observed, in contrast to the former statute, the date of the “act or omission” – the breach of contract itself – is not the only factor to be considered in determining when a claim is discovered under the LA 2002. Instead, the date on which the plaintiff knew of the occurrence of the act or omission is only one factor to be determined. In addition to that factor, the person with the claim must also know that the “injury, loss or damage had occurred” (s. 5(1)(a)(i)), that it was caused or contributed to by the act or omission (the breach of contract) (s. 5(i)(a)(ii)), and that the act or omission was that of the defendant (s. 5(1)(a)(iii)).

[87]   As a result of the presumption under s. 5(2), the limitation period begins to run on the date of the breach (being the date of the “act or omission”), unless it is proven that the person with the claim did not know of one or more of the matters set out in s. 5(1)(a), and that a reasonable person would not have known of those matters.

[88]   A plaintiff with a claim for breach of contract may displace the presumption in s. 5(2) if, for example, they establish that they did not know that “the injury, loss or damage” had occurred or, if it had occurred, they did not know that it was caused by an act or omission of the defendant – the breach of contract. But it is well-settled that the person need not know the extent of the injury, loss or damage to trigger the commencement of the limitation period. It is enough that they know that some damage has occurred. In Hamilton (City) v. Metcalfe & Mansfield Capital Corp., 2012 ONCA 156 (CanLII), 290 O.A.C. 42, at paras. 59-61, this court adopted the common law rule expressed in Peixeiro v. Haberman, 1997 CanLII 325 (SCC), [1997] 3 S.C.R. 549, at para. 18, that “some damage” is sufficient to start the running of the limitation period.

Justice Strathy set out the impact this has on a limitations analysis for a breach of contract: 91-92

[91]   First, to determine when a claim is discovered in a breach of contract case, it is necessary to examine the terms of the contract and the nature of the alleged breach (the “act or omission”) on which the claim is based: see Mew, Rolph & Zacks, at §9.5, citing to NFC Acquisition L.P. v. Centennial 2000 Inc., 2010 ONSC 733, 67 B.L.R. 218, at paras. 29-30, affirmed in 2011 ONCA 43 (CanLII), 78 B.L.R. (4th) 11; Hopkins v. Stockman, 2013 SKCA 118 (CanLII), 427 Sask. R. 4, at para. 10. As van Rensburg J.A. noted in Morrison v. Barzo, at paras. 33, 49, the application of the test in s. 5(1)(a) requires the identification or definition of the claims at issue. This is a necessary starting point.

[92]   Second, in many cases, the act or omission, causation, and the injury, loss or damage will occur simultaneously, and will be discovered simultaneously. But this will not always be the case. In some cases, discovery of the “act or omission” will not start the limitation period running unless injury, loss or damage has occurred and has been discovered (s. 5(1)(a)(i)).

To understand the significance of this decision, compare it to the Court’s description of discovery in Lawless:

[22]         The principle of discoverability provides that “a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence.  This principle conforms with the generally accepted definition of the term ‘cause of action’ – the fact or facts which give a person a right to judicial redress or relief against another”:Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 CanLII 954 (ON CA), 38 O.R. (3d) 161 (C.A.), at p. 170.

Here the Court describes discovery in terms of knowledge of the material facts of the cause of action, which is a statement of common law discovery, not discovery as codified in s. 5 of the Limitations Act.  Apotex, together with recent decision in Gillham, suggests that the Court is moving away from the misconception that underlies reliance on Lawless.   

Two other points:

  1. Justice Strathy’s decision begins with s. 2 of the Limitations Act.  Because this is the provision that determines the application of the Limitations Act, this is the correct starting point for any limitations analysis.  However, you rarely see courts considering it.
  2. It would have been helpful for the Court to include a paragraph explaining why the cause of action does not feature in the Limitations Act.  It was a deliberate decision.  The Legislature sought to resolve the enormous problems inherent in cause of action accrual by converting all causes of action into one unit, the claim.  This also allowed for universal limitation periods, rather than limitation periods for different categories of causes of action.

 

Ontario: Court of Appeal says death is not a “condition”

In Lee v. Ponte, the Court of Appeal held that death does not trigger the application s. 7 of the Limitations Act.

Section 7 suspends the limitation period when the claimant “is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition”.  The appellant in Lee argued that this provision could extend the limitation period for an estate trustee to bring a claim that the deceased person had before death:

[5]         The appellant urges that s. 7 should be interpreted to apply when the person having the claim dies before commencing proceedings. He argues that a deceased person is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition. He submits that the same policy concerns for allowing additional time for a litigation guardian to be appointed and take over the management of the affairs of the incapable person apply to an estate trustee. He points out that it takes time for an estate trustee to review the affairs of the deceased, and to obtain probate.

