In St. Denis v. TD Insurance, decided on October 9, an Ontario Superior Court judge considered the one-year limitation period for theft claims in the standard Ontario auto policy. (The limitation, found in statutory condition 9, relates to claims for “loss or damage to the automobile or its contents”. It also appears in s. 259.1 of the Insurance Act.)

In this case, an action was started eight days after the expiry of the one-year limitation, as a result of inadvertence on the part of the plaintiff’s solicitor. The insurer moved for summary judgment, dismissing the claim as being out of time. (Interestingly, it appears that the solicitor argued the motion himself.)

Mr. Justice Gordon Thomson dismissed the defendant’s motion. He did so on two different grounds, one pertaining to the claim for contractual relief under the auto policy and the other to a separate claim based on allegations of “bad faith”. His Honour ruled that the latter was governed by a longer limitation period (see below).

The court’s reasons are of interest because they may apply in other types of cases, not just claims under auto insurance policies.

On the contractual claim (for payment under the policy), Thomson J. made these points:

  1. the court may, in “special circumstances” and in the absence of prejudice, exercise discretion to relieve against unfairness in the imposition of a statutory limitation period;
  2. although some caselaw has held that this power does not apply in cases of contractual limitation periods, the limitation in statutory condition 9 of the auto policy was primarily a statutory one;
  3. the inadvertence of a solicitor in failing to effect service should not work a hardship on his or her client;
  4. it was admitted that the insurer here would not be prejudiced by an eight-day extension of the limitation period; and
  5. the solicitor’s inadvertence here, which consisted of the limitation period being incorrectly entered into the solicitor’s “tickler” system by his staff, was reasonably explained and should not be visited on the client (i.e., the insured plaintiff). Justice Thomson felt that the solicitor had provided a reasonable explanation of the inadvertence and that this constituted “special circumstances”.  When combined with the admitted lack of prejudice, he ruled that the defendant’s motion should fail.

This decision takes a liberal view of “special circumstances”. There have been a number of cases that have cast doubt on whether solicitor’s inadvertence alone can constitute “special circumstances” (e.g., Swiderski v. Broy Engineering Ltd.; Robertson v. O’Rourke; Wong v. Adler). This decision makes it clear that “inadvertence” can still be an important factor in determining whether special circumstances exist.

There was also a claim in St. Denis for damages “breach of duty of good faith”. It was alleged that the insurer had failed to provide copies of documents that had been requested of it by counsel for the plaintiff. It appears that those documents related to an assertion by the insurer, that the insured had made “wilfully false statements”.

Justice Thomson ruled that because this claim had been “framed as an independent action in bad faith based on the inaction of the defendant [insurer]”, it was subject to a two-year limitation period under ss. 4 and 15 of the Insurance Act, 2002. (That Act provides for a two-year limitation period for most causes of action.) Thus, the action here had been brought in time. 

His Honour’s finding would suggest that it is possible to plead a cause of action for breach of a duty of good faith arising under a contract of insurance, such that the “bad faith” cause of action becomes entirely independent of the contractual relief and not subject to the same limitation period. Certainly, earlier cases have established that the cause of action is a separate one. But the Court of Appeal, in a case referred to by Thomson J., Arsenault v. Dumfries Mutual Insurance Co., refused to treat a bad faith claim in a no-fault benefits action as subject to a longer limitation period than the claim for contractual relief. Justice Thomson distinguished Arsenault solely on the basis of the way in which the claims in the two cases had been pleaded.

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