The Court of Appeal for Ontario has affirmed that the limitation period in section 17 of the OPCF 44R (Family Protection Endorsement) starts from when the plaintiff has a body of evidence accumulated that would give him a “reasonable chance” of persuading a judge that his claims would exceed $200,000.
In Roque v. Pilot Insurance, the plaintiff issued the claim against his insurer well beyond the two-year anniversary of the accident. The motions judge found that the plaintiff’s claim was barred by section 17 of the OPCF 44R:
17. Every action or proceeding against the insurer for recovery under this change form shall be commenced within 12 months of the date that the eligible claimant or his or her representative knew or ought to have known that the quantum of claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the accident occurred, but this requirement is not a bar to an action which is commenced within 2 years of the date of the accident.
The Court of Appeal agreed with the motions judge. The Court rejected the plaintiff’s argument that the section should be interpreted to mean that the limitation period begins to run when the plaintiff’s damages have been quantified by settlement or judgment. It also rejected the plaintiff’s argument that the limitation period does not begin to run until the plaintiff knows that the quantum of the claim is greater than the tortfeasor’s insurance coverage.
A link to the decision is available here.
A Superior Court judge has denied an accident benefits plaintiff a “peace of mind” declaration she sought with respect to her claim for income replacement benefits. The decision is interesting as it appears that the plaintiff might have been categorized under the MIG, which was apparently the basis for her premptive act to secure indefinite entitlement to her income replacement benefits.
In Risebrough v. Co-operators, the plaintiff was involved in a motor vehicle accident on May 25, 2011. She was the named insured on a policy of automobile insurance with the defendant. She made an application for accident benefits to the insurer in June 2011 and has received payments including weekly income replacement benefits in the amount of $400 per week. The payments have been made based on the defendant being satisfied that the plaintiff met the disability test applicable in the first 104 weeks post-accident and that she was therefore entitled to benefits in accordance with the SABS. There has been no interruption in those payments to date. In other words, there has been no dispute between the parties.
The plaintiff issued a statement of claim against the defendant on November 23, 2011 (only five months after the accident), seeking a declaration that she meets the disability test for receipt of income replacement benefits under the SABS as a result of her injuries suffered in the motor vehicle accident. The insurer brought a Rule 21 motion to strike out the statement of claim on the grounds that it discloses no reasonable cause of action or in the alternative to dismiss the claim on the basis that the action is frivolous, vexatious or otherwise an abuse of the court's process.
Essentially the plaintiff was seeking a “peace of mind” declaration for entitlement to ongoing income replacement benefits. One of the arguments she raised was that “it would be prejudicial to the plaintiff for the claim to be dismissed since the claims adjuster for the defendant has indirectly put the plaintiff on notice that he is categorizing the plaintiff's injuries as minor and it is likely that a dispute over entitlement or amount of benefits will arise in the future.”
The insurer countered that there was no right to bring an action since there was no dispute between the parties. It also argued in the alternative that if there was a dispute, the plaintiff failed to follow the dispute resolution provisions under sections 279-281 of the Insurance Act.
The judge agreed with the insurer and struck the claim. He held:
A declaration is in essence a statement from the court as to the rights and duties between parties and does not in and of itself grant a remedy. However, in the context of this case a successful claim for a declaration can have no other result than to create or continue an obligation on the defendant to pay statutory accident benefits. In my view, it is not possible to isolate the claim for a declaration in this context from a dispute between the parties over matters set out in section 279 of the Insurance Act.
The judge also found that issue between the parties might be “moot”, as it was not clear that there ever will be a dispute between the parties on the issue of entitlement to or the amount of benefits to be paid. He concluded:
I am satisfied that, for the reasons noted above, it is inappropriate for there to be a claim for a declaration in advance of the mandatory mediation provisions contained in the Insurance Act. Further, and quite apart from those requirements, it is premature to seek a declaration when there is no existing disagreement between the parties.
It would have been a bizarre result if a properly “MIG-ed” claimant was also holding a Superior Court declaration that she was entitled to indefinite income replacement benefits. If anything else, this decision is a great example of how crafty plaintiff lawyers are becoming in the post September 1, 2010 SABS regime.
