Insurance

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

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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

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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

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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.