Freudmann-Cohen et al. v. Tran et al.; Pizza Nova Restaurants et al., Third Parties
[Indexed as: Freudmann-Cohen v. Tran]
70 O.R. (3d) 667
[2004] O.J. No. 1699
Docket No. C40353
Court of Appeal for Ontario
Gillese, Armstrong and Blair JJ.A.
April 26, 2004
Insurance -- Subrogation -- Rule 29.01 of Rules of Civil Procedure permitting subrogated insurer to issue third party claim in its own name rather than in name of insured where conditions of rule 29.01 are met -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 29.01.
The defendants were the operator and owner of a motor vehicle that struck the plaintiff's vehicle, injuring her. The plaintiff's insurer was a defendant in the plaintiff's personal injury action because the defendants were underinsured and the plaintiff had asserted a claim under her underinsured motorist coverage pursuant to the insurer's Family Protection Endorsement O.E.F. 44. The insurer subsequently learned that the operator had been delivering pizza for a pizza franchise at the time of the accident and that the franchisee had insurance coverage. The insurer issued a third party claim against the franchisee pursuant to rule 29.01 of the Rules of Civil Procedure. The franchisee moved for an order striking out the third party claim as failing to disclose a reasonable cause of action or, in the alternative, for summary judgment dismissing the claim. It submitted that the insurer's only claim against it was a subrogated claim. As such, it had to be brought in the name of the insured (the plaintiff), and could not be brought as an independent third party claim in the name of the insurer. The franchisee also submitted that a subrogated action is a derivative action and the insurer accordingly had no greater right than the plaintiff. Since the limitation period for a claim by the plaintiff against the franchisee had expired, the insurer's claim was precluded as well. The motions judge dismissed the motion, and in so [page668] doing concluded that the insurer could bring the third party claim in its own name. The franchisee appealed.
Held, the appeal should be dismissed.
The provisions of rule 29.01 of the Rules of Civil Procedure permit a subrogated insurer to issue a third party claim in circumstances such as these. The amendments effected by rule 29.01 were intended to make substantial changes in the law; claims which could not previously have been asserted under the former Rule 167 may well be allowed under rule 29.01. The purpose of the new rule was to simplify third party procedure and to avoid multiplicity of proceedings. This promotes efficiency and expedition in litigation, lowers costs, and enhances accessibility to the system. The insurer relied on rule 29.01(c), which permits a defendant to commence a third party claim against any person who is not a party to the action and who "should be bound by the determination of an issue arising between the plaintiff and the defendant". While it is doubtful whether a procedural rule can override a substantive common law principle, the subrogation principle obliging the insurer to sue in the name of the insured is a procedural requirement itself, as opposed to a substantive obligation. While subrogation is a matter of substance rather than form, this aspect of subrogation is a matter of procedure to be followed in the exercise of the substantive right of subrogation. In the competition between two procedural principles -- the one founded in the law of subrogation; the other embodied in the provisions of rule 29.01 -- the objectives expressed in rule 29.01 should carry the day. The fact that the insurer had resorted to the third party procedure to put its subrogated claim on behalf of the plaintiff in play in the action did not mean that the insurer was asserting the plaintiff's claim against the franchisee in the insurer's own name. Rule 29.01 merely provides a mechanism whereby the defendant may ensure that an issue regarding which the third party should be bound is determined in the action; it is not necessary that that issue arise out of a claim whereby the defendant says the third party is or may be liable to the defendant. The insurer was entitled to resort to the third party rule in its own name in the circumstances of this case.
A subrogated claim is derivative, and it was the limitation period as between the plaintiff and the franchisee that was relevant. However, the question whether the franchisee had a limitation period defence could not be determined on the record at this stage. As there was a triable issue based on discoverability principles, the motions judge was correct in declining to grant summary judgment to the franchisee on the basis that the limitation period had expired.
APPEAL from an order of Dambrot J. (2003), 2003 35516 (ON SC), 66 O.R. (3d) 106, [2003] O.J. No. 2944 (S.C.J.) dismissing a motion for an order striking out a third party claim or, alternatively, for summary judgment dismissing a third party claim.
