31st Floor 130 Adelaide Street West Toronto, Ontario M5H 3P5 Tel: 416-869-0123 Fax: 416-869-0271 Website: www.brownandpartners.ca

Harry P. Brown Marlett Dobson Jennifer Beresford Christopher Whibbs Kate Meyers Benjamin Hutchinson

William G. Scott George Tsakalis Jonathan Tatner Andrew Laviolette Sharan Dhami Peter Pietraszek

Leilah Edroos Jillian Van Allen Mikhail Shloznikov Philip Ghosh Adam Pennino

Success with Limitation Period Defences

Canadian Defence Lawyers

Accident Benefits CDL

Hilton Hotel, Toronto, ON

October 15, 2014

Overview

• What is a limitation period defence? • Why should I bring a limitation period defence? • What is the difference between an AB vs. Tort limitation period defence? • How and when can I bring a limitation period defence? • How can I actually succeed?

What is a limitation period defence?

When litigating a Statutory Accident Benefits Schedule, Effective September 1, 2010 (“SABS”) denial, there are two fundamental limitation periods to be mindful of:1 1. Section 281.1(1) of the Insurance Act states:

Limitation period

A mediation proceeding or evaluation under section 280 or 280.1 or a court proceeding or arbitration under section 281 shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.

1 There are many more SABS limitation periods including, but not limited to, the “rolling limitation period”

of Loss Transfer Claims (see ING v. Markel and Federation v. Kingsway, 2012 ONCA 218), the 60 day

limitation for the commencement of a mediation after a delivered application for mediation (see Cornie v.

Security National, 2012 ONSC 905), the seven (7) day limit for providing notice of an intention to apply for

benefits (s.32.1 of the SABS), and those dealing with procedural and reporting guidelines. However,

because the limitation periods found in s.281.1 of the Insurance Act (and s.51 of the SABS) are those

most commonly encountered, we have chosen to focus on the two-year limitation period and its legislated

90-day extension that commence after a benefit denial before the Financial Services Commission of

Ontario (“FSCO”).

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2. Section 281.1(2) of the Insurance Act provides for an exception:

Exception

Despite subsection (1), a proceeding or arbitration under clause 281 (1) (a) or (b) may be commenced,

(a) if there is an evaluation under section 280.1, within 30 days after the person performing the evaluation reports to the parties under clause 280.1

(b) if mediation fails but there is no evaluation under section 280.1, within 90 days after the mediator reports to the parties under subsection 280 (8).

These limitation periods are also incorporated in the SABS:

Time Limit for Proceedings

51(1) A mediation proceeding or evaluation under section 280 or 280.1 of the Insurance Act or a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Act in respect of a benefit under this Regulation shall be commenced within two years after the insurer’s refusal to pay the amount claimed.

51(2) Despite subsection (1), a court proceeding or arbitration under clause 281 (1) (a) or (b) of the Insurance Act may be commenced within 90 days after the mediator reports to the parties under subsection 280 (8) of the Act or within 30 days after the person performing the evaluation provides a report to the parties under section 280.1 of the Act, whichever is later.

Therefore, a mediation and arbitration must be commenced within the two years of the

Insurer's refusal to pay. If the mediation, but not the arbitration, was commenced within

two years, then the limitation period for commencing arbitration is extended to 90 days

after the release of the Report of Mediator.

What are the benefits of a limitation period defence?

If available, a limitation period defence can be recognized and argued very early in the

mediation and arbitration process. It focuses on a narrow issue and, as such, is an ideal

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candidate for a FSCO preliminary motion hearing or a summary judgment motion. A

successful limitation period defence will result in having the action dismissed.

In the proper cases, astute adjusters and their counsel will resolve cases more quickly

and more efficiently by pursuing a limitation period defence early in a dispute.

Tort vs. AB limitation period defence

The “discoverability principle” does not apply in the AB context.2 An accident benefits

applicant has strict timelines to commence a mediation and arbitration following a legal

denial of a benefit. If the denial is lawful, the claimant does not have the discoverability

principle to fall back on.

