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. Day2016 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 appropriateTo 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. LLP2017 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.

Ontario: CA confirms insurers have no duty to disclose limitation period

In Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), Court of Appeal has confirmed that an insurer’s duty of good faith does not require it to give notice of the limitation period to its insured.  While the legislatures of some provinces have imposed a statutory obligation to this effect on insurers, Ontario has not.  Whether it should is a matter for the legislature.

We wrote about the lower court decision here.

This was the plaintiff’s argument on appeal:

[20]      The appellant submits, however, that the insurer’s failure to inform him of the limitation period precludes it from relying on the limitation period to defend his claim. He submits that the insurer’s common law duty of good faith and fair dealing should require it to inform the insured of the existence of the limitation period.

[21]      The appellant concedes that there is no statutory obligation to this effect in Ontario. He submits, however, that this obligation flows from the insurer’s duty to give the same consideration to the insured’s interest as it does to its own interests and can be imposed through the development of the common law and need not be based on statute.

Justice Strathy rejected this argument:

[45]      The Ontario legislature might have gone further than it has, for example, by adopting the approach taken in Alberta or British Columbia. It presumably chose not to do so and, in my respectful view, the court should not impose consumer protection measures on insurers, outside the terms of their policies, that the legislature has not seen fit to require. A properly crafted regime, such as those in effect in Alberta and British Columbia, would not only have to specify the requirement to give notice, but also the consequences of failing to do so.

[46]      The consequences of the appellant’s proposed expansion of the duty of good faith are significant. The appellant’s interpretation would effectively judicially overrule the provisions of the Limitations Act, 2002 by making notice given by an insurer to an insured the trigger for the limitation period, rather than discoverability of the underlying claim. This would defeat the purpose of the statute and bring ambiguity, rather than clarity, to the process.

Ontario: It’s still a two-year limitation period for IRB claims

 

In Bonilla v. Preszler,  the appellant argued that the respondent’s termination notice for her Income Replacement Benefits was not clear and unequivocal and that the applicable limitation period was “rolling”.  This was a futile position and the Court of Appeal rejected it.

[10]      It is well established in this court’s case law that the limitation period is triggered by a single event, which is the refusal of an insurer to pay the IRB claimed: see e.g. Bonaccorso v. Optimum Insurance Company Inc., 2016 ONCA 34 (CanLII), 129 O.R. (3d) 544 and Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111 (CanLII), 118 O.R. (3d) 713. The appellant was informed on February 4, 2003 that she would not receive IRB after February 27, 2003. Even taking the later of these two dates, February 27, 2003, as the date of the refusal, the two-year limitation period expired February 27, 2005. The appellant’s action is several years late.

[11]      The appellant submits that this court’s prior cases are either distinguishable or are wrongly decided and offers several arguments in support. She submits that the limitation period covers only the amount of a benefit claimed, and not the nature of the benefit; that the cause of action for IRB is an “entitlement to indemnification”; that the amount claimed is limited to an amount accrued or crystallized, rather than future benefits; and that the common law discoverability rule applies.

[12]      We do not accept any of these arguments. In our view the operation of the limitation period under the legislation is clear and straightforward. It is well settled in the case law of this court, and it would be inappropriate for a three-judge panel of the court to overrule a prior decision of the court in any event. We note that the appellant requested, and was denied, a five-judge panel for this appeal.

Ontario: insurers have no obligation to give notice of the limitation period

In Usanovic v. La Capitale Life Insurance Company, the plaintiff argued that the defendant insurer owed him a duty of good faith that included an obligation to provide him with notice of the limitation period.

Justice Broad rejected this argument in a well-reasoned decision.  After reviewing the jurisprudence, he concluded that no such obligation exists:

[40]           It would appear that, at its highest, the obligation of good faith and fair dealing arguably carries with it a positive obligation on an insurer to inform its insured of the nature of the benefits available under the policy. There is a marked difference, however, between imposing on an insurer a positive obligation to advise with respect to rights and benefits internal to the policy and the imposition of an obligation to advise with respect to the application of law external to the policy, such as pursuant to the Limitations Act.