Maggio v. Lopes (1985), 1985 2228 (ON SC), 52 O.R. (2d) 694 (Div. Ct.), affg (1985), 1985 1986 (ON SC), 51 O.R. (2d) 441, [1985] I.L.R. Â1-1924, 1 C.P.C. (2d) 165 (S.C.); Matt (Litigation guardian of) v. Barber, 2002 45023 (ON CA), [2002] O.J. No. 3171, 216 D.L.R. (4th) 574 (C.A.); Royal Insurance Co. of Canada v. Aguiar (1984), 1984 2099 (ON CA), 48 O.R. (2d) 705, 7 O.A.C. 141, 16 D.L.R. (4th) 477, [1985] I.L.R. Â1-1868, 33 M.V.R. 133 (C.A.), distd Chatham Motors Ltd. v. Fidelity & Casualty Insurance Co. of New York (1983), 1983 1657 (ON SC), 149 D.L.R. (3d) 94, 42 O.R. (2d) 464 (Div. Ct.), consd Other cases referred to Carswell v. Traders General Insurance Co. (1987), 1987 9917 (ON SC), 20 C.P.C. (2d) 117, [1987] O.J. No. 2347 (H.C.J.), affg (1987), 1987 9956 (ON SC), 19 C.P.C. (2d) 126, [1987] O.J. No. 1508 (Dist. Ct.); Castellain v. Preston (1883), 11 Q.B. 380; DiGuilo v. Boland, 1958 92 (ON CA), [1958] O.R. 384, 13 D.L.R. (2d) 510 (C.A.); Gough v. Toronto and York Radial R.W. Co. (1918), 42 O.L.R. 415, [1918] O.J. No. 205 (C.A.); [page669] Harris v. Floyd (1991), 1991 7302 (ON SC), 7 O.R. (3d) 512, [1992] I.L.R. Â1-2836 (Gen. Div.); Morey v. Knipple (1994), 7 M.V.R. (3d) 134, [1994] O.J. No. 2181 (Gen. Div.); Nuvo Electronics Inc. v. London Assurance (2000), 47 C.P.C. (4th) 333, [2000] O.J. No. 808 (Div. Ct.); Sanga v. Bettridge (1994), 1994 1358 (ON CA), 17 O.R. (3d) 773, 113 D.L.R. (4th) 161, 3 M.V.R. (3d) 29 (C.A.); Simpson v. Thomson (1877), 3 App. Cas. 279 (H.L.); Somersall v. Friedman, [2002] 3 S.C.R. 109, 215 D.L.R. (4th) 577, 292 N.R. 1, [2002] I.L.R. Â1-4114, 2002 SCC 59, 25 M.V.R. (4th) 1, [2002] S.C.J. No. 60; Yorkshire Insurance Co. Ltd. v. Nisbet Shipping Co. Ltd., [1962] 2 Q.B. 330 Statutes referred to Highway Traffic Act, R.S.O. 1990, c. H.8, s. 206(3) [as am.; repealed S.O. 2002, c. 24, Sched. B, s. 25] Insurance Act, R.S.O. 1990, c. I.8, s. 278(1) Negligence Act, R.S.O. 1990, c. N.1, s. 8 [repealed S.O. 2002, c. 24, Sched. B, s. 25] Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 5.03(3), 29.01 Rules of Practice and Procedure of the Supreme Court of Ontario, R.R.O. 1980, Reg. 540, Rule 167 Authorities referred to Brown, C., Insurance Law in Canada, looseleaf ed. (Toronto: Carswell, 1999) (updated 2001, release 2) Watson, G.D., Holmested and Watson: Ontario Civil Procedure, vol. 1 (Toronto, Carswell, 2003)
No one appearing for plaintiff. R.A. Levin, for respondent Zurich Insurance Company. J.D. Strung, for appellants.