The Court rejected this argument:

[6]         We are not persuaded the motion judge erred by dismissing the claim as statute barred. The grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.

This is a very sensible response to a doubtful argument.  It’s plain that the Legislature didn’t intend that a “physical, mental or psychological condition” should be so broad as to encompass the condition of being dead.  Besides, it’s the Trustee Act that limits the pursuit of a deceased person’s claim.  The appellant didn’t rely on this provision, probably because it wouldn’t have helped, but it should be the starting point when considering the limitation of a deceased’s person claim.

Ontario: Court of Appeal on adding a party after the presumptive expiry of the limitation period

The Court of Appeal decision in Morrison v. Barzo sets out in detail the test for adding a party to a proceeding after the presumptive expiry of the limitation period.  It’s now the leading decision on the subject.

To obtain leave, the plaintiff must first rebut the presumption in s. 5(2) of the Limitations Act by leading evidence as to the date of subjective discovery.  The plaintiff doesn’t need to show evidence of due diligence; due diligence is immaterial to subjective discovery:

[31]      The evidentiary burden on a plaintiff seeking to add a defendant to an action after the apparent expiry of a limitation period is two-fold. First, the plaintiff must overcome the presumption in s. 5(2) that he or she knew of the matters referred to in s. 5(1)(a) on the day the act or omission on which the claim is based took place, by leading evidence as to the date the claim was actually discovered (which evidence can be tested and contradicted by the proposed defendant). The presumption is displaced by the court’s finding as to when the plaintiff subjectively knew he had a claim against the defendants: Mancinelli, at para. 18. To overcome the presumption, the plaintiff needs to prove only that the actual discovery of the claim was not on the date the events giving rise to the claim took place. It is therefore wrong to say that a plaintiff has an onus to show due diligence to rebut the presumption under s. 5(2): Fennell, at para. 26.

Second, the plaintiff must establish a prima facie discovery argument by leading evidence as to why the claim couldn’t have been discovered through reasonable diligence:

[32]      Second, the plaintiff must offer a “reasonable explanation on proper evidence” as to why the claim could not have been discovered through the exercise of reasonable diligence. The evidentiary threshold here is low, and the plaintiff’s explanation should be given a “generous reading”, and considered in the context of the claim: Mancinelli, at paras. 20 and 24.

This is not a due diligence analysis.  While a plaintiff’s due diligence is relevant to the finding under s. 5(1)(b), the absence of due diligence is a not a separate basis for dismissing a claim as statute-barred.  This is so whether the expiry of the limitation period is at issue in a motion for summary judgment or in a motion to add a defendant.

When a claimant ought reasonably to have discovered a claim requires an evidentiary foundation.  The court can’t say merely that the claim was discoverable before the expiry of the limitation period without explaining why.  It may be that the court can only determine when discovery ought to have occurred at a later stage of the proceeding.  In such a case, the motion to add the defendant should be granted, with leave for the defendant to plead a limitation defence:

[30]      Reasonable discoverability of a claim under s. 5(1)(b) that precludes adding a party contrary to s. 21(1) requires an evidentiary foundation. The court must be satisfied that a reasonable person in the plaintiff’s circumstances ought to have discovered the claim, and the date of such reasonable discovery must be determined. It is not sufficient for the court to say that the claim was discoverable “before the expiry of the limitation period”, without explaining why. It may be that the date of reasonable discoverability can only be determined at a later stage in the proceedings, at trial or on a summary judgment motion. In such a case, the motion to add the defendant should be granted, with leave for the defendant to plead a limitation defence: Mancinelli, at paras. 31 and 34.

Conceptually, I recognise the distinction between the court assessing the plaintiff’s due diligence in investigating the claim against the proposed defendant, and the court assessing whether the plaintiff could through reasonable diligence have discovered the claim against that defendant.  However, in practice, I suspect this is a distinction without a difference.  In both cases, the plaintiff will lead evidence of the steps taken to investigate the claim—due diligence—and argue that she did what was reasonable to investigate the claim and still didn’t discover it.  The proposed defendant will lead evidence of some other step the plaintiff could have taken and argue that it was a reasonable step and would have led to discovery.  And so the adequacy of due diligence is always in issue.

