Ontario: An insurer’s denial has to be (really) explicit to trigger discovery

The Divisional Court decision in Western Life Assurance Company v. Penttila demonstrates that if an insurer intends for a denial to commence a limitation period for a coverage proceeding, that denial needs to be as explicit as explicit can be.

The insurer, Western, denied its insured Penttila’s claim for LTD benefits in February 2013, and told her that she could appeal the denial within 60 days by written request.  At the same time, Western stated explicitly that it wasn’t waiving its right to rely on any “time limitations”.

Penttila initiated an appeal within the prescribed time.  Western wrote to Penttila in October 2014 that its position “remained unchanged”.  Pentilla didn’t understand this to mean Western had denied her appeal.  She wrote to Western in May 2015 asking about the decision in her appeal.  Western responded in June 2015 by confirming that benefits remained declined.  Penttila commenced a proceeding in June 2016.  Western defended, pleaded a limitations defence, and moved for judgment on it.  The motion judge held that a trial was necessary to determine the defence.

Penttila’s evidence was that she believed Western continued to consider appeal June 2015.  She didn’t understand Western October 2013 correspondence to be determinative of her appeal.

Western appealed. It argued that the Penttila should have known that a proceeding was an appropriate remedy for her loss once it terminated her LTD benefits.

Penttila’s position was that a proceeding wasn’t appropriate as of that date:

[24]           Ms. Penttila takes the position that it was not appropriate for her to file a claim as of March 7, 2013, as her appeal had not yet been finally determined by Western because:

a)   She was told she had a right to appeal provided she took certain steps which she did.  It was therefore not clear that the process had run its course;

 b)   There was no denial of the appeal or any reason to believe that the matter would not be amicably resolved;

 c)   She was not represented by legal counsel;

 d)   There was no clear reference to the fact that the limitation period was running in the communications from the insurer.  The insurer said only that “the limit”, whatever it was, was not being waived;

 e)   She made concessions and repaid monies paid pursuant to her CPP disability setoff, believing that she was engaging in an attempt at dispute resolution.  This was done at the request of the insurer;

 f)     There was no reason for her to do this except to attempt to resolve the claim instead of litigating; and

 g)   There is no suggestion that the delay was a tactical decision to delay the proceeding.

[25]           Moreover, the courts have recognized that there is a clear policy objective to encourage parties to resolve matters instead of going directly to litigation.  Waiting for the appeal to be determined is consistent with that important policy objective.

The Divisional Court rejected Western’s argument:

[50]           For the reasons set out herein, we find that the motion judge was correct to hold that the triggering event for the commencement of the two-year limitation period was the date upon which it would be legally appropriate to commence legal proceedings to seek payment of long-term disability benefits that the insurer refused to pay.

[51]           We further find that the motion judge made no palpable and overriding error in dismissing the motion for summary judgment on the basis that Western had not established that the claim was statute-barred.  We come to this conclusion for the following reasons:

(i)                 Right of Appeal

[52]           Before March 7, 2013, Ms. Penttila was advised that as of March 7, her benefits would no longer be paid by the insurer but that, “you may appeal this claim decision by sending your written request for review to our office within 60 days from the date of this letter.”

[53]           On April 8, 2013, Ms. Penttila advised that, “I wish to appeal this claim.”

[54]           On November 13, 2013, Western wrote her to advise that: “[u]pon receipt of all the above requested information, we will complete our review of your appeal and advise you of the decision.”

[55]           Ms. Penttila thereby accepted a clear offer to allow her to appeal the denial of her claim for benefits.  A process was established, and her appeal was determined by the insurer.  She was advised by letter dated October 21, 2014, of the decision that her appeal had been rejected.  (Ms. Penttila says she did not receive written confirmation until June 15, 2015.)

[56]           The right to appeal was not simply part of an insurer’s general obligation to accept any material; it was a specific and agreed right of appeal, a clear articulation of the process to be followed, and a specific decision in respect of the appeal.

[57]           A reasonable person in Ms. Penttila’s position would have pursued her right of appeal.  Until that process ran its course, it would be premature to commence legal proceedings against the insurer.

(ii)               No Need to Review the Tone and Tenor of Discussions

[58]           The court was not required to assess the “tone and tenor” of communications between the parties as there was a clear beginning and end to the process.  Western told Ms. Penttila that she had a right to appeal and that a decision would be rendered, and it was.