See Risebrough v. Co-operator’s General Insurance Company, 2012 ONSC 2738 (CanLII)
Since the Parveen and AVIVA decision (and its companion Fredric and AVIVA) was published on March 30, 2012 there has been considerable confusion regarding the adequacy of the Settlement Disclosure Notice (“SDN”). Prior to that time, the SDN has been understood to have been adequate to the degree that insurers were relying upon its wording. Understandably, insurers have been caught off guard by the contradictory views taken by the Superintendent of FSCO and Arbitrator Alves (see Ashleigh Leon’s blog of April 23, 2012 below) and have struggled with the issue of the settlement claims going forward. Of course, the specter of rescissions of past claims has arisen creating no small amount of concern. The feeling in the industry is that the decision undermines the settlement process in its entirety.
It has been my view that this anxiety may very well be an overreaction. The case is wrongly decided for a number or reasons: the SDN is not inadequate and any purported inadequacies were not material to the rescission. But I leave this criticism for another time. For now we will look at how to proceed with settlements going forward.
It is obvious that the facts of the case are unique. The Applicant executed an SDN. Over a month later she executed a Release. Three days later, the insurer received a letter rescinding the settlement. Settlement funds were then forwarded, and then duly returned. The arbitrator took issue with the fact that the current SDN does not provide both examples regarding when the cooling off period begins, only when the SDN is executed following the release (despite the clear wording on the first page).
Typically, the SDN and Release are executed contemporaneously. This allows for a predictable 48 hour cooling off period to be calculated and for funds to be delivered. Upon settlement, counsel and client want to know when the funds would be delivered. Insurers want to know when the file can be closed. It is cumbersome and confusing if the closing documents are not executed at the same time.
1. To be on the safe side (for now) Releases should be executed first, or at the same time as the SDN.
While it is trite to state that the Release is a key document in settling a file, one must not lose sight of its purpose: to effectively and permanently terminate the accident benefits relationship between the insured and the insurer. This is the reason why the SDN, in and of itself is not viewed as adequate to bring about an end of the relationship. It should be noted that this is even reflected in the SDN itself: it refers to an accompanying Release. Insurers are also aware of this. The adequacy of closing documents is their responsibility since they are the parties that wish to rely upon them.
Standard releases contain extra information to ensure that the insured is completely aware that he or she is terminating the accident benefits relationship with insurer, permanently. They typically contain references to and repeat information contained in the Settlement Regulation and SDN.
Assuming the Release is properly drafted, the only practical issue becomes the timing of its execution. The purported inadequacies in Parveen relate to the fact that the Release was executed second. The SDN makes an example of only the other scenario, when the SDN is executed second. Practically speaking, the SDN could not be inadequate if the Release is always executed first or at the same time as the SDN. Thus, Releases should always be executed first. This can be acknowledged in the Release itself.
2. The current Settlement Disclosure Notice continues to be the form approved by the Superintendant in accordance with the Settlement Regulation.
Despite the reaction to the Parveen decision, the current SDN has never been removed from the FSCO site nor has there ever been any information from the Superintendant’s office to suggest that it was no longer “approved”. The regulation does not require the SDN to be approved by the dispute resolution branch of FSCO, only by the Superintendent.
In order to emphasize this point, the Superintendant of FSCO issued a Notice on May 4, 2012 confirming the view that the SDN continues to be the approved form. Indeed, the Notice also takes the position that the form is adequate, contrary to the Arbitrator’s decision.
3. Still skittish? Add additional information to the SDN.
This is what the Superintendent suggests in the May 4, 2012 Notice. This has been our view since the decision was released. We would recommend the following wording be added to the text box on page 2:
IF YOU CHANGE YOUR MIND: you may, within two business days after the later of the day you sign the disclosure notice and the day you sign the release (whichever is signed last), rescind the settlement by delivering a written notice to our office [address] OR the office of our representative [address] and return any money you received by you as consideration for the settlement;
I conclude by confirming that the current SDN is adequate but the following steps should be taken to ensure an effective settlement: the SDN should be accompanied by a properly drafted Release that should be executed before the SDN. The SDN should also contain the extra notice as described above.
On May 3, 2012, the Supreme Court of Canada dismissed an application for leave to appeal the dismissal of an action seeking damages for alleged negligent road maintenance [Morsi v. Fermar Paving Limited et al, SCC 34515].