The judgment of the court was delivered by
1BLAIR J.A.: -- The court is called upon to resolve the interaction between two well-established principles on this appeal. The first of these is the tenet of insurance subrogation law that an insurer may sue only in the name of the insured in relation to a subrogated claim. The second relates to the policy underlying the third party provisions of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (rule 29.01), which seeks to promote efficiency, cost effectiveness and the avoidance of multiplicity of proceedings in civil actions. The tension arises because the respondent, Zurich Insurance Company, seeks to pursue, in its own name, what is in reality a subrograted claim on behalf of the plaintiff, by way of a third party claim against the appellants. The appeal also [page670] entails an examination of the nature of the subrogation right in the context of a limitation period defence.
Introduction
2The defendants Tran and Vu (the "Tran defendants") were respectively the operator and owner of a motor vehicle that struck another motor vehicle being operated by the plaintiff, Ms. Freudmann-Cohen. She was injured in the accident.
3Zurich is Ms. Freudmann-Cohen's insurer. It is a defendant in the action because the Tran defendants are underinsured and the plaintiffs have asserted a claim under their underinsured motorist coverage pursuant to Zurich's Family Protection Endorsement O.E.F. 44.
4Zurich subsequently learned that Mr. Tran had been delivering pizza for Pizza Nova franchise #81 at the time of the accident and that the franchisee had insurance coverage. Zurich then issued a third party claim against Pizza Nova Restaurants and Pizza Nova #81 (together "Pizza Nova") pursuant to rule 29.01 of the Rules of Civil Procedure.
5Pizza Nova moved for an order striking out the third party claim as failing to disclose a reasonable cause of action, or, in the alternative, for summary judgment dismissing the claim. Justice Dambrot dismissed the motion, and in so doing concluded that Zurich could bring the third party claim in its own name. Pizza Nova appeals from that decision.
6I would dismiss the appeal, for the reasons that follow.
Facts
7The accident occurred on October 15, 1993, and the action was commenced against the Tran defendants on October 10, 1995. On June 18, 1996, Zurich was added as a defendant, after the plaintiffs' solicitors formed the opinion that the Tran defendants were underinsured.
8For reasons that are not explained, Mr. Tran was not examined for discovery until April 30, 2001. At that time, Zurich became aware that he had been delivering pizza for Pizza Nova at the time of the accident. After further research, it discovered in February 2002 that Pizza Nova had Non-Owned Automobile Insurance Coverage. In May 2002, the plaintiffs consented to the issuance of Zurich's third party claim and, on June 12, 2002, the third party claim was issued against Pizza Nova.
9The Family Protection Endorsement-O.E.F. 44 is a prescribed form under the Insurance Act, R.S.O. 1990, c. I.8, as amended, for insertion into policies of automobile insurance [page671] where a premium is paid in consideration of which the insurer agrees to indemnify the insured for the amount that he or she is entitled to recover from an inadequately insured motorist. The insurer is then subrogated to the claimant's rights in accordance with s. 20 of O.E.F. 44, which states:
Where a claim is made under this endorsement, the insurer is subrogated to the rights of the eligible claimant by whom a claim is made, and may maintain an action in the name of that person against the inadequately insured motorist and the persons referred to in section 7.
10As Dambrot J. noted, it is common ground that Pizza Nova falls within s. 7.
11It appears to be common ground as well that the nature of the claim being asserted by Zurich is a subrogation claim. Although the claim is framed in terms of contribution and indemnity, contributory negligence and vicarious liability, it is in substance the claim that the plaintiffs could have made against Pizza Nova as Mr. Tran's employer, alleging that the appellants are jointly liable with Mr. Tran for the plaintiffs' claims. No explanation has been provided for why the plaintiffs have not themselves sought to add Pizza Nova as a party defendant, but they have not done so.
Analysis
12Pizza Nova's argument is two-fold. First, it submits that Zurich's only claim against it is a subrogated claim. As such, the claim must therefore be brought in the name of the insured (Freudmann-Cohen), by virtue both of the language of O.E.F. 44 and at common law; it cannot be brought as an independent third party claim in the name of the insurer, as Zurich has purported to do. Secondly, Pizza Nova argues that a subrogated action is a derivative action and Zurich accordingly has no greater right than the plaintiffs. Since the limitation period for a claim by the plaintiffs against Pizza Nova has expired, Zurich's claim is precluded as well. I shall refer to these arguments as "the third party/subrogation argument" and "the limitation period argument".