[41]           In my view the court should be circumspect in extending the common law to impose positive obligations of general application on parties, particularly where the implications of so doing are unknown. The law of insurance is broadly occupied by legislation and in my view it should be left to the legislature to regulate, if it deems it necessary and appropriate, the nature and extent of information which must be given by insurers to their insureds upon denial of benefits, including the existence and details of applicable limitation periods.

[42]           I find that there was no obligation in law on the defendant to advise the plaintiff of the applicable limitation period in the Limitations Act.

The decision also includes a good overview of the jurisprudence considering whether a denial of benefits is clear and unequivocal.  See paras. 20-28.

 

Ontario: no, Schmitz v. Lombard hasn’t been overturned

For the insurance bar, two points are worth noting in Justice Faieta’s decision in Buurman v. The Dominion of Canada General Insurance Company.

First, the limitation periods in section 5.9.3 of OAP 1, section 8(3) of the Schedule to Ontario Regulation 676, and section 17 of OPCF 44R don’t trump the basic section 4 limitation period in the Limitations Act.  This is because these limitation periods are not included in the Limitations Act’s section 19 schedule.  This seems self-evident, but the defendant apparently thought it was an argument worth venturing.

Second, unsurprisingly, Justice Faieta found that the Court of Appeal decision in Lingard v. Milne-McIsaac didn’t overturn its decision Schmitz v. Lombard, which remains binding:   

[17]           Dominion submits that the last sentence of paragraph 11 of the Lingard decision should be read as deciding that the limitation period for a claim for indemnity against an insurer under OCPF 44R begins when the insured discovers that the other vehicle was uninsured …

[18]           It is my view that Schmitz was not overturned in Lingard for at least two reasons.  First, the focus of the Lingard decision was not whether the limitation period had expired.  The issue before the Court was whether the Plaintiff had acted diligently in seeking to add its insurer as a Defendant.  Accordingly, the Court’s findings regarding the commencement of the limitation period appear to be obiter.  On the other hand, in Schmitz the sole issue before the Court was the time at which the limitation period begins to run for an indemnity claim under OCPF 44R.  Second, unlike Schmitz, in Lingard the Court’s finding regarding the commencement of the limitation period is unsupported by any analysis.  Nor does it appear that Schmitz was drawn to the Court’s attention in Lingard.

Newfoundland and Labrador: The Commencement of the limitation period for breach of an insurance indemnity

In Tucker v. Unknown Person, the Court of Appeal held that in a claim for breach of indemnity pursuant to an insurance contract, the limitation period begins on the date of the insured’s loss of the right to be indemnified. This loss occurs when the insurer refuses to pay. Refusal occurs on the earlier of an express refusal or the day after the insured demands indemnification and does not receive it.

In arriving at its decision, the Court followed the Ontario Court of Appeal decisions in Markel and Schmitz. It’s notable that Ontario jurisprudence is influencing the direction of Newfoundland and Labrador’s limitations law because they have fundamentally different limitations regimes. Ontario is one of the “reformed” jurisdictions. Broadly speaking, these are jurisdictions with one general and ultimate limitation period and codified discovery rules. In Newfoundland and Labrador, it remains necessary to classify the action to determine the applicable limitation period and, where appropriate, to apply the common law principle of discoverability. Nevertheless, the Court’s adoption of Ontario limitation law indicates that reform, if only de facto, is at work.

Ontario: the limitations jurisprudence of 2014 in review

This post is a paper I wrote for LawPro on the year’s limitations jurisprudence.  It may be of interest to Under the Limit readers; if you’d like a PDF version , just ask.