The claim arose from a single vehicle accident. The trial judge correctly stated that the municipality was required to ensure the roadway “was in a state of repair that was reasonable in the circumstances such that users of the road, exercising ordinary care” could travel upon it in safety…” The trial judge also held that, if the deceased driver “had been operating his vehicle at the posted speed limit, or even slightly above it he would have been able to successfully negotiate the transition area. There is ample evidence in this case which demonstrates that speed was a significant factor in this collision.” However, the trial judge apportioned liability at 25% to the municipal road authority, 25% to the contractor that had been working on the roadway, and 50% to the deceased driver.
The Ontario Court of Appeal overturned the verdict, and dismissed the action as against the road authority and the contractor [Morsi v. Fermar Paving Limited et al 2011 ONCA 577]. The Court noted the deceased driver was travelling at a speed in excess of 90 km/hr and even approaching 120 km/hr in a 60 km/hr zone. In addition signs had also been posted warning of construction being done on the roadway. Further, there was a sign posted indicating that a curve near the area of the accident should not be taken at more than 40 km/hr.
The case reaffirms the test set out by the Supreme Court regarding the duty to be met by road authorities, namely that the obligation to maintain roadways is not a standard of perfection, but rather a standard of reasonableness. In addition, when assessing whether maintenance has been reasonable, it can be anticipated by the municipality that the persons using the roadway will be exercising ordinary care themselves.
Yesterday the Ontario Divisional Court unanimously upheld FSCO’s decisions in Whipple v. Economical (affectionately known as the “stripper pole” case).
In Whipple, the claimant and his golf buddies were returning via Interstate 90 from a day of golfing in New York State when Mr. Whipple was injured at about 10:30 in the evening. The incident occurred in a 24-passenger luxury limousine coach tall enough for passengers to stand and move around in. It was advertised as a "Party Bus". Its amenities included "a pole with a light above it in the center of the wrap-around seating in the rear of the vehicle, referred to by all of the witnesses, including the owner and driver of the vehicle, as a 'stripper pole'… [T]he pole was an amenity of the vehicle, was intended to be used as one, and was so used by various members of the group on the evening of the incident."
During the return trip, the passengers started playing a game of one-upmanship around the stripper pole, which started with some of the men "amusing themselves and the others with a rudimentary form of 'pole dancing,' i.e., cavorting around the pole at the rear of the bus, mimicking the antics of strippers." Whipple testified that "each one was trying to 'out-do' or one-up the others, raising the ante so to speak, and this is likely what prompted him to attempt a headstand and one-up them all."
After one man slid down the stripper pole upside down, Mr. Whipple tried to top that antic with a headstand. He walked normally up to the pole, placed his head on the floor, braced himself with his hands and flipped his legs in the air, caught one foot on the pole, missed it, his arms gave out, his forehead hit the floor and his neck snapped. He fractured his neck, rendering him an incomplete quadriplegic.
As a result of the incident, Whipple applied to his personal insurer for accident benefits (pursuant to the priority rules under section 268(2) of the Insurance Act). His insurer denied coverage on the basis that he was not involved in an “accident”.
At FSCO, the arbitrator found that claimant was involved in an accident. She found that Whipple's headstand met the purpose and causation tests of an "accident", set out in the jurisprudence. He met the cause test because "but for" the pole being there Whipple would not have attempted the headstand. He met the purpose test just before and just after the incident as a passenger in the limo bus. In light of the type of vehicle in question, its amenities, and the activities inside it, Whipple's actions were seen as occurring in the course of the ordinary and well-known activities of that particular limo bus.
The Director’s Delegate dismissed the insurer’s appeal, agreeing with the arbitrator’s findings on the purpose and causation tests. The Divisional Court dismissed the insurer’s application for judicial review, with oral reasons.
So next time you ride a party bus that is equipped with a stripper pole, you might have some assurance knowing that your automobile insurer will have your back.
A husband and wife separated in 1992. In 1998 the husband took out a life insurance policy on his wife. In 2006 he killed his wife. He was charged with second degree murder. At trial was found not criminally responsible.
The life insurer paid the monies into court. The son of the deceased brought an application seeking payment of the life insurance proceeds to the estate of the deceased. The applications judge held that, for public policy reasons, the husband was not entitled to payment of the monies. She found that the physical act of killing his wife disentitled the husband to the insurance proceeds.
In its April 24, 2012 decision the Ontario Court of Appeal reviewed the Canadian caselaw regarding the public policy rule that prevents a criminal from profiting from his crime. The Court held that, where there is a finding that a person was not criminally responsible for their actions, they will not be prevented from receiving the proceeds of a life insurance policy. More specifically, the Court held that a person who is not held legally responsible for an alleged wrong-doing is not to be punished for that wrong-doing.
