On February 4, 2014, the Ontario Court of Appeal may have finally put to rest the longstanding issue regarding the length of the applicable limitation period and when it begins to run regarding claims for underinsured motorist coverage under the Ontario Policy Change Forms-44R (OPCF-44R).
This matter arose from a claim for damages for personal injuries suffered by the Plaintiff, Schmitz, as a result of a July 19, 2006 motor vehicle accident. The initial tort action, commenced in June 2007 claimed damages in excess of $1,000,000.00 being the Defendant’s policy limits. The Defendants’ automobile insurance coverage was limited to $1,000,000.00. However, Schmitz had a policy of insurance with Lombard which included underinsured motorist coverage to a maximum of $2,000,000.00. For reasons which are not explained in the Judgment, the Plaintiff did not commence his underinsured claim against Lombard until June, 2010. This precipitated a motion by Lombard to have the action dismissed on limitation grounds on the basis that it was commenced after the expiry of the 12 month limitation period contained in section 17 of the OPCF-44R.
In response, the Plaintiff took the position that section17 did not apply but argued instead that the two year limitation period contained in section 4 of the Limitations Act applied. Further, the Plaintiff took the position that the discoverability principles contained within section 5 of the Limitations Act also overrode Section17 of the OPCF-44R.
The Motions Judge accepted the Plaintiffs arguments and dismissed Lombard’s motion from which it appealed.
On appeal, Lombard conceded the applicability of the two year limitation period, under the Limitations Act as opposed to the one year limitation contained in section 17 of the OPCF-44R. However, it argued that the Limitations Act did not override section17 as to when the limitation period commenced and took the position that the limitation period started to run when the Plaintiff knew or ought to have known the quantum of their claims exceeded the Defendant’s policy limits of $1,000,000.00.
In rejecting this argument, the Court of Appeal concluded that the limitation period did not begin to run until the day after a demand for indemnity was made. Lombard argued that this interpretation basically amounted to no limitation period at all as the claimant could delay the running of the limitation period indefinitely by refusing to file the claim and as such insurers would be prejudiced as they would be unable to participate in the underlying tort litigation and may not even be aware of it. This argument was rejected by the Court of Appeal which concluded that insurers would be adequately protected by section14 and section15 of the OPCF-44R. Section14 provides that the findings of a court with respect to issues of quantum or liability were not binding on an insurer, unless the insurer was provided with a reasonable opportunity to participate in those proceedings as a party. In addition, section 15 provides various conditions precedent to the liability of insurers including obligations on eligible claimants to promptly give written notice, to provide details of any policies of insurance to which the eligible claimant may have recourse, to submit to an examination under oath and to produce relevant documents in their possession or control.
With this decision the Court of Appeal now appears to have come almost full circle regarding limitation period issues involving underinsured motorist coverage claims.
In Winbush v Progressive Casualty (1995) it was held that the time under section 17 only begins to run once the Plaintiff’s damages have been assessed at trial.
Subsequently there are a series of cases which focussed on section17 and in particular what was meant by the phrase “quantum of claims.” For example in McCook v. Subramaniam (2008), Master Dash concluded that the 12 month limitation period contained in section 17 commenced on the day on which the Plaintiff knew or ought to have known, not that his or her damages would exceed the actual liability limits of the tortfeasor’s policy, but from the date on which he knew or ought to have known that the “quantum of claims” would exceed the statutory minimum limits of $200,000.00. Unfortunately the phrase “quantum of claims” was never defined and there was various case law commenting on whether it referred to what was claimed in the prayer for relief, or the quantum that was recovered after a trial proceeding, or the Plaintiff’s subjective assessment of its claim during the course of the litigation. The difficulty with respect to “quantum of claims” is that the damage assessment during the course of litigation is often a moving target dependent upon a number of different factors. As a practical matter this uncertainty precipitated unnecessary litigation as Plaintiffs, to avoid a potential limitation period expiring were compelled to commence underinsured claims before they could assess the realistic merits of such a claim. This precipitated unnecessary costs on not only the Plaintiffs but for insurers who had to respond to such claims.
Although the Court of Appeal’s decision in Schmidt will be of benefit to the Plaintiffs and delay in some instances, an underinsurer’s involvement in a claim, as a practical reality, this will be a rare occurrence as generally where there are realistic underinsured claims, Plaintiffs by reason of section14 will generally involve the underinsurer in the primary proceedings to avoid a multiplicity of trials.