The limitations jurisprudence of 2014 in review

Dan Zacks[1]

January 1, 2014 marked ten years since the Limitations Act, 2002 came into force. Now many aspects of the old limitations regime are forgotten, or will be soon. Consider for instance the classification of actions. Once a key step in the limitations analysis, it is barely remembered, and rarely fondly.[2]

Meanwhile, the courts have developed an extensive body of jurisprudence interpreting and applying the new Act. To be sure, this jurisprudence remains in development. Many of 2014’s leading decisions consider fundamental limitations issues arising from the Limitations Act for the first time. For example, in 2014 we learned from the Court of Appeal how a plaintiff should plead a discoverability argument (by reply), and that there is no legislative gap that would prevent the Limitations Act from applying to claims for unjust enrichment (Collins v. Cortez and McConnell v. Huxtable respectively, both discussed below). The Superior Court also delivered decisions of consequence, in particular by confirming that the Limitations Act applies to will challenges (Leibel v. Leibel, also discussed below).

While it is difficult to identify definite trends in the year’s limitations jurisprudence, several lower court decisions point toward an increasing receptiveness to boundary-pushing discovery analyses. In one case, the “no, I won’t pay my 407 toll” decision, the Court found that proportionality can be a factor when determining whether a plaintiff has discovered that a proceeding is an appropriate means to seek a remedy.[3] In another somewhat eccentric case, the Court found that, pursuant to “cultural dimension theory”, being Slovenian can determine when a plaintiff discovers her claim.[4] It will be interesting to see whether courts follow either of these decisions, and more generally, whether they remain open to creative discovery arguments.

What follows is a summary of the more consequential Ontario limitations decisions from 2014. For mostly up-to-date reporting on this year’s limitations jurisprudence, you are welcome to visit limitations.ca.

McConnell v. Huxtable: In which the Court of Appeal says yes, a claim for unjust enrichment is subject to the Limitations Act[5]

McConnell is a family law decision involving an unmarried couple. The applicant made a constructive trust claim for an ownership interest in the respondent’s house and, in the alternative, for compensation in money. The respondent sought the dismissal of the claim on the basis that it was barred by the expiry of the limitation period.

The motion judge’s 2013 decision[6] was sensational, at least in the rather staid world of limitations. In thorough and persuasive reasons, Justice Perkins held that the discovery provisions of the Limitations Act cannot apply to a remedial constructive trust based on a claim of unjust enrichment. Taken to its logical conclusion, this meant that in a great many circumstances, only the equitable doctrine of laches and acquiescence would limit a claim for unjust enrichment.

A limitation period commences when the injured party discovers the claim within the meaning of section 5 of the Limitations Act. Justice Perkins concluded that a claim for constructive trust is not in all circumstances discoverable as contemplated by this section. If a claim is not discoverable, the limitation period will never commence. If the limitation period never commences, there is no limitation period. This is how he described the problem:

I think that section 5(1)(a) makes it impossible to know when if ever the limitation [period] would start running because the claimant may never (reasonably) know of a “loss, damage or injury” and because there is no act or omission of the respondent that the claimant is required to or is even able to point to in order to “discover” a claim for a constructive trust. Claims to recover land aside, the Limitations Act, 2002 may have been meant to but does not manage to encompass constructive trust claims. I am unable to give effect to the precise and detailed wording of sections 4 and 5 so as to make them apply to constructive trusts in family law cases.[7]

Not surprisingly, Justice Rosenberg, writing for the Court of Appeal, disagreed, and held that there is no legislative gap:

I do not agree with the motion judge that a remedial constructive trust claim does not require any act or omission by the person against whom the claim is brought. Generally speaking, a claim of unjust enrichment requires that the defendant retain a benefit without juristic reason in circumstances where the claimant suffers a corresponding deprivation. In other words, the relevant act of the defendant is simply the act of keeping the enrichment (or the omission to pay it back) once the elements of the unjust enrichment claim have crystallized. In the family law context, this may typically occur on the date of separation, when shared assets, including real property, are divided and the possibility therefore arises of one party holding onto more than a fair share.[8]

Justice Rosenberg acknowledged that in some cases it may be difficult to apply section 5 to a claim for unjust enrichment, but it applies nonetheless. Even if the difficulty means the claim is never discovered, the ultimate limitation period will still limit it. This is sound reasoning, but terribly disappointing to the plaintiffs’ bar, who had begun to think very hard about how to make every old claim one for unjust enrichment.