This issue was addressed by the Court of Appeal in Wadhwani v. State Farm Mutual

Insurance Company.3 The insured returned to work after an accident, then later

stopped working because of accident-related injuries. The insured was not allowed to

rely on “fresh medical findings” two years after income replacement benefits were

denied to reactivate the limitation period and make fresh claims for further benefits.

How to get the limitation period to start running?

1. In order to trigger the two-year limitation period, the denial or stoppage of benefits must be “clear and unequivocal”.4

2. Secondly, the notice of a refusal to pay benefits must also contain, in

straightforward and clear language, directed towards an unsophisticated person,

a description of the most important points of the dispute resolution process, such

as the right to seek mediation, the right to arbitrate or litigate if mediation fails,

and the relevant time limits that govern the entire process.5

2 Section 19 of the Limitations Act specifically excludes the limitation set by s.281.1 of the Insurance Act

from being subject to the Limitations Act. 3 2013 ONCA 662; see also, Compton v. State Farm Insurance Company of Canada, 2014 ONSC 2260

at para 30. 4 Zeppieri and Royal Insurance Company of Canada, QIC A-005237, Arbitrator Naylor, February 17,

1994; Turner v. State Farm Mutual Automobile Insurance Company, (2005) 195 OAC 61 (ONCA); Monks

v. Dominion of Canada, P09-00018, Director’s Delegate Blackman, December 10, 2009. 5 Smith v. Co-operators General Insurance Co., [2002] 2 SCR 129, 2002 SCC 30 at para 14; see also,

Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111.

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In speaking for the Supreme Court of Canada majority in Smith v. Co-operators General

Insurance Co.,6 Justice Gonthier wrote on the requirements of a denial:

In my opinion, the insurer is required to inform the person of the dispute resolution process contained in ss. 279 to 283 of the Insurance Act in straightforward and clear language, directed towards an unsophisticated person. At a minimum, this should include a description of the most important points of the process, such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process. Without this basic information, it cannot be said that a valid refusal has been given.

The standard OCF-9 forms now relied upon by adjusters all contain wording which

satisfies the second requirement, meaning defence counsel need only be concerned

with the first requirement.

The 90-day limitation period extension

S.281.1(2)(b) of the Insurance Act (and s.51(2) of the SABS) provides, in part, that

despite the two year limitation set out in subsection 281.1(1), if mediation fails, an

arbitration may be commenced "within 90 days after the mediator reports to the parties

under subsection 280(8)”.

The controlling date setting the 90-day limitation in motion is the date on which the

parties actually received the Report of Mediator, not the date it was mailed.7 It is

appropriate to allow five (5) business days for delivery for the Applicant to have received

or be deemed to have received the Mediator’s Report.8

In Kurichh v. Allstate Insurance Co. of Canada, Arbitrator Hale held that the Report of

Mediator was deemed received by finding that “it defies logic to take the position that

letters sent both to counsel and [the Applicant] were not delivered or were not returned

to this office as undeliverable”.9

6 [2002] 2 SCR 129, 2002 SCC 30. 7 Bhambi v. State Farm Mutual Automobile Insurance Company, A07-001075, Arbitrator Bayefsky,

December 20, 2007, at para 20. 8 Ibid. 9 A97-002118, Arbitrator Hale, May 6, 1999

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Principles of limitation period denial

a. The denial is not required to be legally correct

Although the denial requires a reason for refusing benefits, the reason does not have to

be legally correct. The obligation to give reasons is to permit the insured to decide

whether or not to challenge the denial. If the reasons given were legally incorrect, the

insured is expected to challenge them within the applicable limitation periods.10

b. Post-denial negotiations or requests for further information do not restart the

limitation period

Ongoing negotiations or requests for further information between an insured and the

insurer do not extend the time limits for disputing an otherwise clear and unequivocal

refusal.11

c. There can be no valid refusal where there has not first been a valid election

Insureds who are potentially entitled to more than one of income replacement benefits

(“IRBs”), non-earner benefits (“NEBs”), or caregiver benefits (“CGBs”) must elect which

of the benefits they wish to receive.

