Insurance Dispute Limitations: Shorter Periods Than Is Common for Other Cases

Basic limitation period

4 Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was 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).

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.

...

Other Acts, etc.

19 (1) A limitation period set out in or under another Act that applies to a claim to which this Act applies is of no effect unless,

(a) the provision establishing it is listed in the Schedule to this Act; or

(b) the provision establishing it,

(i) is in existence on January 1, 2004, and

(ii) incorporates by reference a provision listed in the Schedule to this Act.

[24] In my view, we are not concerned on this appeal with whether the one-year limitation period was imported, by direct or indirect reference, into the insurance policy by operation of statute. That did not occur because IMC's policy with Hartford was not a fire insurance policy. Accordingly, the statutory conditions set out in s. 148 of the Act are not deemed to be included in the policy by operation of law. In this case, Hartford elected to incorporate the statutory conditions, including condition 14, into the policy. In consequence, the issue is whether clause 14 was clearly and unambiguously included in the policy as a matter of contract, so as to bind the insured under the normal rules of contract law.

[25] IMC argues that Hartford's use of the heading "Statutory Conditions" in the policy, is misleading and, on proper interpretation of the policy, compels the conclusion that an insured is to have reference to Part IV of the Act, including ss. 143 and 148. IMC submits that once regard is had to s. 143 of the Act, an insured would necessarily conclude that clause 14 in the policy does not apply to a claim for loss of income or business interruption. At the very least, it is said, regard to s. 143 renders the policy confusing and potentially misleading to an insured.

[26] In considering IMC's position on this issue, the motion judge stated:

. . . Section 143 of the Act clearly applies only to the deemed application of the statutory conditions to contracts for fire insurance. The language in the insurance policy itself is clear. The conditions listed in the policy under the heading "Statutory Conditions" are stipulated to apply to "all of the perils insured by" the policy. This language does not require any reference to the statute for clarification. Accordingly, I do not see how s. 143 of the Act creates any confusion as to the applicability of the limitation period in this case.

(Emphasis added)

[27] She further observed:

There is no evidence in this case that the plaintiff [IMC] was itself misled by the inclusion of the heading "Statutory Conditions". . . . the fact that the plaintiff's professional adjuster did not understand the distinction between conditions that arise by operation of statute and conditions directly incorporated into the insurance policy does not render the contractual language ambiguous. Professional adjusters are expected to know the difference. The fact that the plaintiff's adjusters misinterpreted the statute is not Hartford's fault and is not the fault of the language used in the Hartford policy. Hartford should not be deprived of the protecton of a clear and unambiguous contractual provisions [sic] merely because the plaintiff got mistaken advice from its own adjuster. Accordingly, I find that the use of the heading "Statutory Conditions" does not make the contractual terms which follow ambiguous. [See Note 2 at end of document]

[28] I agree with these conclusions by the motion judge. Clause 14 is clear and unambiguous. Indeed, in my view, it is difficult to conceive how it could have been made more explicit. Use of the heading "Statutory Conditions" does not render it ambiguous or confusing.

[15]  Secondly, the plaintiff is suing not just for the property damage payable under the insurance contract, but also for damages for breach of the insurer’s duty of good faith and fair dealing.  Mr. O’Brien, for the plaintiff, points out that such a claim has been held to be a separate cause of action from an action for the failure of an insurer to compensate for loss covered by the policy:  Whiten v. Pilot Insurance, 1999 CanLII 3051 (Ont. C.A.) at para. 25, per Laskin J.A..  Mr. O’Brien submits that this separate actionable wrong is governed by the general limitation period of two years, such that the claim is not statute-barred.

[16]  Mr. Goodman, for the defendant, answers this argument by relying upon Arsenault v. Dumfries Mutual Insurance Co., 2002 CanLII 23580 (Ont. C.A.).  In that case, the plaintiff was suing for damages arising out of the denial of no-fault accident benefits.  Section 281(5) of the Insurance Act stated that an action in respect of no-fault benefits must be commenced within two years of the insurer’s refusal to pay the benefits claimed.  The plaintiff did not commence her action until five years after the refusal.

[17]  Abella J.A. (as she then was) refused to accede to the argument that the claim for bad faith in refusing to pay these benefits could be distinguished from the claim for the benefits themselves, for purposes of determining the applicable limitation period.  At that time, the general limitation period was six years, so that if the bad faith claim was treated as a separate and distinct claim from the claim for the benefits themselves, it would not have been statute barred.

[18]  At para. 18, she said the following:

I am prepared to assume, without deciding, that there can be an independent claim for bad faith conduct in respect of the insurer’s refusal to pay or continue to pay no-fault benefits.  In order to establish such a claim, the appellant would first have to establish that the insurer’s termination of her benefits was improper.  Such a claim must comply with the requirements outlined in ss. 280-284 of the Insurance Act, one of which is the two year limitation period for the institution of proceedings to determine this question.  The appellant cannot, by the device of a claim for bad faith damages, extend threefold the length of that termination period.

[19]  What distinguishes Arsenault from the case at bar is that the limitation period in that case was triggered by the refusal to pay benefits.  Any failure to deal with the claim in good faith that led up to the denial of benefits had to have preceded the date of the refusal, and could not logically be separated from the denial of benefits itself.  In other words, the bad faith claim and the claim that benefits were wrongly denied were one and the same.  Since the Act provided a clear limitation period of two years from the date that benefits were denied, it provided a complete defence to the plaintiff’s claims.

[20]  The case at bar, though, is quite different.  The triggering event for coverage under the insurance policy is the date of the loss, which is the date of the car accident.  However, the cause of action regarding the alleged bad faith dealing arises well after that date, including the plaintiff’s subsequent dealings with the adjuster and concluding with the dumping of the bloodstained wreck in the plaintiff’s driveway.  The wrongful denial of coverage itself that is alleged here did not occur until October 9, 2008, more than one year after the accident.  The Statement of Claim was issued less than one year later, well within the two-year general limitation period provided in s. 4 of the Limitations Act 2002, S.O. 2002 c. 24.

[21]  I am not persuaded that the independent actionable wrong that has been pleaded by the plaintiff is statute barred.