In a recent decision, Mr. Justice Martin James of the Superior Court has ruled that the limitation period contained in s. 17 of the underinsured automobile endorsement, OPCF 44R “cannot operate as a limitation defence and that the limitation period applicable to a claim pursuant to OPCF 44R is to be determined in accordance with section 4 of the Limitations Act, 2002“. It has not yet appeared on CanLII so a link has been provided above to a PDF version of the case.
The reasons are quite brief. The issue seems to have been whether s. 22 of the Limitations Act, 2002 supersedes the limitation period found in s. 17 of OPCF 44R.
The latter provides as follows:
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.
Section 22 of the Limitations Act, 2002 reads:
A limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6).
As Justice James notes, the Act says that “[a] limitation period under this Act may be varied or excluded by an agreement made before January 1, 2004” and, by implication, cannot be varied or excluded if the agreement was entered into after January 1, 2004.
It seems that everyone agreed that the s. 17 limitation period was a contractual one; the question evidently was, when had the contract been entered into? The defendants said that the endorsement pre-dated January 1, 2004 and that section 22 therefore did not apply. The plaintiffs argued that an automobile insurance contract renews annually and that s. 22 therefore did apply. Justice James sided with the plaintiffs, saying, “I prefer to view the underinsured motorist coverage endorsement as a component or part of the larger, comprehensive agreement between the insurer and the insured that renews annually. It appears to me that the contractual limitation period in this case is caught by section 22.”
The Court of Appeal’s recent decision in Roque v. Pilot Insurance Co. 2012 ONCA 311 (CanLII) was cited to the court. In that 2012 decision, the Court applied the limitation period in s. 17 of the OPCF 44R, resulting in the dismissal of the action. The validity of the provision was not questioned and it appears to have been on that basis that James distinguished it. (He said that in Roque, “the precise point raised by this motion was not addressed”.)
Saying that discoverability was now “an overarching policy consideration implicit in [the Limitations Act, 2002], Justice James directed struck down s. 17 of OPCF 44R as a limitation period and held that s. 4 of the Limitations Act, 2002 governed.
The latter section and s. 5 read as follows:
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. 2002, c. 24, Sched. B, s. 4.
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). 2002, c. 24, Sched. B, s. 5 (1).
(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. 2002, c. 24, Sched. B, s. 5 (2).
(3) For the purposes of subclause (1) (a) (i), the day on which injury, loss or damage occurs in relation to a demand obligation is the first day on which there is a failure to perform the obligation, once a demand for the performance is made. 2008, c. 19, Sched. L, s. 1.
(4) Subsection (3) applies in respect of every demand obligation created on or after January 1, 2004. 2008, c. 19, Sched. L, s. 1.
On what date would s. 5(1)(a) start the limitation period running for a claim against an insurer that had issued an underinsured endorsement? What is it that the plaintiff would have to “discover”? Under s. 17 of OPCF 44R, in the words of Master Dash, endorsed by the Court of Appeal in Roque, “[t]he plaintiff’s case runs from when he has a body of evidence accumulated that would give him a ‘reasonable chance’ of persuading a judge that his claims would exceed $200,000.” Under Justice James’ formulation, perhaps the argument that Court of Appeal rejected in Roque will now find favour. There, the plaintiff made the following submission:
Section 17 of OPCF 44 should be interpreted to mean that the limitation period begins to run when the plaintiff’s damages have been quantified by settlement or judgment. Only then can it be said that the plaintiff “knows” for certain that the available insurance under the defendant’s policy is less than that available under his own coverage.
The Court of Appeal held that that interpretation did not accord with the clear language of s. 17 of OPCF 44R, which started the limitation period when the claimant knew or ought to have known that the quantum of his or her claims would exceed $200,000. But it might now be a different story if the Limitations Act, 2002 applies. And in fact, that was one of the concerns that counsel for the defendant raised in Schmitz, that the underinsured insurer would become involved far too late in the process. That would suggest an apprehension that the limitation period would start to run long after the claim was known to have a value of at least $200,000.
Unfortunately, the mechanics of applying ss. 4 and 5 of the Limitations Act, 2002 to underinsured coverage were not really fleshed out in Schmitz. But they will undoubtedly receive scrutiny in future cases.