An election is only valid if an Insurer has met its consumer protection obligations by

providing to the insured person information required by legislation for an informed

election. No time limit based on an invalid refusal, including the two-year time limit

under section 51 of the Schedule and 281.11 of the Insurance Act, can begin to run.12

d. The 90-day limitation period is not extended by the issuance of an amendment to

a Mediator’s Report

This is pursuant to Dispute Resolution Practice Code Rules 11.3 and 23.

e. The timelines of the accident benefits limitation legislation is strictly adhered to

Unlike some other time limits contained in the SABS, section 51 is a "hard" limit. As

discussed by Arbitrator Wilson in Punwasie v. State Farm Mutual Automobile Insurance

10 Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111; Turner v. State Farm Mutual

Automobile Insurance Company, (2005) 195 OAC 61 (ONCA). 11 Mohamed-Amin and RBC General Insurance Company, A06-002188, Arbitrator Muzzi, June 25, 2007. 12 Grewal v. Certas Direct Insurance Co., P09-00001, Director’s Delegate D. Evans, July 10, 2009.

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Company,13 while subsection 31(1) provides that a "person's failure to comply with a

time limit set out in this Part does not disentitle the person to a benefit if the person has

a reasonable explanation" the section goes on to state specifically that "Subsection (1)

does not apply to the time limits set out in section 51".

In Punwasie, the applicant unsuccessfully submitted several arguments as to why his

application for arbitration was not filed within 90 days of the Report of Mediator,

including:

a. the insurer’s denial was not clear and unequivocal; b. there were minor defects in the refusal; c. the time-limits were contrary to “natural justice and fair play” d. his previous representative failed to adequately represent his interests; and e. he was neither aware nor informed of the time limits for his accident claim.

In his review of the jurisprudence in Punwasie, Arbitrator Wilson found that as long as

the principles and requirements discussed in Zeppieri and Smith were adhered to, “the

section 51 time-limits cannot be “explained away” by an insured”.

Recent Caselaw

The principles underlying the s.51 limitation period have been recently confirmed in

Sietzema v. Economical.14 The Ontario Court of Appeal found that the OCF-9 denial at

issue was valid as “[t]he form gave her clear notice of her rights to mediation, fol lowed

by arbitration, litigation or neutral evaluation if she wished to dispute the refusal or

reduction of benefits. It also gave her clear notice of the two-year limitation period”.15

Counsel for the claimant argued that the stoppage of IRBs did not affect the limitation

for NEBs. The Court of Appeal noted: “If we accepted the appellant’s argument, the

limitation period for making a claim for Non-Earner Benefits never began to run. This

would defeat one of the primary purposes of the SABS regime, namely, to ensure the

timely submission and resolution of claims for accident benefits.”16

The claimant has sought leave to appeal Sietzema to the Supreme Court of Canada.

13 A08-001332, Arbitrator Wilson, April 14, 2009, at para 16-17; see also Mohamed-Amin and RBC

General Insurance Company, A06-002188, Arbitrator Muzzi, June 25, 2007, at p. 4. 14 2014 ONCA 111. 15 Ibid, at para 14. 16 Ibid, at para 16.

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In Compton v. State Farm Insurance Company of Canada,17 we see that limitation

period defences lend themselves well to summary judgment motions. In limitation

period disputes, the facts are predominantly paper-based, (and normally undisputed),

and the issue is narrow, as opposed to, for example, whether an applicant has suffered

a medical disability. A limitation period motion for summary judgment is normally a

purely legal question of when the relevant limitation period commenced and, as such,

the standard of review is one of correctness.

Exceptions to almost every rule

In Monks v. Dominion of Canada,18 Director’s Delegate Blackman overturned an

arbitrator’s decision where an Application for Arbitration was statute barred on the basis

that it was delivered three days after the 90-day limitation extension.