The third party/subrogation argument
13An insurer's right to bring a subrogated claim to enforce the rights of an insured, and to do so in the name of the insured, is now provided by s. 278(1) of the Insurance Act, R.S.O. 1990, c. I.8.
14The doctrine of subrogation is not confined to insurance law, but it has a strong foothold in that domain. The fundamental principle of insurance is indemnity, and subrogation law is [page672] closely aligned with that principle. A classic statement of the indemnity principle is found in the following passage from the judgment of Brett L.J. in Castellain v. Preston (1883), 11 Q.B. 380, at p. 386:
The very foundation, in my opinion, of every rule which has been applied to insurance law is this, namely, that the contract of insurance contained in a marine or fire policy is a contract of indemnity, and of indemnity only, and that this contract means that the assured, in case of a loss against which the policy has been made, shall be fully indemnified, but shall never be more than fully indemnified. That is the fundamental principle of insurance . . .
15Later in that same judgment Brett L.J. made the connection between indemnity and the doctrine of subrogation. He stated, at p. 387 Q.B.:
That doctrine (i.e., the doctrine of subrogation) does not arise upon any of the terms of the contract of insurance: it is only another proposition which has been adopted for the purpose of carrying out the fundamental rule which I have mentioned, and it is a doctrine in favour of the underwriters or insurers in order to prevent the assured from recovering more than a full indemnity; it has been adopted solely for that reason.
16The appellants' argument is based upon the common law notion whereby an insurer with a subrogated claim is said to be required to pursue that claim in the name of the insured; it cannot sue in its own name: Gough v. Toronto and York Radial R.W. Co. (1918), 42 O.L.R. 415, [1918] O.J. No. 205 (C.A.); Union Assurance Society v. British Columbia Electric Railway (1915), 1915 766 (BC CA), 8 W.W.R. 327 (B.C.C.A.); Metz v. Breland (1990), 1990 ABCA 303, 47 C.C.L.I. 107 (Alta. C.A.). Section 278(1) of the Insurance Act and O.E.F. 44 reflect this principle, providing, as they do, that the subrogated insurer "may maintain an action in the name of the insured [or the eligible claimant]". Accordingly, the appellants submit, the third party proceeding cannot be brought in the insurer's name.
17An analysis of this position requires an examination of the third party rule (rule 29.01) and its underpinnings, on the one hand, and the rationale underlying the subrogation principle requiring the insurer to sue in the name of the insured alone, on the other hand.
18The motions judge recognized the conflict between these two principles. At para. 13 of his reasons he said:
The position taken by E. Macdonald J. in Morey v. Knipple that the right of the insurer to subrogate should not be defeated by the technical impediment that it cannot, in the particular circumstances, bring the third party claim in the name of the insured, but only in its own name, is a fair and just position. It is consistent with the policy objective underlying the amendment to Rule 29 of having the rights of all the parties involved in the same factual situation determined without a multiplicity of proceedings. It does appear, however, to [page673] fly in the face of the words of OEF 44, and the common law, which both appear to permit the insurer to maintain an action of this sort only in the name of the insured.
19The motions judge had reservations about the reasoning in Morey v. Knipple, [1994] O.J. No. 2181, 7 M.V.R. (3d) 134 (Gen. Div.), which followed an earlier decision, Carswell v. Traders General Insurance Co. (1987), 1987 9956 (ON SC), 19 C.P.C. (2d) 126, [1987] O.J. No. 1508 (Dist. Ct.), affirmed (1987), 1987 9917 (ON SC), 20 C.P.C. (2d) 117, [1987] O.J. No. 2347 (H.C.J.). However, he felt obliged to follow the prevailing view as laid down in those authorities, particularly since the Divisional Court had approved the same approach in Nuvo Electronics Inc. v. London Assurance, [2000] O.J. No. 808, 47 C.P.C. (4th) 333 (Div. Ct.). Although there is some basis for the reservations of the motions judge, I am satisfied after considering the provisions of rule 29.01, and the policy underlying it, in the context of the nature of the subrogation rule in question, that his decision was correct.