McConnell also brings clarity to the application of the Real Property Limitations Act. The fact that the respondent sought a monetary award in the alternative to an interest in land did not mean that the claim wasn’t for a share of property, and subject to section 4 of the Real Property Limitations Act with its plaintiff-friendly ten year limitation period.[9]

Longo v. McLaren Art Centre: The Plaintiff must not delay, not even for Rodin[10]

This Court of Appeal decision written by Justice Hourigan quickly became a leading authority on the duty imposed by the Limitations Act on plaintiffs to investigate potential claims. It is already much-cited by defendants when arguing that a plaintiff was dilatory in discovering their claim and, more specifically, when envoking section 5(1)(b) of the Act.

Justice Hourigan’s reasoning is not especially novel; rather, he adopts a line of discoverability jurisprudence developed under the previous Act exemplified by Soper v. Southcott (1998)[11]. In essence, a plaintiff must take reasonable action to investigate the matters described in section 5(1)(a) of the Act. What is reasonable depends on the plaintiff’s circumstances and the nature of the potential claim. However, it is never necessary for the plaintiff to investigate to the point where she knows with certainty that a potential defendant is responsible for the impugned acts or omissions. It is enough that she has prima facie grounds to infer that the potential defendant caused the acts or omissions. Establishing these grounds may require an expert report.[12]

Longo has almost glamorous facts.   At issue was the appellants’ discovery of damage to their sculpture Walking Man, possibly the work of Rodin. The sculpture was harmed while in the respondents’ care and the appellants claimed for damages. The court dismissed the claim on motion for summary judgment on the basis that it was commenced out of time.

Justice Hourigan set aside the decision of the motion judge and held that there was a genuine issue requiring a trial. Determining whether a reasonable person with the abilities and in the circumstances of the appellants ought to have discovered the claim required a full trial record. Justice Hourigan nevertheless shared his view on what was appropriate in the circumstances. On learning of concerns about the condition of Walking Man, a reasonable person would arrange for an inspection of the sculpture.

 

Collins v. Cortez: Respond with a reply[13]

This decision is a primer on how pleadings should address a limitations defence, which is often a point of confusion for counsel.

Cortez moved to dismiss Collins’s personal injury claim on the basis that it was commenced two years after her accident and statute-barred by the expiry of the limitations period. Justice Gordon granted the motion. He gave effect to the presumption in section 5(2) of the Limitation Act that the limitation period commenced on the date of the accident. He held that because Collins did not plead discoverability facts in her Statement of Claim, she could not make out a section 5(1) discoverability argument.

Not so, held the Court of Appeal. In the normal course, if a limitations defence is raised in a Statement of Defence, and the plaintiff relies on the discoverability principle, the plaintiff should plead the material facts relevant to discoverability in reply, not the Statement of Claim. The expiry of a limitation period is a defence to an action that must be pleaded in a Statement of Defence. As such, a plaintiff needn’t anticipate discoverability and address it in her Statement of Claim.

Leibel v. Leibel: Two year to challenge a will[14]

Since the Limitations Act came into force, the estates bar has speculated as to whether a limitation period applies to will challenges. Many thought that it would not, based in part on an influential article by Anne Werker on limitation periods in estate actions:

It has been suggested that the 15-year absolute limitation period applies to will challenges. I do not agree. Section 16(1)(a) of the new Act expressly states that there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought”. [15]

The courts have tended increasingly toward asserting the application of the Limitations Act, and it came to seem likely a court would apply the Act to a will challenge. This is what Justice Greer did in Leibel.

The case involved two wills. The testatrix’s son Blake applied for a declaration that the wills were invalid, and another son and other respondents moved for an order dismissing the application on the basis that it was statute-barred by the expiry of the limitation period.