In this case, the applicant had actually submitted the Application for Arbitration to FSCO

within the 90-day limitation period; however, it was delivered and stamped received on

the wrong floor – the 17th and not the 14th. The Director Delegate’s reasoning for

allowing the Arbitration to continue is as follows:

… the Arbitrator's earlier decision in Walia v. Certas Direct Insurance Co., held that an "arbitrator has no discretion to apply principles of equity to alter the result reached by application of the rules of statutory interpretation." It is not relief from forfeiture under the Courts of Justice Act or equitable relief that would be provided in this case. Nor, is the limitation period being extended. Rather, an internal technical rule of the Commission regarding filing on the 14th Floor rather than on the 17th is being waived within the narrow confines of Rules 81 and 1.3 of the Code. I am persuaded that weighing the relative prejudice to the parties, the relatively minor error by the Respondent, that the 17th Floor of the Commission accepted the Application for Arbitration by stamping the document itself and common sense as to what is just, it is appropriate to exercise discretion pursuant to Rule 81.1(b) of the Code, especially in light of Rule 1.3, to decide that Rule 6.1(a) is amended in the specific circumstances of this case to mean that the Application for Arbitration was delivered to the DRG when delivered to the main reception desk of the Commission on the 17th Floor.19

17 2014 ONSC 2260. 18 P09-00018, Director’s Delegate Blackman, December 10, 2009. 19 Ibid, at paras 70-71.

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Exceptions to almost every rule – Clean Hands

In Roger v. Personal Insurance Co. of Canada,20 Justice Aitken found that the insurer

was not allowed to rely on their denial to commence the limitation period because they

themselves were in non-compliance with mandatory provisions, namely,

1. their failure to request that the insured submit a new disability certificate prior to requiring them to submit to insurer's examinations (section 37(1)(a) of the SABS);21 and 2. their failure to send an insurer’s examination report to the health practitioner who had provided the disability certificate (section 37(5) of the SABS).22

By breaching s.37(1)(a) and s.37(5) of the SABS, the insurer was in non-compliance

with important provisions included in the SABS to provide the insured with additional

information and support in deciding whether to challenge the insurer's refusal. As

Justice Aitken expanded:

37 In my view, Smith stands for the general proposition that, where an insurer does not comply with the clear and unequivocal procedural requirements set out in ss. 37 and 42 of the SABS in regard to preconditions which, if ignored, place the insured at a disadvantage, the insurer cannot rely on its purported termination of benefits as triggering the commencement of the limitation period under s. 281.1(1). 38 There is case law to the effect that the insurer may still rely on the purported refusal of benefits to terminate payment of such benefits, pending any mediation, arbitration, or court proceeding to finally determine entitlement to benefits; however, that is a different matter from the question of triggering a limitation period.

Conclusion

As long as the insurer provided a clear and unequivocal denial, a limitation period

defence can be a highly effective, narrow, and predictable way to have an action

dismissed early in the litigation process.

20 2014 ONSC 1964. 21 See also Yogesvaran v. State Farm Mutual Automobile Insurance Co. A08-001142, Arbitrator Miller,

November 26, 2009; upheld by Delegate Blackman, PO9-00042, September 13, 2010. 22 See also Nadarajah v. RBC General Insurance Co. P13-00010, Dir. D. Blackman, October 24, 2013.

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Leilah Edroos

T: 416.640.2930

ledroos@brownandpartners.ca

With the assistance of Christopher Whibbs, Philip Ghosh and Peter Pietraszek

13/10/2014

1

Accident Benefits Wednesday, October 15, 2014Hilton Hotel, 145 Richmond St. W., Toronto ON

Limitation Period DefencesSuccess with Limitation Period Defences

3100-130 Adelaide Street WestToronto, ON M5H 3P5

T: 416.869.0123

By:

Leilah EdroosT: 416.640.2930 Ledroos@brownandpartners.ca

With the assistance of:

Christopher WhibbsT: 416.640.2945CWhibbs@brownandpartners.ca

Philip GhoshT: 416.640.2958PGhosh@brownandpartners.ca

Peter PietraszekT: 416.640.2933PPietraszek@brownandpartners.ca

• What is a limitation period defence?