20Rule 29.01 provides:
29.01 A defendant may commence a third party claim against any person who is not a party to the action and who,
(a) is or may be liable to the defendant for all or part of the plaintiff's claim;
(b) is or may be liable to the defendant for an independent claim for damages or other relief arising out of,
(i) a transaction or occurrence or series of transactions or occurrences involved in the main action, or
(ii) a related transaction or occurrence or series of transactions or occurrences; or
(c) should be bound by the determination of an issue arising between the plaintiff and the defendant.
21This language is quite different from the provisions of the third party rule, as it existed prior to 1985 [see Note 1 at end of the document]. Zurich submits that the changes are pivotal to the disposition of this matter and that they support Zurich's right to assert its third party claim. In effect, Zurich argues that rule 29.01 constitutes a procedural scheme, with the force of regulation, which overrides the normal subrogation principle requiring an insurer claiming a subrogated right to sue in the name of the insured in circumstances such as these. I agree. [page674]
22As several authorities have noted, the amendments effected by rule 29.01 were intended to make substantial changes in the law; claims which could not previously have been asserted under the former Rule 167 may well be allowed under rule 29.01: see Nuvo Electronics, Morey v. Knipple and Carswell v. Traders General Insurance Co., supra. In a notation to rule 29.01, the authors of Holmested and Watson, Ontario Civil Procedure, 2003, Volume 1, state, at p. 604:
The significance of this change should not be underestimated. It changes the very nature of a third party claim. No longer is it limited to situations designed to obtain "a flow through of recovery" to D from the third party because of the judgment that the plaintiff may obtain against the defendant. Instead, it is now a general joinder device by which a defendant may engraft on to the main action any "related claim" he or she may have against non-parties, subject to the severance power given to the court by rule 29.09.
23The purpose of the new rule was to simplify third party procedure and to avoid multiplicity of proceedings: Carswell v. Traders Insurance, at p. 129 C.P.C. This promotes efficiency and expedition in litigation, lowers costs, and enhances accessibility to the system. As E. Macdonald J. noted, in Morey at para. 26, one of "the policies underlying the amendment to the rules, as reflected in Rule 29 is the objective of having the rights of all parties involved in the same factual situation determined without a multiplicity of proceedings". See also Sanga v. Betteridge (1994), 1994 1358 (ON CA), 17 O.R. (3d) 773, 113 D.L.R. (4th) 161 (C.A.), at p. 777 O.R.
24It is significant, in my view, that under rule 29.01(c) -- the provision relied on by Zurich in this case -- it is not necessary for the person against whom the third party claim is asserted to be a person who "is or may be liable to the defendant". Rather, it is sufficient that the party sought to be added "should be bound by the determination of an issue arising between the plaintiff and the defendant". The fact that Zurich seeks to add Pizza Nova on the basis of a claim by which Pizza Nova is or may be liable to the plaintiff is not fatal to the operation of the third party procedure; in fact, it is exactly what that procedure is now designed to do (assuming the other criteria for its operation are also met).
25Pizza Nova argues that the requirement for an insurer, as subrogee, to sue in the name of the insured is not merely a "technical impediment", as the motions judge suggested, but rather a matter of substantive law. Therefore it must be adhered to. I agree it is doubtful whether a procedural rule -- desirable as its objectives may be -- can override a substantive common law principle. But is the insurance law requirement that Zurich put forward its claim in the name of the plaintiffs a matter of procedural or substantive law? [page675]
26There are cases that have allowed the third party procedural rule to supersede the common law requirement; however, they had done so without analysis of the rationale underlying the subrogation principle: see Morey, Carswell and Nuvo Electronics, supra. There are other authorities that have declined to do so: see Harris v. Floyd (1991), 1991 7302 (ON SC), 7 O.R. (3d) 512, [1992] I.L.R. Â1-2836 (Gen. Div.); Metz v. Breland (1990), 1990 ABCA 303, 47 C.C.L.I. 107 (Alta. C.A.).