However, in an interesting twist, the Court stayed the Order for payment to the husband for a period of 30 days. The stay was imposed to allow the Attorney General to consider whether he wanted to apply to have the monies forfeited under the Civil Remedies Act. Under the Act monies acquired directly or indirectly as a result of unlawful activity can be forfeited. The Act contemplates that a finding a person is not criminally responsible of an offence would still allow for forfeiture. Forfeiture would result in the monies flowing to the Crown, not the beneficiaries of the deceased.
FSCO Arbitrator Suesan Alves has ruled that the (FSCO) prescribed Settlement Disclosure Notice might be inadequate to effect settlement.
In Parveen v. Aviva, a preliminary issue was whether Ms. Parveen had rescinded her accident benefits settlement and was entitled to move to arbitration. The chronology of events are as follows:
- At a pre-hearing held at FSCO on May 30, 2011, Ms. Parveen agreed to resolve her accident benefits claims arising from a November 2008 accident on a full and final basis. She signed a settlement disclosure notice at this time.
- On June 1, 2011, counsel for the Insurer sent counsel for the Applicant a release for his client’s signature by fax.
- On June 10, 2011, counsel for the Applicant sent counsel for the Insurer an e-mail in which he stated that his client “will not execute the release provided ”and asked: “Please advise if settlement will be in effect without it.” Counsel for the Insurer replied that “As she signed the Settlement Disclosure Notice and the cooling off period has expired, the settlement is in effect. We require however that the Release is signed …”
- On July 4, 2011, Ms. Parveen signed a release after 5:00 p.m.
- On July 5, 2011, counsel for the Applicant sent a letter to counsel for Aviva by courier advising that his client was rescinding the settlement. He enclosed the original executed release and a copy of a letter to the Financial Services Commission of Ontario in which he asked for a hearing to be scheduled to determine Ms. Parveen’s entitlement to her claims for statutory accident benefits, interest and expenses.
- On July 8, 2011, counsel for Aviva received the letter rescinding the settlement.
- On July 13, 2011, counsel for Aviva sent the settlement funds to counsel for the Applicant.
- On July 18, 2011, counsel for Ms. Parveen returned the settlement funds to counsel for Aviva.
Arbitrator Alves found that important information in the Settlement Regulation was not conveyed by the text of the prescribed Settlement Disclosure Notice. Specifically, she noted that Paragraph 3 of subsection 9.1(3) of the Settlement Regulation sets out the information that must be included in the disclosure notice with respect to the right to rescind a settlement. It requires:
A statement that the insured person may, within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.
Meanwhile, the prescribed Settlement Disclosure Notice that Aviva gave Ms. Parveen contained the following statements with respect to her right to rescind:
- At page one: “…Your insurer will probably also give you a
release to sign. . .
- IF YOU SIGN THIS SETTLEMENT DISCLOSURE NOTICE AND A RELEASE, YOU WILL BE GIVING UP RIGHTS YOU MAY HAVE NOW OR IN FUTURE, EVEN IF YOUR CONDITION CHANGES. IF YOU DO SIGN THIS NOTICE AND A RELEASE YOU HAVE 2 BUSINESS DAYS TO CHANGE YOUR MIND.
- At page six, in a text box immediately below the line for the
signature of the insured:
- IF YOU CHANGE YOUR MIND
IF YOU CHANGE YOUR MIND AFTER AGREEING TO SETTLE YOUR CLAIM BY SIGNING A RELEASE, YOU MUST:
NOTIFY THE INSURER IN WRITING AND RETURN ANY SETTLEMENT FUNDS YOU RECEIVED WITHIN 2 BUSINESS DAYS AFTER YOU SIGNED THE RELEASE
IF YOU SIGNED A RELEASE AND LATER SIGNED THIS DISCLOSURE NOTICE, YOU HAVE 2 BUSINESS DAYS FROM WHEN YOU SIGNED THE DISCLOSURE NOTICE IN WHICH TO NOTIFY THE INSURER AND RETURN ANY SETTLEMENT FUNDS YOU RECEIVED.
The Arbitrator found that the prescribed disclosure notice did not contain a statement that the insured person may:
“within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release, rescind the settlement.”