• What are the benefits of a limitation period defence?

• What is the major difference between a Tort vs. AB limitation period defence?

• How and when can I bring a limitation period defence?

• Can I actually succeed?

Overview

13/10/2014

2

• Pursuant to s.281(1) and s.281(2) of the Insurance Act

• Mirrored in s.51(1) and 51(2) of the SABS

• A mediation and arbitration shall be commenced within the two years of the Insurer's

refusal to pay.

• If the mediation was commenced on time, the release of the Mediator’s Report will

extend the limitation period to commence an arbitration by 90 days.

What is a limitation period defence?

• Can be recognized very early in the proceedings

• Can be brought very early in the proceedings

• If successful, will statute bar the action

• No discoverability principle in AB

Benefits of a limitation period defence?

13/10/2014

3

Commencing the Limitation Period

To trigger the running of the two-year limitation period, an insurer’s denial has two requirements:

1. the cancellation must be “clear and unequivocal”Zeppieri and Royal Insurance Company of Canada, QIC A-005237, Arbitrator Naylor, February 17, 1994

2. the reasons for the refusal must be straightforward, clear and complete, in writing, and inform the reader of the dispute resolution process, including all relevant time limits that govern the process.

Smith v. Co-operators General Insurance Co., [2002] 2 SCR 129

Commencing the Limitation Period

It is hardly "onerous," to cite Bouassali, or requiring a "standard of perfection," to cite Turner, to require an insurer, in order to trigger the limitation period regarding a specific benefit, to specify the benefit or amount claimed it is refusing to pay.

- Director’s Delegate Lawrence Blackman, Do v. Guarantee Co. of North America, 2013, P12-00037

13/10/2014

4

The 90-day extension

• S.281.1(2)(b) of the Insurance Act provides, in part, that despite the two year limitation set out in subsection 281.1(1), if mediation fails, an arbitration may be commenced "within 90 days after the mediator reports to the parties under subsection 280(8)" .

Principles of a denial

• The denial does not have to be legally correctSietzema v. Economical Mutual Insurance Company, 2014 ONCA 111

• Post-denial negotiations or requests for further information do not restart the limitation period

• There can be no valid refusal where there has not first been a valid election

13/10/2014

5

Additional Principles of a denial

• The accident benefits limitation legislation is strictly adhered to

In Punwasie v. State Farm Mutual Automobile Insurance Company, the applicant submitted reasons for his late Application for Arbitration, including:

a. the insurer’s denial was not clear and unequivocal; b. there were minor defects in the refusal; c. the time-limits were contrary to “natural justice and fair play”d. his previous representation had failed to adequately represent his interests; and e. he was neither aware nor informed of the time limits for his accident claim.

Arbitrator Wilson found that as long as the Zeppieri and Smith requirements were fulfilled, “the section 51 time-limits cannot be “explained away” by an insured”.

Recent Caselaw

• Sietzema v. Economical, 2014 ONCA 111

• Compton v. State Farm Insurance Company of Canada, 2014 ONSC 2260

13/10/2014

6

Exceptions to every rule

• Roger v. Personal Insurance Co. of Canada, 2014 ONSC 1964

• Monks v. Dominion of Canada, P09-00018, Director’s Delegate Blackman, December 10, 2009

Conclusion

As long as the insurer provided a clear and unequivocal denial, a limitation period defence can be a highly effective, narrow, and predictable way to have an action dismissed early in the litigation process.

Peter PietraszekT: 416.640.2933Ppietraszek@brownandpartners.ca

With assistance from: Christopher WhibbsT: 416.640.2945Cwhibbs@brownandpartners.ca

Philip GhoshT: 416.640.2958PGhosh@brownandpartners.ca

By: Leilah EdroosT: 416.640.2930 Ledroos@brownandpartners.ca

Accident Benefits Wednesday, October 15, 2014Hilton Hotel, 145 Richmond St. W., Toronto ON

3100-130 Adelaide Street WestToronto, ON M5H 3P5

T: 416.869.0123