27In my view, the provisions of rule 29.01 do permit a subrogated insurer to issue a third party claim in circumstances such as this. I have reached this conclusion because the subrogation principle obliging the insurer to sue in the name of the insured -- as well embedded in insurance law as it is -- is nonetheless a procedural requirement itself, as opposed to a substantive obligation. While subrogation is a matter of substance rather than form (see Somersall v. Friedman, 2002 SCC 59, [2002] 3 S.C.R. 109, per Binnie J. at para. 97), this aspect of subrogation is a matter of the procedure to be followed in the exercise of the substantive right of subrogation.
28To understand this conclusion it is important to understand the rationale underlying the principle that a subrogated insurer must sue in the name of the insured. That rationale has its roots in the need to provide a process by which the insurer would be able to exercise its subrogated rights. The principle of "indemnity-but-no-more-than-indemnity" required that the insured take -- or, on being indemnified as to costs, permit to be taken -- all steps within the insured's power to reduce the amount of loss for which indemnity had been received. This included exercising the insured's remedies against third parties. Since those remedies were remedies personal to the insured, however, they could only be exercised in the name of the insured as a matter of procedural law. The common law did not provide a method whereby a person could be compelled to commence an action against another; therefore, in the days before the Judicature Act, insurers would have to apply to the Chancery Court and equity would compel the insured to allow his or her name to be used for legal proceedings against third persons in order to reduce the loss. See Yorkshire Insurance Co. Ltd. v. Nisbet Shipping Co. Ltd., [1962] 2 Q.B. 330, per Diplock J. at p. 341.
29As Lord Cairns, the Lord Chancellor, noted in Simpson v. Thomson (1877), 3 App. Cas. 279 (H.L.), one of the early seminal cases on the subject, at p. 286:
My Lords, these authorities seem to me to be conclusive that the right of the underwriters is merely to make such claim for damages as the insured himself could have made, and it is for this reason that (according to the English mode of procedure) they would have to make it in his name . . .
(Emphasis added) [page676]
30Similarly, in the same case Lord Penzance said, at p. 293:
In England, the action must be in the name of the shipowner, not of the underwriters. I think this material, as shewing that it is the personal right of action of the shipowner, the benefit of which is transferred to the underwriters. In other systems of jurisprudence, or it may be in our own as altered hereafter, the assignee of such a right may be able to sue in his own name.
31The requirement to sue in the name of the insurance claimant is therefore procedural in origin, not substantive. A reference to assignment law is helpful by way of analogy, too. Although subrogation is not the equivalent of assignment, it has assignment-like aspects to it, as the comments of Lord Penzance indicate. Whether an assignee can or cannot sue in his or her own name is another facet of the law that is shrouded in mystery and history; but it is also based upon the personal nature of the claim being asserted. It is clear that this same type of requirement in assignment law is a procedural one. See rule 5.03(3); DiGuilo v. Boland, 1958 92 (ON CA), [1958] O.R. 384, 13 D.L.R. (2d) 510 (C.A.).
32If the common law requirement that a subrogee must sue in the name of the insured claimant is procedural in nature, the provisions of O.E.F. 44 that incorporate it are procedural as well, as are the provisions of s. 278(1) of the Insurance Act. I note in passing that neither of these provisions specify that the insurer must sue in the name of the insured, but merely that it may do so. This suggests they are designed to facilitate the insurer's subrogation right, not to circumscribe it. I am satisfied, therefore, that what is at issue here is a competition between two procedural principles -- the one founded in the law of subrogation; the other embodied in the provisions of rule 29.01 -- rather than between a procedural and a substantive right. In that competition the objectives expressed in the rule, namely, more effective and less costly litigation, and the avoidance of multiplicity of proceedings, should carry the day.
