Limitation Period and Discoverability in Unidentified Motorist Claims
By Alon Barda and Natalia Sheikh
The Ontario Court of Appeal’s decision in Rooplal v. Foder, 2021 ONCA 357 addresses the time period that applies in unidentified motorist claims pursuant to s. 265 of the Insurance Act[1] and Uninsured Automobile Coverage, R.R.O. 1990, Reg. 676 (“Regulation 676”).
Facts
The plaintiff was injured while riding a Toronto Transit Commission (“TTC”) bus that was cut off by an unidentified driver. The plaintiff brought a claim against the unidentified motorist, the TTC, the bus driver, and her own insurer pursuant to a family protection coverage endorsement (“OPCF 44R”).
Following examinations for discovery, the plaintiff’s personal insurer amended its statement of defence and crossclaim to plead that it did not provide coverage for the claim and also that any such claim should be brought against the TTC’s insurer.
Thereafter, the plaintiff sought to add Toronto Transit Commission Insurance (“TTC Insurance”) to the action seeking a declaration that, at the time of the accident, the plaintiff was an occupant of the TTC insured vehicle and an insured under the TTC’s insurance policy. The plaintiff further sought a declaration that TTC Insurance must indemnify her for all damages caused by the unidentified motorist up to the policy limits.
TTC Insurance opposed the motion on the grounds that the claim was statute-barred pursuant to s.4 of the Limitations Act, 2002 (the “Limitations Act”).[2]
The Underlying Decisions
In the decision on the motion, the motion judge permitted the claim against TTC Insurance to proceed on the basis that the two-year limitation period for commencing a claim set out in s. 4 of the Limitations Act had not expired. The Court reasoned that, under the criteria set out in s. 5 of the Limitations Act, the plaintiff had not yet discovered her claim against the insurer.
The motion judge held that the limitation period for the indemnification claim against TTC Insurance did not begin to run until “the day after [the plaintiff] made an indemnification claim which [TTC Insurance] failed to satisfy. Since [the plaintiff] made her motion to add [TTC Insurance] as a defendant before making a claim that [TTC Insurance] failed to satisfy, the limitation period ha[d] not expired.”
The motion judge’s decision was upheld by the Divisional Court.
Decision of the Court of Appeal
Issue
The narrow issue before the Court of Appeal was whether the plaintiff’s claim against TTC Insurance was statute- barred pursuant to ss.4 and 5 of the Limitations Act.
Position of the Parties
The plaintiff submitted that the limitation period did not begin to run until the insurer denied her claim for indemnification under the contract of insurance.
Alternatively, she argued that, even if the limitation period began to run when she knew or ought to have known there was a tort claim against the unidentified motorist, she did not have evidence of how the accident happened until the TTC bus driver was examined for discovery.
Since she served the motion to add the TTC less than two years thereafter, she argued that she was not out of time.
TTC submitted that the limitation period began to run when the plaintiff knew or ought to have know the unidentified motorist was at fault, which TTC argued happened when the plaintiff received the police report.
TTC further argued that, if the plaintiff’s position is accepted, it would lead to an absurd result. In this regard, TTC submitted that a finding that the limitation period only begins to run when the plaintiff makes an indemnification demand could result in the possibility of the plaintiff potentially waiting indefinitely before bringing a claim against an insurer.
Decision
The Court of Appeal first highlighted s.5(1)(a)(iii) of the Limitations Act, which states that a claim is discovered “only when a plaintiff learns that their injury was caused by the acts or omissions of the person against whom the claim is made.”
The Court cited the decision of Markel Insurance Company of Canada v. ING Insurance Company of Canada,[3] which dealt with the limitation period in loss transfer matters. The court noted that the Markel decision, as well as the decision of Schmitz v. Lombard General Insurance Company of Canada,[4] stands for the proposition that the plaintiff suffers a loss when the insurer fails to satisfy its legal obligation under the policy.
Specifically, in Markel, the Court of Appeal stated that once a request for indemnification has been sent, “all the facts are present to trigger the legal obligation on the part of the second party insurer to indemnify the first party insurer for the loss.”
In its reasoning, the Court of Appeal in the case at bar noted that s.5 of the Limitations Act, states that, unless the Act provides otherwise, a proceeding must be commenced within two years of when the “claim is discovered”, that is, “when the plaintiff knows, or ought to have known they have suffered loss, injury or damage caused by or contributed to by the acts or omissions “of the person against whom the claim is made (emphasis in original) and that it is appropriate to commence a proceeding.”