Justice Greer held that the limitation period began running in June 2011, the date of the testatrix’s death, because a will speaks from death. However, Blake discovered his claim within the meaning of the Limitation Act about a month later in July 2011 (for reasons that don’t bear mentioning here, but are at paragraph 39 of the decision). This meant that he commenced his application out of time.

In particular, Justice Greer rejected Blake’s argument that no limitation period applied to his will challenge pursuant to section 16(1)(a). She held that the legislature did not intend for section 16(1)(a) to exclude will challenges from the two-year limitation period:

To say that every next-of-kin has an innate right to bring on a will challenge at any time as long as there are assets still undistributed or those that can be traced, would put all Estate Trustees in peril of being sued at any time. There is a reason why the Legislature replaced the six-year limitation in favour of a two-year limitation.[16]

Kassburg v. Sun Life Assurance Company of Canada: In business agreements, the party isn’t literal[17]

Kassburg demonstrates the Court’s commitment to protecting individuals from contracts that impose shortened limitation periods. It deals with section 22(5) of the Limitations Act, which permits contracting out of the statutory limitation period through “business agreements” unless one of the parties to the contract is an individual. Rather than limiting the word “parties” in this section to its literal meaning, the Court of Appeal instructs us to adopt a meaning consistent with the objective of protecting individuals from unexpectedly or unfairly abridged limitation periods.

Kassburg was an insured under a group policy issued by the appellant Sun Life to the North Bay Police Association. The respondent submitted a claim for long-term disability benefits that Sun Life denied.

She commenced an action claiming entitlement to the benefits. Sun Life moved for summary judgment on the basis that her claim was out of time. Among other things, Sun Life relied on a one-year limitation period contained in the insurance contract. It argued that this was a limitation period subject to section 22(5).

The motion judge held that the insurance policy fit within the business agreement exception. Because the parties to the insurance contract were the Police Association and the appellant, the contract was not entered into by an individual.

Justice van Rensburg rejected this reasoning. The word “parties” in section 22(5) must be given a broad, purposive reading. The literal reading of “parties” is inconsistent with the objective of section 22, which is to restrict the circumstances in which a contract can alter the statutory limitation periods in the Limitations Act. Although the group insurance contract under which Kassburg made her claim was between the Police Association and Sun Life, Justice van Rensburg deemed Kassburg to be a party for the purpose of asserting her claim, and for Sun Life’s limitations defence.[18]

Green v. Canadian Imperial Bank of Commerce: Plaintiffs must fully control whether they commence an action in time[19]

In Green, the Court of Appeal overturned its decision in Sharma v. Timminco (2012)[20], thus restoring peace and order to the limitation scheme under the Securities Act. [21]

Timminco created a distinctively perverse phenomenon in limitations jurisprudence: a limitation period that did not allow plaintiffs to control whether they commenced an action in time. As Justice Feldman noted in her decision for the Court of Appeal, this was unprecedented and entirely foreign to the concept of limitations.

At issue in both cases was the statutory cause of action in section 138.3 of the Securities Act. This section creates a cause of action for misrepresentations regarding shares trading in the secondary market. A plaintiff, most often a representative plaintiff in a class proceeding, can only commence a section 138.3 claim with leave. Pursuant to section 138, a plaintiff has three years from the date of the misrepresentation to obtain leave and commence the action. [22]

The Timminco Court held that a claim for damages under section 138.3 is statute-barred if the plaintiff does not obtain leave to commence it within the three-year limitation period, and that section 28 of the Class Proceedings Act[23], which suspends limitation periods in favour of class members once a claim is asserted in a class proceeding, will not operate in respect of a 138.3 claim until leave is obtained.

The Timminco Court reasoned that a section 138.3 claim is “asserted” within the meaning of section 28 of the Class Proceedings Act only when leave is granted because leave is a component of the cause of action. Given the dictionary definitions before the Court of “assert”, this conclusion was sound, at least in theory.

In practice, it was problematic. Its effect was to require representative plaintiffs to move for and obtain leave to commence a section 138.3 claim within three years, but the plaintiffs could not control the timeliness. Obtaining leave within three years was challenging, if not impossible.