33The fact that Zurich has resorted to the third party procedure to put its subrogated claim on behalf of the plaintiffs in play in the action does not mean that Zurich is asserting the plaintiffs' claim against Pizza Nova in Zurich's own name. As I have earlier pointed out, rule 29.01 merely provides a mechanism whereby the defendant Zurich may ensure that an issue regarding which the third party should be bound is determined in the action; it is not necessary that that issue arise out of a claim whereby the defendant says the third party is or may be liable to the defendant. In my view, Zurich is entitled to resort to the third party rule in its own name in these circumstances.
34I am buttressed in my conclusion on this point -- again by way of analogy -- by the decision of Krever J. in [page677] Chatham Motors Ltd. v. Fidelity & Casualty Insurance Co. of New York (1983), 1983 1657 (ON SC), 42 O.R. (2d) 464, 149 D.L.R. (3d) 94 (Div. Ct.). There, an insured who was sued on a fidelity bond was entitled to institute third party proceedings against the employee of the insured alleged to have committed the fraud causing the loss, notwithstanding the defendant insurer was denying the claim and had not paid the insured. This state of affairs appeared to fly in the face of another deeply-entrenched principle of insurance subrogation law, namely, that the insurer must admit the claim and indemnify the insured before it can recover on its subrogated rights: see Brown, Insurance Law in Canada (Toronto: Carswell, 1999) [updated] 2001, Rel. 2, s. 13.3(a) and the cases therein referred to. This was said to preclude the insurer from suing before payment of the claim, and therefore from instituting third party proceedings before doing so. Krever J. rejected this argument in the procedural context. At pp. 469-70 O.R., pp. 99-100 D.L.R. he said:
. . . it must be emphasized that what is involved in this appeal is not the right of the defendant to recover from the third party before it has indemnified its insured, the plaintiff, but rather whether it is entitled to resort to third party proceedings. . . .
That an insurer may not recover on a subrogated claim of the insured against a third party is, I agree, substantive law. As a matter of principle, it does not seem to me that it necessarily follows that, as a matter of procedure, the insurer should therefore not be entitled to employ third party procedure unless it has first indemnified the insured, at least in the circumstances of this case.
35If as important a principle as the requirement that an insurer pay the claim before suing to recover on its subrogated rights can yield to the desired goal of promoting the disposition of all relevant issues between all relevant parties in one action, thus avoiding the multiplicity of proceedings, I see no reason in principle why the same result should not flow when the provisions of rule 29.01 collide with the procedural principle in subrogation law requiring the insurer to sue in the name of the insured.
36Mr. Strung concedes on behalf of the appellants that, leaving aside the third party/subrogation issue and the limitation period defence, Pizza Nova is a person who is not a party to the action but who "should be bound by the determination of an issue arising between the plaintiff and the defendant" pursuant to rule 29.01(c). The appellants fit into this category because of the limits of Zurich's coverage under s. 4 of O.E.F. 44, which provides:
The insurer's maximum liability under this endorsement . . . is the amount by which the limit of family protection coverage exceeds the total of all limits [page678] of motor vehicle liability insurance . . . of the inadequately insured motorist and of any person jointly liable with that motorist.
(Emphasis added)
37Thus, the issues that must be sorted out between the plaintiffs and Zurich in the main action include not only the amount, if any, by which the liability of the Tran defendants exceeds the limits of their own insurance coverage, but also the amount for which Pizza Nova (and therefore its insurer) may be liable. The question of Zurich's liability cannot be settled until the latter issue has been determined. Pizza Nova should be bound by that determination so that it cannot take a different position at a later time.