The Court also make important points about the findings that are necessary in a limitations analysis.  The court must identify the claims in question, and then find when they were discovered.  This requires a specific finding of fact that answers the question asked by s. 5(1)(b):

[60]      Instead, the motion judge was required, after clearly defining the nature of the claims against the respondents on the evidence, and after finding no actual knowledge of the claims, to make a specific finding of fact as to when a reasonable person “with the abilities and in the circumstances” of the appellants “first ought to have known of the matters referred to in clause (a)”.

Ontario: Court of Appeal on adverse possession and prescriptive easements

The Court of Appeal decision in Majewsky v. Veveris restates two real property principles:

  1. Adverse passion can be established with respect to lands registered under the Land Titles Act by possession meeting the necessary requirements during any continuous ten-year period prior to registration in Land Titles.
  2. To acquire a prescriptive easement whether under the doctrine of lost modern grant or by prescription under the RPLA, the claimant must demonstrate use that is continuous, uninterrupted, open, and peaceful for a period of 20 years.

Ontario: two notable misnomer decisions

Master Short’s decision in Frederica Mitchell v. John Doe is notable for its comprehensive summary of misnomer principles.

So too is Master Short’s decision in Livska v. Molina .  It’s an example of the circumstances where the court grants misnomer relief while granting leave to the correct party to plead a limitations defence.  Usually, misnomer relief means the correct party can’t plead a limitations defence because misnomer relief is a correction, not an addition or substitution (although the Court of Appeal is inconsistent on this point).  This means that the correct defendant was always a party to the proceeding, just misnamed, and if the proceeding was commenced in time, there can be no limitation defence for the correct defendant.

In Livska, the plaintiff named Molina, the alleged perpetrator of an assault, as a defendant.  Molina didn’t defend, and the plaintiff noted her in default.  Subsequently, the sister learned that Molina’s sister may have participated in the assault.   Master Short granted misnomer relief on the basis that Molina, correctly named, was in fact both herself and her sister.  Because Molina didn’t defend the action, whether the plaintiff’s proceeding was timely remained a live issue.

Ontario: the Court of Appeal on s. 36(8) of the Building Code Act

 

Nothern Bruce Peninsula (Municipality) v. Dolson considers the limitation period in s. 36(8) of the Building Code Act for proceedings under that Act.  I don’t think it’s technically a civil limitations issues, and I’ve never encountered it before.  Still, I’m all for completeness, so if you’re looking for a s. 36(8) authority, here you go.

Ontario: the limitation of will challenges

The decision in Shannon v. Hrabovsky follows Leibel for the principle that the Limitations Act applies to will challenges:

[63]           As I understand the analysis in Leibel v. Leibel, because a will is effective as of the date of death, section 5(2) creates a presumption that an applicant has knowledge of the contents of the will on such date. Given this presumption, an applicant with knowledge at the date of death of a will, and its contents, together with all other facts upon which a claim for lack of testamentary capacity would be based would therefore be fixed with all necessary knowledge as of that date.  In such circumstances, the date on which such a claim would have been discovered for the purposes of section 5(1)(a) would be the date of death. The same principle would appear to operate with respect to any claim for undue influence.

I’ve given this issue quite a lot of consideration in the course of drafting a paper on the limitation of will challenges.  In short, I don’t think that it does.  Statutory limitation periods have always applied to causes of action.  A will challenge is not a cause of action.  The Limitations Act applies to “claims”, not causes of action, but a “claim” is just a universalized cause of action that functions to simplify the accrual analysis and allow for a general basic and ultimate limitation period.  If there’s no cause of action, there’s no “claim”.  If there’s no “claim”, the Limitations Act doesn’t apply.  Let me if know you’d like a copy of the draft paper; I’m happy to provide it.

The quotation above illustrates the problem.  Section 5(2) creates a presumption that discovery occurs on the date of the “act or omission” giving rise to the claim.  No act or omission necessarily occurs on the date of death.  Indeed, there isn’t necessarily any act or omission at all in a will challenge.

The fundamental flaw in Leibel, and the jurisprudence that follows it, is to understand the Limitations Act as having expanded the scope of the statutory limitations scheme to include all court proceedings.  This is wrong: the Limitations Act only expanded the scope of the limitations scheme to include all causes of action (the old Act applied to a closed list of causes of action, excluding some, like certain equitable causes of action, that were limited only by equity).

