The Superior Court has released an important loss transfer decision, finding that the equitable “doctrine of laches” does not apply in loss transfer proceedings.
In Intact v. Lombard, Intact became responsible for paying accident benefits to its insured as a result of a motor vehicle accident that occurred on February 13, 2007. The accident involved a heavy commercial vehicle that Lombard insured, triggering Intact’s statutory right to claim loss transfer against Lombard pursuant to section 275 of the Insurance Act. However, Intact did not send Lombard a loss transfer notice or request for indemnification until September 7, 2011 (some 4.5 years after the date of loss).
Some readers might recall that the Court of Appeal held in Markel v. ING/Federation v. Kingsway (April 2012) that the limitation period for loss transfer claims starts the day after the second party insurer receives a loss transfer request for indemnification. On the facts of Intact v. Lombard, Intact did initiate arbitration within two years after it sent Lombard its request for indemnification.
However, Lombard refused to indemnify Intact, based on the amount of time that elapsed from the date of loss to Intact’s first indemnification request. Lombard relied on the equitable doctrine of laches, which is when a party asserts that the opposing party has “slept on its rights”. The doctrine is an equitable defence that can bar an opponent’s claim.
At arbitration, the arbitrator agreed with Lombard and held that the doctrine of laches applied to bar Intact’s loss transfer claim in its entirety, based on the delayed loss transfer notice. As the doctrine of laches applied, the arbitrator held that it did not matter whether Intact had initiated arbitration within two years after Lombard received Intact’s first indemnification request. The effect of the arbitrator’s Award also barred Intact from recovering any present or future accident benefits payments.
On appeal, the judge disagreed with the arbitrator and held that the doctrine of laches does not apply in loss transfer matters. She held that the insurer’s loss transfer right was purely statutory (under section 275 of the Insurance Act). She noted that unlike other types of claims where laches might apply, loss transfer claims did not have a “distinctively equitable flavour”. She found that loss transfer claims were “devoid of equitable relief” and that it would inappropriate to grant the equitable laches defence to this type of statutory claim.
Interestingly, the judge also found that the arbitrator’s application of laches to the facts of the case was unreasonable. In other words, had she found that the doctrine of laches applied to loss transfer matters, she then would have found that it did not apply against Intact in any event.
In short, this is what insurers need to know about loss transfer limitations:
- A two-year limitation period is triggered when the first party insurer sends the second party insurer a loss transfer request for indemnification (technically the clock starts the day after the second party insurer receives the request).
There is some debate in the industry as to whether sending a Notification of Loss Transfer form starts a clock. My view, based on the Court of Appeal’s decision in the Markel/Federation cases, is that only a loss transfer request for indemnification starts the clock.
- The first party insurer controls the process. It decides unilaterally when it will send a loss transfer request. A delay in sending the initial loss transfer notice/request is seen as a reservation of rights instead of a waiver of rights.
This discussion applies only to loss transfer matters. Priority dispute matters are subject to different limitation periods.
A link to the decision will be available once it is posted on CanLii.
Lombard has until October 15 to decide whether to seek leave from the Court of Appeal to appeal the decision.