38Finally, I pause here to consider a decision the appellants submit the motions judge should have followed. In Maggio v. Lopes (1985), 1985 1986 (ON SC), 51 O.R. (2d) 441, 1 C.P.C. (2d) 165 (S.C.), affirmed (1985), 1985 2228 (ON SC), 52 O.R. (2d) 694 (Div. Ct.), Master Sandler refused to authorize third party proceedings by a defendant (being defended by an insurer) in a personal injury action against the plaintiff's no-fault insurer. The question whether a subrogated insurer, as a defendant, could claim in its own name, as opposed to the name of the insured, did not arise in that case, however. The plaintiff had the right to elect whether to sue the tortfeasor or to claim no-fault benefits. He chose the former route and there was no right in the tortfeasor's insurer to claim the no-fault benefits from his own insurer or to sue for them. There was therefore no issue in the action as between the plaintiff and the defendant regarding which the plaintiff's no-fault insurer should be bound. Accordingly, the third party claim was dismissed. The case is quite distinguishable from the case at bar and does not assist the appellants.
39I would not give effect, therefore, to the appellants' arguments on the third party/subrogation issue. A subrogated insurer is entitled to resort to rule 29.01 in its own name for purposes of instituting third party proceedings, provided the circumstances are such that the criteria set out in that Rule are otherwise met.
The limitation period argument
40The appellants' second argument is based upon the derivative nature of the subrogated claim. An insurer can be in no better position against a third party than the injured party would be: see Brown, Craig, Insurance Law in Canada, 2001, Rel. 2, s. 13.6; Royal Insurance Co. of Canada v. Aguiar (1984), 1984 2099 (ON CA), 48 O.R. (2d) 705, 16 D.L.R. (4th) 477 (C.A.); Matt (Litigation guardian of) v. Barber, 2002 45023 (ON CA), [2002] O.J. No. 3171, 216 D.L.R. (4th) 574 (C.A.). In [page679] the context of the present case, it is the plaintiffs' claim against Pizza Nova that Zurich seeks to have litigated. The appellants argue that that claim is statute barred and since the insurer can be in no better position against a third party than the insured, Zurich has nothing to which to be subrogated. Accordingly, the third party claim should be struck.
41A subrogated claim is derivative, and I agree that it is the limitation period as between the plaintiffs and Pizza Nova that is relevant for the purposes of disposing of this submission. The argument must also fail, however, on discoverability principles.
42The question whether Pizza Nova has a limitation period defence is a question that cannot be determined on the record at this stage. As there is a triable issue on the point, the motions judge was correct in declining to grant summary judgment to the appellants on the basis that the limitation period has expired.
43Neither Royal Insurance Co. of Canada v. Aguiar nor Matt (Litigation Guardian of) v. Barber, which are relied on by the appellants, are of assistance to them in these circumstances. In Aguiar, it was clear that the rights of the insured persons were barred by the limitation period; therefore the subrogated claim could not proceed. For the reasons outlined above, that cannot be said to be the case at this point in the proceedings here. Barber simply re-affirms the principle that the right of subrogation is derivative in nature, a point that is accepted, but not dispositive of the issues on this appeal.
44Given this conclusion, it is not necessary to determine whether the provisions of s. 206(3) of the Highway Traffic Act, R.S.O. 1990, c. H.8 [as am. S.O. 1998, c. 38] or of s. 8 of the Negligence Act, R.S.O. 1990, c. N.1, apply to assist Zurich.
A third argument
45The appellants raised a third argument in support of the position that Pizza Nova is not a party who should be bound by the determination of issues between the plaintiffs and the defendant, under rule 29.01(c). It is based upon the following logic. Since Pizza Nova cannot be found liable to either Zurich (which cannot sue in its own name) or to the plaintiffs (against whom the limitation period has run), there is no issue that the third parties should be bound by and no reason for them to be a party to the action.
46This argument is simply a reiteration of the issues discussed above, however, and cannot succeed for the reasons already outlined.
Disposition
47For the foregoing reasons, I would dismiss the appeal. [page680]
48In accordance with the agreement of counsel, costs are fixed at $3,000, all inclusive, payable by the appellants to the respondent.
Appeal dismissed.
Notes
- Prior to 1985, a third party claim was available only where a defendant claimed to be entitled to contribution or indemnity, or any other relief over, against any person not a party to the action: Rule 167(1) of the Rules of Practice and Procedure of the Supreme Court of Ontario, R.R.O. 1980, Reg. 540.
