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: Appealing s. 5 analyses

Nicholson v. McDougall is a reminder that the omission of a s. 5 analysis isn’t necessarily a ground for appeal:

[31]           There is no reference to s. 5 at all, or any of its detailed requirements, in the Reasons for Decision.  I agree with the respondent that this omission from the Reasons for Decision is not sufficient to grant this appeal.  The Deputy Judge could have implicitly applied s. 5, including the presumption in s. 5(2), without expressly referring to it.  To assess whether the Deputy Judge did so and therefore complied with the Limitations Act requirements, I begin with the law regarding s. 5(2) and then I will move to how it applies in this case.

Ontario: the Divisional Court on the nunc pro tunc doctrine

The Divisional Court has confirmed that the entitlement to an order granting leave nunc pro tunc to commence a derivative action under s. 26 of the Business Corporations Act requires bringing the leave motion within the limitation period.

In 1186708 Ontario Inc. v. Gerstein, the appellants appealed from the order dismissing their motion as statute-barred arguing that the Supreme Court decision in Green (which set out the principles of the nunc pro tunc doctrine) applies only to leave applications under the Securities Act and not under other statutes.

The Divisional Court disagreed.  There was no basis not to apply the Court’s analysis in Green regarding the Securities Act to the Business Corporations Act (and probably any other statute). 

Ontario: r. 21 motions and limitation defences

Can you bring a r. 21 motion to strike a claim as statute-barred before delivering a statement of defence? Yes, the Divisional Court confirmed in Amrane v. York University, but only where it is plain and obvious that the plaintiff could assert no additional facts that would alter the limitations analysis:

[14]           I agree with the motion judge that the expiry of a limitation period is normally a defence that must be pleaded. However, as the Court of Appeal recognized in Beardsley v. Ontario, 2001 CarswellOnt. 4137 at para. 21, in those cases where it is plain and obvious from a review of the claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired, it would be unduly technical to require the delivery of a statement of defence.

See also this summary from Justice Stinson’s decision in Clark v. Ontario (Attorney General):

[12]        By way of response the plaintiffs argue that, save in exceptional cases (of which this is not one) courts do not entertain motions to decide limitation period issues prior to service of a statement of defence. In any event, they further contend, there are live factual issues that bear on the limitation issue, which are expressly raised in the statement of claim and preclude determination of the question on a pleadings-based motion such as this.

[13]        Strong authority for the former proposition can be found in Beardsley v. Ontario Provincial Police (2001), 2001 CanLII 8621 (ON CA),57 O.R. (3d) 1 (C.A.) where the Court of Appeal stated as follows (at paras 21 and 22):

[21]      The motion to strike based on the expiry of a limitation period could only be made pursuant to Rule 21.01(1)(a), which provides that a party may move for the determination of a question of law “raised by a pleading”. The expiry of a limitation period does not render a cause of action a nullity; rather, it is a defence and must be pleaded. Although we agree that it would be unduly technical to require delivery of a statement of defence in circumstances where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted that would alter the conclusion that a limitation period had expired [for example expiry of the two-year limitation period under the Highway Traffic Act … in connection with a claim for property damage only, in circumstances where it is clear the discoverability rule does not apply] , a plain reading of the rule requires that the limitation period be pleaded in all other cases. See Pollakis v. Corner (1975), 1975 CanLII 597 (ON SC), 9 O.R. (2d) 691 (H.C.J.).

[22]           Plaintiffs would be deprived of the opportunity to place a complete factual context before the court if limitation defences were determined, on a routine basis, without being pleaded. Adherence to rules that ensure procedural fairness is an integral component of an appearance of justice. The appearance of justice takes on an even greater significance where claims are made against those who administer the law. …

[14]        More recently, Brown J. observed in Portuguese Canadian Credit Union Ltd. v CUMIS General Insurance (2010), 2010 ONSC 6107 (CanLII), 104 O.R. (3d) 16 (S.C.J.) as follows (at para. 33):

… I do not accept the submission of the Credit Union that its Rule 21 motion falls within the category of cases alluded to inBeardsley “where it is plain and obvious from a review of a statement of claim that no additional facts could be asserted”. InBeardsley the possibility of bringing a Rule 21.01(1)(a) motion before the close of pleadings was discussed in the context of a determination as to whether an action was statute-barred – for example, such as in cases where the injuries suffered in a car accident occurred on a date certain and nothing more could be said about that fact. That type of case is a far cry from the complex claim asserted in this proceeding. [Footnote omitted.]

[15]        In Canadian Real Estate Assn. v. American Home Assurance Co., 2015 ONCA 389 (CanLII) (at para. 2) the Court of Appeal again reminded us that “the exception in Beardsley … must be confined to cases that involve no legal or factual complexities.”

 

Ontario: Appealing from an order dismissing an OBCA claim as statute-barred

An appeal from a final order made under the Business Corporations Act is to the Divisional Court even where the order dismisses the proceeding as statute-barred.

In 1186708 Ontario Inc. v. Gerstein, the plaintiffs brought a motion under s. 246 of the Business Corporations Act.  The motion judge found it statute-barred by the expiry of the limitation period.  The Court of Appeal held that the Divisional Court had jurisdiction:

[7]         Under s. 6(1)(b) of the Courts of Justice Act, R.S.O. 1990, c. C.43, an appeal lies to this court from “a final order of a judge of the Superior Court of Justice, except … an order from which an appeal lies to the Divisional Court under another Act” (emphasis added).  Under s. 255 of the OBCA, “[a]n appeal lies to the Divisional Court from any order made by the court under this Act.”
[8]         There is no dispute that the Order is a final order.
[9]         Paragraph 1 of the Order flowed from a motion for leave to commence a derivative action under s. 246 of the OBCA.  We acknowledge that the claim was found to be statute-barred and leave refused on that basis.  We also acknowledge that the determination that the claim was statute-barred was made under the Limitations Act, 2002, not the OBCA.  However, para. 1 of the Order disposed of the motion which was brought under s. 246 of the OBCA.  Given the broad scope afforded to s. 255 of the OBCA in this court’s jurisprudence, it is our view that para. 1 of the Order is an order within the meaning of s. 255 of the OBCA: see Amaranth L.L.C. v. Counsel Corp. (2004), 2004 CanLII 10897 (ON CA), 71 O.R. (3d) 258 (C.A.); and Ontario Securities Commission v. McLaughlin, 2009 ONCA 280 (CanLII), 248 O.A.C. 54.