This limitation period is not subject to the discoverability provisions of the Limitations Act because it commences on the date of the misrepresentation. The longer it takes to discover the misrepresentation, the shorter the time for obtaining leave and commencing the action. Even if a plaintiff brought the motion in good time, the defendant could initiate procedural steps resulting in delay, and court availability could affect the timing of the hearing and the rendering of the decision.

And so the Court reversed itself. Justice Feldman set aside the Timminco Court’s interpretation of the Class Proceedings Act, holding instead that when a representative plaintiff brings a section 138.3 claim within the limitation period, pleads section 138.3 together with the facts that found the claim, and pleads an intent to seek leave to commence, the claim has been “asserted” for the purposes of the Class Proceedings Act, and the limitation period is thereby suspended for all class members.

This decision is obviously of great significance to the securities bar, but beyond that, it preserves the fundamental principle of limitations that a plaintiff must have unilateral control over whether it misses a limitation period.

 

And for the insurance bar…

Lastly, several insurance decisions bear noting.

From Sagan v. Dominion of Canada General Insurance Company, we learned that time begins to run for a claim for denied accident benefits on the date of the denial.  A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.[24]

In Sietzema v. Economical Mutual Insurance Company,[25] the Court of Appeal held that the limitation period begins to run for a claim for statutory accident benefits when the insurer denies the application for those benefits.

In Schmitz v. Lombard General Insurance Company of Canada[26], the court determined when the limitation period commences for a claim for indemnity under OPCF 44R, an optional endorsement for underinsured motorist coverage to the standard form automobile insurance policy. The limitation period does not start to run when the demand for indemnity is made because default must first occur. The limitation period begins to run the day after the demand for indemnity is made.

[1] Dan is a contributor to the upcoming fourth edition of The Law of Limitations and a lawyer at Clyde & Co. His practice focuses on commercial litigation and lawyers’ professional negligence. He also publishes Under the Limit, a blog about developments in the always riveting world of limitations jurisprudence.

[2] This is subject to the occasional exception. See for example Economical Mutual Insurance Company v. Zurich Insurance Company, 2014 ONSC 4763, in which the Court undertakes a classification of actions analysis, presumably out of nostalgia.

[3] See 407 ETR Concession Company v. Ira J. Day, 2014 ONSC 6409.

[4] See Miletic v. Jaksic, 2014 ONSC 5043 and the related post on Under the Limit, <http://limitations.ca/?p=19>.

[5] 2014 ONCA 86.

[6] 2013 ONSC 948.

[7] 2013 ONSC 948 at para. 143.

[8] 2014 ONCA 86 at para. 51.

[9] Conversely, the mere fact that a claim affects real property will not exclude the application of the Limitations Act. See Zabanah v. Capital Direct Lending, 2014 ONCA 872.

[10] 2014 ONCA 526 (“Longo”).

[11] 1998 CanLII 5359 (Ont. C.A.).

[12] See Longo, supra note 1, at paras. 41-44.

[13] 2014 ONCA 685.

[14] 2014 ONSC 4516.

[15] Anne Werker, “Limitation Periods in Ontario and Claims by Beneficiaries”, (2008) 34:1 Advocates’ Q at 24-28.

[16] 2014 ONSC 4516 at para. 52.

[17] 2014 ONCA 922.

[18] 2014 ONCA 922 at paras. 58-61.

[19] 2014 ONCA 90.

[20] 2012 ONCA 107.

[21] R.S.O. 1990, C. S.5.

[22] See also section 19 of the Limitations Act, 2002.

[23] S.O. 1992, C. 6.

[24]2014 ONCA 720.

[25] 2014 ONCA 111.

[26] 2014 ONCA 88.