 

Ontario: Court of Appeal emphasises that discovery is contextual

The Court of Appeal’s decision in Fehr v. Sun Life Assurance Company of Canada is noteworthy for it its emphasis on the contextual nature of the discovery analysis:

[173]   However, when it came to assessing the limitation period defences applicable to the individual plaintiffs, the motions judge did not engage in a detailed examination of these idiosyncrasies. In particular, he did not consider the impact of each plaintiff’s circumstances and experiences on the critical issue of when each plaintiff discovered his or her claim or knew or ought to have known of the requisite facts grounding their claim. He failed to engage in an individualized and contextual analysis, and, instead, applied a broad presumption as to when they ought to have known of certain alleged misrepresentations.

[174]   An individualized and contextual analysis was necessary in this case for the very reason that misrepresentation claims are not generally amenable to class actions: people receive, process, and act upon written and verbal statements in different ways. Their behaviour varies depending upon a variety of factors, including their own particular circumstances, what specific representations and information they received and from whom, how they understood or processed those representations and information, the extent to which they relied upon them, and their own wishes and intentions.

[175]   An individualized and contextual analysis was particularly important in this case because, among other things: (a) there is a relationship of vulnerability between insurer and insured; (b) many of the plaintiffs are unsophisticated with respect to the insurance industry; (c) the insurance policies are complicated and not easily understood; (d) misrepresentations were made to some consumers and not others; (e) some or all of these misrepresentations were made by individuals on whom the plaintiffs might reasonably rely; (f) there is no evidence that the insurer expressly corrected the misrepresentations; and (g) the insurer may have reinforced or made further misrepresentations, to some or all of the plaintiffs, during the life of the policies.

Ontario: Court of Appeal changes (maybe?) the limitation of claims arising from coverage denials

The Court of Appeal in its decision Nasr Hospitality Services Inc. v. Intact Insurance has held that, at least in the circumstances of the case, the limitation period for a coverage action commences presumptively on the date the insured gives notice of its loss to the insurer.  This is a significant departure from the bar’s understanding, and seemingly at odds with the Court’s decision in Kassburg, and problematic enough that Justice Feldman dissented.  Both the issues and the implications of the decision are significant, so I summarise the facts in some detail.

The plaintiff purchased a commercial insurance policy from Intact. On January 31, 2013, a flood occurred on the plaintiff’s premises.  The Plaintiff notified its broker of its loss, and the broker notified Intact.

On February 13, 2014, Intact confirmed coverage, subject to policy terms and conditions, for the business interruption the plaintiff suffered, and issued a cheque to cover the losses.  Intact issued another cheque in May 2013.

The plaintiff disputed Intact’s valuation of the claim.  On May 13, 2014,  Intact wrote to advise that it would not accept the plaintiff’s valuation.  Subsequently, the plaintiff submitted a proof of loss.  On June 25, 2013, Intact rejected the proof of loss as incomplete, and advised that it was not rejecting or denying the plaintiff’s claim.

The plaintiff filed a further proof of loss on June 26, 2013.  On July 22, 2013, Intact rejected the proof of loss and advised the plaintiff that it would deny any further coverage under the policy.  Curiously, the decision suggests that Intact nevertheless provided the plaintiff with a blank proof of loss form and advised that it had two years from the date of loss to finalise its claim.

It appears from the decision that the plaintiff filed a third proof of loss on July 31, 2013, and that on August 15, 2013, Intact returned rejected that proof of loss.

The plaintiff issued its Statement of Claim on April 22, 2015 seeking damages arising from the coverage denial.  Intact moved for summary judgment on the basis of an expired limitation period.  Intact lost the motion, and appealed.

The parties agreed that the plaintiff’s cause of action arose on February 1, 2013 and the Court of Appeal accepted this agreement as “an admission of fact that February 1, 2013 was the day on which [the plaintiff] first knew the matter in ss. 5(1)(a)(i)-(iii)” of the Limitations Act.  The court found this position was consistent with its decisions in Markel and Schmitz.  Once the insured requests indemnification, the insurer is under a legal obligation to satisfy it.

The court rejected the plaintiff’s s. 5(1)(a)(iv) appropriateness argument.  Though the jurisprudence recognizes that some conduct by an insurer after receiving notification of a claim under a policy can impact on the discovery of a claim, but to apply to in this instance would result in a form of promissory-estoppel, and the plaintiff had conceded that a promissory estoppel was unavailable:

[59]      Nasr has not pointed to any cases involving ordinary claims for indemnification under a commercial policy of insurance that have treated the appropriate means element in s. 5(1)(a)(iv) as some form of watered-down promissory estoppel. To treat s. 5(1)(a)(iv) in that manner for ordinary commercial insurance indemnification claims – as the motion judge effectively did – would risk ignoring the caution voiced by Sharpe J.A. in Markel Insurance, at para. 34 – and echoed by Laskin J.A. in 407 ETR, at para. 47 – that:

To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Emphasis added.]

