A recent Ontario Court of Appeal decision appears to have determined the longstanding limitation period issues involving underinsured motorist coverage claims.
In Schmitz (Litigation Guardian of) v. Lombard General Insurance Co. of Canada,1 the Court concluded that the limitation period for an indemnity claim under the underinsured motorist coverage provided by the OPCF 44R begins to run the day after demand for indemnification is made and the insurer fails to satisfy the claim for indemnity.
The respondent, Schmitz, was struck by a car driven by Bakonyi. Schmitz sued Bakonyi for damages in excess of $1,000,000. Bakonyi’s coverage was limited to $1,000,000, so Schmitz brought the action against Lombard for indemnity under the OPCF 44R for those amounts owing in excess of $1,000,000.
Both parties agreed that the governing limitations legislation was section 4 of the Limitation Act, 2002,2 and not the 12-month limitation period in section 17 of the OPCF 44R. As such, the issue was when the limitation period began to run for underinsurance claims pursuant to OPCF 44R.
Section 17 of the OPCF 44R provides that:
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 exceed 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.
Additionally, section 5 of the Act provides that:
5. (1) A claim is discovered on the earlier of,
(a) the day on which the person with the claim first knew, ...
(ii) that the injury, loss of 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, ...
Lombard took the position that the limitation period began to run the moment the Plaintiff knew or ought to have known the quantum of their claim exceeded the Defendant’s policy limits of $1,000,000.
The Court of Appeal rejected this argument, concluding that the limitation period did not begin to run until the day after demand for indemnity was made and the insurer failed to satisfy its obligation. According to subsection 5(a)(ii) & (iii) of the Act, a second party insurer cannot be said to have failed to indemnify, and the claimant cannot be said to have suffered a loss, if there was no request for indemnification in the first place.
Lombard further argued that such an interpretation would permit a claimant to delay the limitation period indefinitely by not filing the claim, thus eliminating the limitation period all together. The Court rejected this argument stating that the insurer was adequately protected by section 14 of the OPCF-44R which states:
For the purposes of this change form, the findings of a court with respect to issues of quantum or liability are not binding on the insurer unless the insurer was provided with a reasonable opportunity to participate in those proceedings as a party.
This decision may embolden plaintiffs to take a wait and see approach, waiting to sue the OPCF-44R underinsurer until after final judgment obtained as this is the only time they will know whether they have a claim against the underinsurer. On the other hand, by employing the wait and see approach, the plaintiff runs the risk, pursuant to section 14, that the court’s findings will not be binding on the OPCF-44R underinsurer if it is deemed that they were not provided a reasonable opportunity to participate.
The meaning to be ascribed to a “reasonable opportunity to participate” is a question that the courts will need to address in the near future.