(iii)            No Litigation Counsel Engaged

[59]           Ms. Penttila did not retain counsel while the appeal was ongoing. This fact does not “[belie] any suggestion of a lack of awareness of the appropriateness of commencing a lawsuit at that point in time”: Pepper, at para. 1.

[60]           The words “in offering to review additional evidence we are not waiving our right to rely on any statutory or policy provisions including any time limitations”, in this factual context, were not sufficiently clear to demonstrate to Ms. Penttila that the insurer intended to rely on the fact that the limitation period was running before the appeal had been decided.

(iv)            Ms. Penttila’s Evidence as to Her Belief

[61]           On the contrary, Ms. Penttila’s uncontradicted sworn evidence was that she at all times believed that, from the time the initial benefits were denied (in the letter dated February 19, 2013), to the time she received the final decision on appeal, Western was considering her appeal.

[62]           This belief is supported by the fact that, on November 13, 2013, Western advised that: “[u]pon receipt of all the above requested information, we will complete our review of your appeal and advise you of the decision.”  There was no statement in respect of time limitations.

[63]           Lastly, unlike Nasr, Ms. Penttila never conceded that the insurer never told her that it would not be relying on a limitations defence.

(v)               No Tactical Delay

[64]           Ms. Penttila made good faith efforts to avoid unnecessary litigation believing Western was considering her appeal. There is no suggestion that Ms. Penttila engaged in a tactical delay of the proceeding.

(vi)            Meets the Policy Objectives

[65]           The motion judge’s decision is consistent with the policy objective of avoiding unnecessary litigation and discouraging parties from rushing to litigation, provided there is no tactical delay.

The court also provided a good summary of the principles for assessing the appropriateness of a proceeding against an insurer:

[35]           In assessing when it is legally “appropriate” to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act, 2002, the courts have articulated the following guidelines:

a)      The determination of whether legal action is “legally appropriate” takes into account what a reasonable person with the abilities and in the circumstances of the plaintiff ought to have known: Presidential, at para. 18.

b)      Parties should be discouraged from rushing to litigation or arbitration.  Rather, they should be encouraged to resolve claims as courts take a dim view of unnecessary litigation: Markel Insurance Company of Canada v. ING Insurance Company of Canada2012 ONCA 218 (CanLII)109 O.R. (3d) 652, at para. 34; and 407 ETR, at para. 48.

c)      It is premature for a party to bring a court proceeding to seek a remedy if a statutory dispute resolution process offers an adequate alternative remedy and that process has not fully run its course or been exhaustive: Volochay v. College of Massage Therapists of Ontario2012 ONCA 541 (CanLII)111 O.R. (3d) 561, at paras. 61-70.

d)      However, where the insurer has been clear that it intends to rely on the limitation period, and the claim has “ripened”, the court should be wary of getting involved in assessing the “tone and tenor of communications” to determine where and when there was a denial of the claim by the insurer as this would inject an undesirable element of uncertainty into the law of limitation of actions: Markel, at para. 34.

e)      The courts should also be wary of allowing a party to delay the commencement of proceedings simply for tactical reasons: 407ETR, at para. 47; and Markel, at para. 34.

f)        It is appropriate for the court to consider what was communicated to the insured and whether the claim was clearly and unequivocally denied: Kassburg v. Sun Life Assurance Company of Canada2014 ONCA 922 (CanLII)124 O.R. (3d) 171, at para. 42.

g)      The courts have specifically recognized two circumstances in which the issue of “appropriate means” may delay the date on which a claim was discovered.

•         First, where the insured relies on the superior knowledge and expertise of the insurer, especially where the insurer made efforts to ameliorate the loss.

•         Second, where other proceedings remain ongoing (such as criminal proceedings or arbitration): Presidential, at paras. 28-48.

h)      Where an insured seeks to preclude an insurer from relying on a limitations defence on the basis of promissory estoppel, the insurer’s conduct must amount to a promise on which the insured acted to its detriment: Maracle v. Travellers Indemnity Co. of Canada, 1991 CanLII 58 (SCC)[1991] 2 S.C.R. 50; and Marchischuk v. Dominion Industrial Supplies Ltd., 1991 CanLII 59 (SCC)[1991] 2 S.C.R. 61.


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.