[60]      The motion judge did not find that Intact had promised, expressly or impliedly, not to rely on the limitation period. Accordingly, it was not open to the motion judge to recast, for purposes of the appropriate means analysis, the conduct by Intact that Nasr conceded could not support a finding of promissory estoppel that the insurer would not rely on the limitation period.  With respect, the motion judge erred in doing so.

Justice Feldman dissented.

She rejected that the limitation period should commence on the date of the loss, rather than the breach of the insurance contract:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

The insurance policy itself would determine when the obligation to pay arose, and therefore the date on which Intact failed to perform that obligation in breach of the policy.  Because neither party put the policy into evidence, the moving party couldn’t prove when the breach occurred, and therefore when the limitation period commenced:

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

[65]      In a nutshell, the appellant insurer asked the court to dismiss the insured’s action on the flood insurance policy on the basis that its claim is statute-barred, the claim having been brought more than two years after the flood, referred to as the loss. The problem is that this is not an action against the person who caused the flood. It is an action against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss it suffered in the flood.

Further, an agreement between the parties as to when a cause of action arose cannot bind the court:

[72]      However, on appeal, the insurer again asks the court to reject the respondent’s argument, overturn the decision of the motion judge, and grant summary judgment. To grant summary judgment this court must then decide when the cause of action against the insurer for breach of the insurance contract arose, in order to determine when the limitation period commenced to run.

[73]      That is a question of mixed fact and law. The legal part requires the court to determine when the insurer became legally obligated to pay under the policy. The factual part is the determination of when the insurer did not pay in accordance with that obligation. Parties cannot bind the court on legal issues by agreement or concession. For example, in OECTA v. Toronto Catholic District School Board (2007), 2007 CanLII 6454 (ON SCDC), 222 O.A.C. 23 (Div. Ct.), Lane J. stated at para. 13:

The fourth difficulty is that the agreement asserted is an agreement not as to the facts, but as to the law. Whether the doctrine of culminating event applies only where the alleged culminating act is culpable is a question of law. Parties cannot agree on the law so as to bind a court or tribunal to their view; the law is the law and it is always open to the tribunal to determine what it is.

Justice Feldman rejected the support the majority found in Markel and Schmitz.  In those cases, the legal obligations of the insurers arose from statute:

[78]      Markel Insurance involved a transfer claim for indemnification by a first party insurer against a second party insurer in the motor vehicle accident context. The claim was governed by the Insurance Act, R.S.O. 1990, c. I.8, its regulations, and procedures set out by the Financial Services Commission of Ontario. The court had all the information before it that it required to determine when the second insurer’s obligation to indemnify arose and was breached.

[79]      Similarly, in Schmitz, the claim for indemnity at issue was brought within and was governed by the underinsured motorist coverage provided by the OPCF 44R, an optional endorsement to Ontario’s standard form automobile insurance policy.

There are many things that are problematic with this decision, which is perhaps why it is one of the very few limitations decisions to have a dissent. Let’s go through the list:

  1. The foremost flaw is the majority’s ratio that the cause of the action accrued on February 1, 2013 based on the parties’ agreement. Curiously, neither the majority nor the motion judge set out what occurred on February 1, 2013.  Because the majority presumes that the limitation period commenced presumptively on the date of notice of the loss, I assume February 1, 2013 was the date the insured through its broker gave notice of the loss to the insurer.  Markel and Schmitz are only relevant to the majority’s decision if this is so.
  2. It’s hard to understand why the plaintiff would agreed on this point, or why both parties had the misapprehension that cause of action accrual was determinative of the commencement of the limitation period. My guess is that the policy (which mysteriously wasn’t part of the record) contained a provision that the insured had two years from the loss to sue, which is reasonably common.  However, this kind of term has nothing to do with cause of action accrual, it just operates to vary the basic limitation period by making it run in all circumstances from a fixed date.
  3. This decision could have wonky implications. Insurers will undoubtedly rely on it as standing for the principle that the limitation period for a coverage action, certainly when coverage is under a CGL policy but probably also under other policies as well, commences presumptively on the date the insured gives notice of its loss.  This is certainly not the bar’s current understanding as it’s seemingly entirely at odds with the decision in Kassburg. 
  4. Fortunately, it will be possible to distinguish Nasr on the grounds that the limitations analysis flowed from the parties’ agreement as to cause of action accrual, and that such an agreement can have no precedential value. I think this argument will generally prevail, given both Kassburg and the decision’s ambiguity about what happened on February 1, 2013 that resulted in accrual.  However, the right limitations argument very often doesn’t prevail, and I see the potential for a body of dubious caselaw until the CA revisits the issue and, one hopes, distinguishes Nasr into irrelevance.  It’s not helpful that the Nasr court said that Markel and Schmitz supported the parties’ accrual analysis.  It’s easy to imagine a lower court considering that conclusive of the issue.
  5. Lastly, one quibble with the dissent’s statement about cause of action accrual:

