The Supreme Court of Canada has dismissed the plaintiff’s appeal in Boyce v the Co-Operators General Insurance Company on the question of whether the contractual limitation period in a commercial insurance policy can override a statutory limitation period[1].

The plaintiff owned a clothing boutique, which was closed down for a period of time in order to address a foul odour emanating from the store.  The closure resulted in clean-up costs and a loss of inventory. The plaintiff believed the store had been vandalized filed a proof of loss within two months of the closure.  The insurer took the position that the odour was caused by a skunk and denied the claim.  The plaintiff commenced an action challenging the denial just over one year after the incident.

The insurer moved for summary judgment on the basis that the action was statute-barred by operation of the one-year limitation period in Section 148 of the Ontario Insurance Act[2], which had been incorporated by reference into the terms of the policy.  The insurer relied on section 22(b) of the Limitations Act, which allows parties to a “business agreement” to vary the applicable statutory limitation period.  A “business agreement” is understood to be an agreement made by parties “none of whom is a consumer as defined in the Consumer Protection Act, 2002”[3].

Under the heading “statutory conditions” the policy read (as many policies do):

Action

Every action or proceeding against the insurer for recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.

What the plaintiff did not argue – and what may have saved them on appeal – was that an insurer who denies coverage has repudiated the policy and can no longer rely upon its technical terms[4].

The motion judge dismissed the insurer’s motion reasoning that the policy lacked the specific language necessary to override the applicable statutory limitation period of two years and that, in any event, the policy was not a “business agreement”. The insurer appealed.  

On appeal, the Court considered the foundational question of whether the policy did in fact provide for a one-year limitation period and, if it did, whether it was capable of overriding the otherwise applicable two year limitation period. The Court of Appeal answered all question in the affirmative and found in favour of the insurer. 

The Court held that the one-year limitation in the policy was written in clear and unambiguous language and that the policy qualified as a “business agreement” as neither party was a consumer acting for personal, family or household purposes – the policy was capable of overriding the Limitations Act.

The Court of Appeal’s decision is significant for any commercial insured but – in our view –should also be top of mind for those in the brokerage and legal community who can expect to be held to account by insured’s who are not made aware of a one-year limitation period in their policy.