The Court further noted the importance of isolating the wrongful act of each particular defendant. In this regard, the Court stated that it is not enough that the plaintiff has “suffered some loss from some act or omission.”
The Court further explained that the “discovery requires that the person with the claim “know that the ‘injury, loss or damage had occurred’ (s. 5(1)(a)(i)), that it was caused or contributed to by the act or omission (the breach of contract) (s. 5(i)(a)(ii)), and that the act or omission was that of the defendant (s. 5(1)(a)(iii))” (emphasis in original).”[5]
Addressing the facts of this case, the Court stated that there is a distinction to be drawn between the plaintiff’s knowledge of the act or omission of the unidentified motorist for which damages in tort is sought and the act or omission of the insurer for which indemnification pursuant to the policy of insurance is sought.
Accordingly, the Court found that the plaintiff only “discovered” her claim against TTC Insurance when she knew or ought to have known that “TTC Insurancedid or omitted to do something that caused her loss or damage.” It was only then, the Court held, that the two year limitation period set out in s.4 of the Limitations Act began to run. The Court then pointed out that, in this case, there was no evidence that the plaintiff made any demand for indemnification to commence the limitation period.
In terms of TTC’s argument that a finding that the limitation period only begins to run on a request for indemnification may result in the plaintiff delaying the bringing of the claim, the Court highlights that there are requirements set out in s.8(1) of the Schedule contained in Regulation 676 that must also be considered. This includes that “no person is entitled to bring an action to recover an amount provided for under the contract, as required by subsection 265 (1) of the [Insurance Act] unless the requirements of this Schedule with respect to the claim have been complied with.”
Accordingly, while a person may choose not to commence a claim against the insurer, the insurer must be provided with (a) a statement setting out the details of the accident including whether it was caused by an unidentified motorist and what damages were suffered within 30 days or as soon as practicable (s. 3), and (b) written notice of the claim against the insurer and the circumstances thereof within 30 days or as soon as practicable (s. 6).
The Court then stated that the statutory scheme does indeed provide some safeguards against the concerns raised by TTC Insurance. In this regard, the Court stated that “an insurer faced with a potential unidentified motorist claim may begin the limitation period by refusing to indemnify a s. 265 claimant after receipt of timely notice, as required by the regulation. In this manner, the insurer retains control of the limitation period.”[6] The Court noted that it was unclear from the record whether the claimant fulfilled the notice obligations as that issue was not before the court.
Applying the above reasoning to the facts of the case, the Court held that the plaintiff discovered her claim against TTC Insurance when she knew or ought to have known that TTC Insurance did or omitted to do something that caused her loss or damage. The Court stated that the act or omission was the failure to indemnify the plaintiff for the damage caused by the unidentified driver as required by the policy of insurance.
Since there was no evidence that the plaintiff had made a demand for indemnification from TTC Insurance, the limitation period against TTC Insurance had not yet expired and the appeal was dismissed.
The Takeaway
Based on this decision, the limitation period for a claim for unidentified motorist coverage pursuant to s.265 of the Insurance Act commences when the insurer fails to indemnify the plaintiff for the damage caused by the unidentified driver as required by the policy of insurance.
As argued by TTC Insurance, this raises the possible issue of the plaintiff waiting to seek indemnification from the insurer. Nevertheless, as set out by the Court of Appeal, a prudent insurer faced with a potential unidentified motorist claim, and one that intends to deny the claim, should ensure the limitation clock starts ticking by refusing to indemnify the s. 265 claimant after receipt of timely notice, as required by the regulation.
This will provide certainty to the insurer as to the limitation period and avoid a potentially lengthy waiting period for a claim to commence.
[1] R.S.O. 1990, c. I.8.
[2] S.O. 2002, c. 24, Sch. B.
[3] 2012 ONCA 218, 109 O.R. (3d) 652.
[4] 2014 ONCA 88, 118 O.R. (3d) 694, leave to appeal refused, [2014] S.C.C.A. No. 143.
[5] Citing the decision of Strath C.J.O in Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23, 431 D.L.R. (4th) 262, at para 86.
[6] Citing Hoegg J.A. of the Newfoundland and Labrador Court of Appeal in Tucker v. Unknown Person, 2015 NLCA 21, 365 Nfld. & P.E.I.R. 307, leave to appeal refused, [2015] S.C.C.A. No. 250, at paras. 22-23.