[66]      As the moving party on the motion for summary judgment, the insurer had the onus to prove all of the elements that found the basis for its limitation claim, including the date when the cause of action arose, i.e. the date when the act or omission by the insurer caused the injury to the insured: see the definition of “claim” in s. 1 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, and ss. 4 and 5.

The moving party did not bear the onus of establishing when the cause of action arose, but when the Claim arose.  The Limitations Act doesn’t tie the commencement of time to cause of action accrual, and the language “cause of action” doesn’t appear in the Limitations Act.  The cause of action was breach of contract.  A breach of contract is actionable per se and the cause of action doesn’t require damage to accrue.  The Limitations Act, pursuant to s. 2, applies to claims pursued in court proceedings.  Until there is a claim, the Limitations Act won’t apply.  A claim requires both wrongful conduct and resulting damage.  Until there is damage, there is no claim, and without a claim the Limitations Act doesn’t apply.  The limitation period commences presumptively from the date of the act or omission pursuant to s. 5(2), but the precondition to the application of s. 5(2) is the application of the Limitations Act itself, and therefore the occurrence of damage.  Here the point is likely practically of little consequence, as the breach and damage occurred contemporaneously (denial of coverage resulting immediately in the plaintiff being without indemnification for its loss), but conceptually it matters very much.

All of that said, the decision does have a good summary of s. 5(1)(a)(iv) principles:

[46]      In commencing his analysis under s. 5(1)(a)(iv) of the Act, the motion judge properly noted the general proposition that the determination of when an action is an appropriate means to seek to remedy an injury, loss or damage depends upon the specific factual or statutory setting of each individual case: 407 ETR Concession Company Limited v. Day, 2016 ONCA 709 (CanLII), 133 O.R. (3d) 762, leave to appeal refused, [2016] S.C.C.A. No. 509, at para. 34; Winmill v. Woodstock (Police Services Board), 2017 ONCA 962 (CanLII), 138 O.R. (3d) 641, leave to appeal to SCC requested, at para. 23.

[47]      However, as this court has observed, that general proposition is not an unbounded one.

[48]      First, in Markel Insurance this court confined the meaning of “appropriate” to “legally appropriate”. Writing for the court, Sharpe J.A. stated, at para. 34:

This brings me to the question of when it would be “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is “discovered” only when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it”, the word “appropriate” must mean legally appropriate. To give “appropriate” an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions. [Italics in original; underlining added.]

[49]      Second, in 407 ETR, Laskin J.A. noted, at para. 47, that the use of the phrase “legally appropriate” in Markel Insurance, “signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless” (emphasis added).

[50]      Finally, in Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325 (CanLII), 135 O.R. (3d) 321, Pardu J.A. observed that the jurisprudence discloses two circumstances in which the issue of appropriate means most often delays the date on which a claim was discovered. First, resorting to legal action might be inappropriate in cases where the plaintiff relied on the superior knowledge and expertise of the defendant, especially where the defendant undertook efforts to ameliorate the loss: at para. 26. Second, a legal action might not be appropriate if an alternative dispute resolution process “offers an adequate alternative remedy and that process has not fully run its course”: at para. 29. See also paras. 28-48; and Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469 (CanLII), at paras. 21 and 34-35. In this regard, in Winmillthis court held that resort to a civil proceeding for a remedy in respect of damage flowing from an incident might not be an appropriate means while criminal proceedings in respect of the incident remain outstanding: at para. 28.

[51]      Although Presidential MSH does not purport to offer an exhaustive list of circumstances in which a proceeding might not be an appropriate means, I would observe that neither circumstance identified in Presidential MSH is present in this case. Some other factor would have to displace the s. 5(2) presumption that Nasr knew a proceeding was an appropriate means on February 1, 2013.