She found that the missing information was required by paragraph 3 of subsection 9.1(3) of the Settlement Regulation.
Accordingly, she held that the Applicant was entitled to rescind the settlement even beyond the two day cooling off period as provided by subsection 9.1(5) of the Settlement Regulation.
It is important to remember that the Settlement Disclosure Notice is an approved form, prescribed by the Superintendent of Insurance (FSCO). Insurers are required to use this form as a disclosure notice. Nevertheless, the arbitrator held that the onus lay on the insurer to ensure that the form contains all of the information necessary to comply with the settlement regulation and that there was nothing preventing the insurer from amending the form and seeking the Superintendant’s approval.
So now again it seems that one branch of FSCO has determined that insurers cannot rely upon a form prescribed by their Regulator, which happens to be another branch of FSCO.
The Court of Appeal for Ontario has clarified the limitation period law for loss transfer arbitrations. The issue before the Court was whether the limitation period to initiate arbitration starts the day after the first party insurer sends a loss transfer request for indemnification (as per Federation v. Kingsway), or whether it starts the day the first party insurer receives a response from the second party insurer denying reimbursement (as per ING v. Markel).
In State Farm v. Dominion (2005), the Court of Appeal held that loss transfer claims were subject to a six-year, rolling limitation period, starting with each accident benefit payment. The court's finding was based on the wording under the old Limitations Act, which was repealed and replaced with the new Limitations Act, 2002 for claims arising on or after January 1, 2004. Under the new Act, the default limitation period is two-years from the date the claim is discovered. Section 5 of the Act prescribes when a claim is discovered:
Discovery
5. (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).
For several years, the insurance industry handled loss transfer claims under the new Act by assuming that the rolling limitation start date prescribed by the Court of Appeal was still good law under the new Act. In other words, the industry treated each accident benefit payment made after January 1, 2004 as the start date for a new limitation period. Of course, the six-year clock had to be reduced to two years to stay inline with the default limitation period under the new Act.
In both Federation v. Kingsway and ING v. Markel, two different arbitrators held that the limitation period under the new Act cannot start with each accident benefit payment because of the wording in section 5 (1)(a)(iii), which requires that the "act or omission" was of the target defendant (the person against whom the claim is made). The arbitrators held that the person against whom the claim is made must be the second party insurer. Therefore, as the second party insurer has nothing to do with the payment of accident benefits, the date of payment of benefits was somewhat irrelevant.
The arbitrators differed with respect to the actual start date: In Federation, the arbitrator decided that all of the criteria under section 5 (1)(a) were satisfied the day after the second party insurer receives a loss transfer request for indemnification. He also noted some good policy reasons for choosing that date, such as allowing the parties to know right away when the clock would start.
In ING v. Markel, the arbitrator agreed that the Federation start date was attractive (for certainty), but did not believe that all of the criteria under section 5(1)(a) was satisfied on the day after the second party insurer received a loss transfer request for indemnification. More specifically, he had trouble finding that the criteria under 5(1)(a)(iv) was satisfied until the first party insurer knew (by receiving a response) that the second party insurer wasn't going to satisfy a loss transfer request.
On appeal to the Superior Court, the judge "marginally" preferred the Federation approach, as it provided some certainty as to when the clock would start. Of note, the judge agreed with both arbitrators that the payment of benefits does not start any limitation clock.
The Court of Appeal agreed with the arbitrator in Federation, finding that all four criteria under section 5 (1) of the Limitations Act, 2002 are satisfied when the first party insurer sends a Loss Transfer Request for Indemnification to the second party insurer.
So for any loss transfer claims arising after January 1, 2004, the first party insurer has two years -- from the date it sends a Loss Transfer Request for Indemnification -- to initiate arbitration against the second party insurer.
Clear?
A FSCO arbitrator has denied an insurer’s request to stay 15 arbitration proceedings while it pursues fraud claims against notorious clinics at the Superior Court.
There are 15 unrelated arbitration matters with a common denominator: the involvement of Assessment Direct Inc., Osler Rehabilitation Centre Inc. and Metro Rehabilitation Centre Inc. The insurer concluded that these Facilities are related to each other and that many of the claims submitted by the Facilities are of dubious merit and that the Facilities have engaged in conduct that was deliberately intended to unjustly enrich the Facilities. In some cases, the Insurer believes that it can prove that the Facilities made misrepresentations to the Insurer.
