Ontario: the limitation of Crown claims under s. 258(1) of the Insurance Act

 

When the Motor Vehicle Accident Claims Fund obtains an assignment of a passenger’s judgment against the vehicle’s owner, is the Fund obliged to bring an action against the owner’s insurer within the one year limitation period in s. 258(2) of the Insurance Act?

No, held the Court of Appeal in Ontario (Finance) v. Traders General Insurance (Aviva Traders).  The Fund had no obligation to bring an action under s. 258(1) because the Insurance Act does not bind the Crown.  However, had the Crown chosen to claim under that section than it would have been bound by the one-year limitation period in s. 258(2).

These are the material facts:

[1]         This action arose out of a catastrophic car accident involving a 1991 Hyundai owned by Peter Leonard. The accident occurred a couple of weeks after the appellant insurer purported to terminate its policy of insurance on the vehicle. The driver, a friend of Peter Leonard’s son, was killed. The passenger, another friend, was seriously injured, claimed statutory accident benefits, and also sued Peter Leonard for damages. The appellant insurer did not defend the action on behalf of Peter Leonard, because it had cancelled the owner’s policy insuring the Hyundai for non-payment of premiums before the accident occurred.

[2]         After Peter Leonard settled the action for $234,574.33, the passenger assigned the judgment to the respondent, representing the Motor Vehicle Accident Claims Fund. The Fund paid the amount of the judgment to the passenger and began to obtain re-imbursement from Peter Leonard. The Fund also sued the appellant insurer in this action for restitution based on unjust enrichment, claiming that the appellant insurer had not effectively terminated its policy, that the policy remained in force at the date of the accident and that it should have responded to the passenger’s claim.

This is the Court’s analysis:

[49]      The appellant submits, however, that having obtained an assignment of the passenger’s judgment against the owner of the vehicle, Peter Leonard, the Fund was obliged to bring its action against his insurer, Traders, under s. 258(1) of the Insurance Act, and further that the one-year limitation period provided in s. 258(2) bars any such claim.

[50]      Subsection 258(1) provides:

Any person who has a claim against an insured for which indemnity is provided by a contract evidenced by a motor vehicle liability policy, even if such person is not a party to the contract, may, upon recovering a judgment therefor in any province or territory of Canada against the insured, have the insurance money payable under the contract applied in or towards satisfaction of the person’s judgment and of any other judgments or claims against the insured covered by the contract and may, on the person’s own behalf and on behalf of all persons having such judgments or claims, maintain an action against the insurer to have the insurance money so applied.

[51]      Prior to its repeal in 2004, s. 258(2) provided:

No action shall be brought against an insurer under subsection (1) after the expiration of one year from the final determination of the action against the insured, including appeals if any.

[52]      The appellant argues that Mr. Bogdanovic could have sued the appellant insurer under s. 258(1) and would have been bound by the limitation in s. 258(2). Because the Fund took an assignment of the Bogdanovic judgment, the appellant argues that the Fund stood in the shoes of the assignor and had to bring its action within the same time limit. It argues further that the Fund was therefore precluded from bringing its claim as an action for unjust enrichment.

[53]      The validity of this submission turns on whether it was mandatory for the Fund to make its claim under s. 258(1). That question turns on whether the Crown on behalf of the Fund was bound by the provisions of the Insurance Act at the relevant time, or whether it had Crown immunity.

[54]      Section 11 of the Interpretation Act, R.S.O. 1990, c. I.11, which was in force until July 2007, provided that specific words were required for an act to bind the Crown:

No Act affects the rights of Her Majesty, Her heirs or successors, unless it is expressly stated therein that Her Majesty is bound thereby.

[55]      Section 71 of the Legislation Act, 2006, S.O. 2006, c. 21, Sch. F, which replaced the Interpretation Act, continues this provision:

No Act or regulation binds Her Majesty or affects Her Majesty’s rights or prerogatives unless it expressly states an intention to do so.

[56]       These provisions constitute the codification of the common law principle of Crown immunity. In Canada (Attorney General) v. Thouin2017 SCC 46 (CanLII)[2017] 2 S.C.R. 184, the Supreme Court stated at para. 20, following Friends of the Oldman River Society v. Canada (Minister of Transport)1992 CanLII 110 (SCC)[1992] 1 S.C.R. 3, that the equivalent section in the federal Interpretation Act, R.S.C. 1985, c. I21is treated as a starting point for the immunity analysis, so that where there are no express words in an Act making it applicable to the Crown, “it … remains to be decided whether the Crown is bound by necessary implication.”

[57]      There was no express provision in the Insurance Act that bound the Crown in 2003, when Mr. Bogdanovic obtained judgment against Peter Leonard and assigned that judgment to the Fund, or in 2008, when this action was commenced.

[58]      Nor was the Crown bound by necessary implication. The only reference to the Crown in the 2003 Act was s. 101(5), which describes when certain returns of insurers become a debt owing to the Crown. The Act was also amended in May 2008 to include in s. 1 the definition of “entity” as including the Crown. However, the references to “entity” in the Act are discrete and involve provisions dealing with corporate law rules and investment rules for various entities operating in the insurance context.

[59]      There were also a number of sections that refer to the Fund, specifically: ss. 268(2), 268.0.1(2), and 267.12(2)(b). These bind the Fund specifically in the particular circumstances described in those sections. Paragraph 267.12(2)(b) sets out how to calculate the insurance coverage entitlements of lessors. Subsections 268(2) and 268.0.1(2) both allow for recovery of statutory accident benefits from the Fund in certain circumstances. None of these provisions relate or apply to s. 258.

[…]

[63]      Having said that, the Crown was not precluded from bringing a claim under s. 258(1), and had it chosen to do so, it would have been obliged to bring its claim within the one-year limitation provided in s. 258(2)[1]. As Ruth Sullivan explains in Sullivan on the Construction of Statutes, 6th ed. (Toronto: LexisNexis Canada, 2014), this is the “benefit/burden” exception to Crown immunity: if the Crown chooses to take the benefit of a statutory provision, it must also accept any conditions that are imposed.

[64]      In this case, the Fund did not pursue an action using s. 258(1): it did not invoke that provision, and therefore was not caught by the corresponding burden imposed by s. 258(2). Instead, the Fund brought its claim as an action for unjust enrichment. It was entitled to do so, as it was not bound either expressly or by necessary implication to assert a cause of action under s. 258(1).

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.