BC: When it comes to death, there is no temporal elasticity (at least for limitation periods)

Generally, the discovery rule won’t extend a limitation period tolled by a fixed event like death; for these limitation periods there is, in the words of the Ontario Court of Appeal, “no temporal elasticity” (See Waschkowski v. Hopkinson Estate at paras. 8 and 9). In Buhr v. Manulife Financial, the BC Court of Appeal affirmed this principle by finding that the discovery rule can’t extend the limitation period applicable to claims against an insurer for death benefits.

Burh claimed against her deceased husband’s insurer for death benefits. On appeal, the insurer argued that the expiry of the limitation period in section 65 of the former Insurance Act barred the claim.

Section 65 provided that “proceedings against an insurer for the recovery of insurance money must not be commenced […] more than 6 years after the happening of the event on which the insurance money becomes payable”.

The Court accepted the insurer’s argument:

[T]he limitation period in this case began to run from the date of Mr. Mattern’s death, regardless of when Ms. Buhr became aware of potential claims. The event on which the insurance money becomes payable, contemplated in s. 65 of the former Insurance Act, is death in cases involving death benefits. The statute designates a fixed event, unrelated to the plaintiff’s knowledge of a cause of action, to start the limitation period, requiring commencement of an action within six years. The discoverability rule does not operate to extend the prescribed period.

In 2012, section 76 of the current Insurance Act replaced section 65. It provides as follows:

76 (1) Subject to subsections (2) and (5), an action or proceeding against an insurer for the recovery of insurance money payable in the event of a person’s death must be commenced not later than the earlier of

(a) 2 years after the date evidence is furnished under section 73, and

(b) 6 years after the date of the death.

The explicit reference to the date of death in section 76(1)(b) means that the discovery rule cannot extend this limitation period. Although the claimant in Buhr evidently required more than six years to bring her claim, six years is three times as generous as the two year limitation period in Ontario’s Trustee Act, which also begins to run from the date of death. I acknowledge that she is unlikely to find this aspect of Canadian limitations jurisprudence consoling.

Ontario: In an accident benefit claim, a denial triggers the limitation period

Time begins to run for the mediation of a denied accident benefit claim from the date of the denial.  A party can’t stop the commencement of the limitation period by sneakily (or inadvertently) omitting certain documents from the accident benefits application.

The appellant in Sagan v. Dominion of Canada General Insurance Company was in a car accident in March 2008. In the same month, he advised his insurer of his claim. The insurance company sent him a package that included the OCF 1 application for accident benefits form and the OCF 3 disability certificate. The appellant filed the OCF 1 form but not the OCF 3 certificate.

The respondent denied the claim in April 2008. In April 2011, the appellant applied for mediation of the denial. The respondent took the position that the two-year limitation period had expired. The appellant commenced an action, which the Court dismissed on a motion for summary judgment.

The appellant argued that the limitation period begins to run not from the date of just any claim, but a valid claim. The appellant’s claim was invalid because it didn’t include a disability certificate. A claim for accident benefits requires a disability certificate pursuant to section 35(2) of the Regulations under the Insurance Act governing claims for accident benefits.

The Court rejected this position:

 1.         A plain reading of section 35(2) provides that the disability certificate is to be filed with the application for benefits.  It is not the application.  In addition, section 35(6) provides for claims to be considered in cases where there is no disability certificate filed at all.

2.         The statutory regime is designed to ensure timely submission and resolution of accident benefits.  It is not in keeping with this overall purpose to suggest that a claimant can delay the start of the limitation period – perhaps indefinitely – by not submitting a disability certificate.

And so sound judicial resoning triumphed over a cute, but improbable argument.

Ontario: In loss transfer claims, each request for indemnification has its own limitation period

Economical Mutual Insurance Company v. Zurich Insurance Company has brought certainty to the limitation of loss transfer claims between insurers. In a loss transfer claim, each Request for Indemnification is an independent cause of action with its own limitation period.

The facts are straightforward. A person was injured in a motor vehicle accident in July 2005.  Economical responded to her accident benefits claim and made payments to her. The truck that struck this person was insured by Zurich. Economical provided a Notice of Loss Transfer to Zurich in November 2005. Economical subsequently forwarded four Requests to Indemnification to Zurich in January 2006, February 2008, November 2009, and a final one in December 2011. Zurich didn’t pay. Economical commenced arbitration.