In the summer of 2011, the insurer commenced an action in the Ontario Superior Court (Court File No. CV-11-428030) against the Facilities and their principals for, among other things, $15,000,000 in general and punitive damages and a declaration that insurer need not pay any future or outstanding amounts to the defendants. That action is at an early stage, as the insurer is still in the process of serving the Statement of Claim upon some of the defendants.
The insurer’s claims against the Facilities stemmed from 218 insured persons. Fifteen of those insured persons were denied accident benefits by the Insurer and have chosen to have those disputes adjudicated at FSCO. In light of the pending Superior Court action, the insurer sought to stay the FSCO proceedings.
In all 15 cases, the arbitrator referred to the three-part test for a stay, pursuant to the Supreme Court of Canada’s decision in RJR-MacDonald. The insurer established, and the 15 applicants conceded, that the insurer’s allegations against the Facilities were not frivolous (Part 1). The applicants argued that there would be relative prejudice to them if a stay was granted (Part 3), but the thrust of their argument was that the insurer had failed to prove that it would suffer irreparable harm if a stay was not granted (Step 2).
In denying the insurer’s motions, the arbitrator found that the insurer had not met the second part of the RJR-MacDonald test. The arbitrator wrote that the only evidence before him was the affidavit of the Director of Accident Benefits for the insurer. Essentially, the Director stated that, if a stay was not granted, the insurer would be put to “excessive expense and time.” However, the arbitrator noted that the Supreme Court of Canada in RJR-MacDonald held that monetary loss would not usually amount to irreparable harm in private law cases.
He also held that the insurer had failed to adduce sufficient evidence to prove that the cost of defending this application would be unrecoverable or that the possibility of additional expense constitutes irreparable harm
Finally, the arbitrator held that the insurer’s sought remedy (a stay) was extraordinary, especially since it was alleging misconduct on behalf of non-parties (the Facilities) and not the Applicants.
Although one division of FSCO has made it clear that insurers have “rights and responsibilities” to challenge questionable or abusive claims (see Auto P&C Bulletin No. A-02/11), we query whether another division of FSCO is making it more difficult for insurers to exercise those rights and responsibilities.
The decisions are available on the FSCO Web site, with subscription.
On March 22, 2012 the Ontario Court of Appeal released its reasons in Dundas v. Zurich Canada 2012 ONCA 181 in which the Court discusses the limitation period for bad faith actions against insurer, where right of action is assigned by a defendant insured to third party victims.
In this case the defendant/insured alleged Zurich's failure to settle an action resulted in the defendant being exposed to increased personal liability. As early as April 1993 it was clear the defendant/insured was going to have personal exposure. In December 1993 the insurance policy limits were paid into court. A consent judgment in the underlying tort action was issued on August 21, 1995, based on a judicial endorsement that was issued on December 21, 1994.
The defendant/insured issued a "bad faith" claim against Zurich on August 19, 1996. In January 1997 the action was eventually assigned to the plaintiff's in the original tort action in exchange for an agreement by the plaintiffs not to enforce the excess judgment as against the defendant/insured.
Zurich brought a summary judgment motion seeking to dismiss the bad faith action on the basis that, by December 1994, the defendant/insured knew or ought to have known it had a claim in bad faith against the insurer. Zurich argued that statutory condition 6(2) required an action by an insured to recover monies under a contract of insurance to be commenced within 1 year of the cause of action arising. The motion was successful. However, the Ontario Court of Appeal allowed the appeal on the basis that Statutory Condition 6(2) had no application to the bad faith action. The bad faith action is not an action by an insured to recover money under a contract of insurance. Rather it is a claim based on a breach of an insurer's duty of good faith and fair dealing. Given the dates involved in the specific case, the applicable limitation period was 6 years. Under the LImitations Act, 2002, the applicable limitation period would now be 2 years.
It should be noted the Court of Appeal also disagreed with the motion judge's interpretation of Statutory Conditions 6(2) and 6(3). In addition, since the defendant/insured was an estate, the Court of Appeal addressed the limitation period in the Trustee Act.
Contributing Authors
Disclaimer
The blog sets out a variety of materials relating to the law to be used for educational and non-commercial purposes only; the author(s) of the blog do not intend the blog to be a source of legal advice. Please retain and seek the advice of a lawyer and use your own good judgement before choosing to act on any information included in the blog. If you choose to rely on the materials, you do so entirely at your own risk.