Zurich’s position was that the limitation period had expired. It argued that the limitation period commenced on the date of Economical’s first Request for Indemnification and Economical commenced arbitration more than two years later.

The arbitrator rejected this argument.  She relied on the Court of Appeal decision in Federation Insurance Company of Canada v. Kingsway General Insurance Company, [2012] OJ No 1505, in which the Court held that the limitation period for a loss transfer claim runs from the date of the Request for Indemnification, to conclude that each request is a distinct claim subject to its own limitation period, not the limitation period applicable to the first request.

Justice Lederer upheld the arbitrator’s decision. He found that Zurich sought to treat the loss transfer as if it were based on the underlying tort, “the negligence that was the cause of the motor vehicle accident”, when it’s not a tort but a statutory cause of action.

Justice Lederer relied on State Farm Mutual Automobile Insurance Co. v. Dominion of Canada General Insurance Co., a case decided under the old limitation act, for the principle that there is “no reason to apply the principles of limitation that have been developed in the common law of torts” to statutory causes of action. Instead, he reasoned, it’s more appropriate to apply the principles developed in the law of in contract:

The better analogy is to claims in contract, say for the payment of rent under a lease or for some product purchased over time. If a tenant or purchaser stops paying monthly rent or installments and no action is commenced for more than two years after the first payment is missed, it would not be the case that the landlord or the seller would lose out on its ability to sue for every and all future failures to pay. Rather, the entitlement to sue would remain for all payments not made within the preceding two years.

[…]

The limitation period should not be applied as it would be in common law torts. The proposition that no new action or claim would have to be commenced is equally true in the analogy to contract claims to which I referred earlier. If a claim is made for a failure to pay rent or to make periodic payments in the furtherance of the purchase of some product, it is unlikely that a new claim would be required for each failure that occurs after an action has begun.

There’s no faulting this conclusion: if each Request for Indemnification is a new cause of action as the Court of Appeal held in Federation Insurance, then each request has its own limitation period. However, the analysis is a surprising reversion to the previous limitation regime. The Court’s consideration of whether a loss transfer claim is better analogised to a claim in tort or contract could almost make a lawyer nostalgic for the days when the classification of an action was the first step in determining the applicable limitation period.

Since 2004, the law hasn’t distinguished between actions that sound in contract, tort, equity, or anything: the Limitations Act, 2002 applies alike to all claims “to remedy an injury, loss or damage that occurred as a result of an act or omission”.

Also since 2004, it’s section 5 of the Limitations Act, 2002 that determines when a limitation period commences:

Discovery

(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a). 2002, c. 24, Sched. B, s. 5 (1).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved. 2002, c. 24, Sched. B, s. 5 (2).

The question under section 5 is when Economical suffered its loss—non-payment of the Requests for Indemnification. This was apparently on the date of the requests. Because the requests are individual losses and not one loss, by operation of section 5(2), the limitation period for each is presumed to have commenced on its date.

Zurich’s non-payment of Economical’s first Request for Indemnification couldn’t have commenced the limitation period for subsequent requests, because Economical couldn’t have suffered a loss for non-payment until it made the request (assuming, as appears to have been the case, that it doesn’t follow from the non-payment of one request that the insurer won’t pay the subsequent requests).

A first party-party insurer like Economical could of course rebut the section 5(2) presumption and argue pursuant to section 5(1) that it discovered its loss on a later date . For example, a first-party insurer may only disover that the second-party insurer won’t pay a request sometime after the request is made (see G.J. White Construction Ltd. v. Palermo (1999), 7 C.L.R. (3d) 13).

It’s anyone’s guess why the Court rejected a section 5 analysis in favour of the old classification of actions approach. My theory is that counsel are very fond of The Law of Limitations and insist on using it until there is a new edition, which, thankfully, is forthcoming.