Galego v. State Farm Mutual Automobile Insurance Company et al. [Indexed as: Galego v. State Farm Mutual Automobile Insurance Co.]
77 O.R. (3d) 434
[2005] O.J. No. 3866
Court File No. 744/03
Ontario Superior Court of Justice
Divisional Court,
Lax J.
September 14, 2005
Limitations -- Insurance -- Actions against insurer -- Phrase "legally entitled to recover damages" meaning that insured person must establish that uninsured or unidentified owner or driver was at fault -- Phrase not importing requirement that there must be prior judicial determination of issue -- Limitation period for direct action against insurer beginning to run when insured knew or ought to have known that she had claim based on fault of uninsured motorist.
The insured was allegedly injured in a May 1998 motor vehicle accident involving an unidentified motorist. She did not make any claim against her insurer in respect of that accident, but commenced an action in November 2001 against her former solicitor P, pleading that P failed to issue a statement of claim against the tortfeasors within the two-year limitation period. The insured subsequently brought a motion to amend her statement of claim to add a claim against the insurer in respect of the 1998 accident. The master determined that the action was statute-barred and refused to permit the amendment. P appealed.
Held, the appeal should be dismissed.
The elements of a direct cause of action against an insurer are: (1) a person insured (2) who is legally entitled to recover damages from (3) an uninsured tortfeasor. The words "legally entitled to recover damages" do not import a requirement that there must be prior judicial determination of the issue. Otherwise there would be no purpose in having a direct action. The relevant time for determining the limitation period against the insurer is when the insured knew or ought reasonably to have known the material facts of the cause of action against the tortfeasor, i.e., that the tortfeasor was uninsured. The insurer informed the insured in 1998 that the alleged tortfeasor was uninsured. The insured knew that she had a claim based on the fault of an uninsured motorist more than two years before she sought to amend her statement of claim. The claim against the insurer was statute-barred.
APPEAL from the order dismissing a motion to amend a statement of claim.
Johnson v. Wunderlich (1986), 1986 2618 (ON CA), 57 O.R. (2d) 600, [1986] O.J. No. 1251, 34 D.L.R. (4th) 120, [1987] I.L.R. para. 1-2155, 45 M.V.R. 184, 18 O.A.C. 89 (C.A.), apld Other cases referred to Chambo v. Musseau (1993), 1993 8680 (ON CA), 15 O.R. (3d) 305, [1993] O.J. No. 2140, 106 D.L.R. (4th) 757, 49 M.V.R. (2d) 111 (C.A.); Somersall v. Friedman, [2002] 3 S.C.R. 109, [2002] S.C.J. No. 60, 215 D.L.R. (4th) 577, [2002] I.L.R. ÂI-4114, 2002 SCC 59, 25 M.V.R. (4th) 1
T. Bates, for appellant, Carlos Pereira. P. Duda, for respondent, State Farm Mutual Automobile Insurance Company. [page435]
[1] Endorsement by LAX J.:-- This is an appeal from an Order of Master Dash refusing to allow the plaintiff to amend her Statement of Claim to add a further cause of action against the defendant, State Farm, for injuries suffered as a result of a motor vehicle accident on May 30, 1998 involving an uninsured motorist.
[2] The plaintiff sued in one action for injuries sustained in motor vehicle accidents that occurred on May 30, 1998, November 22, 1999 and November 2, 2001. The Statement of Claim was issued on November 21, 2001 and alleges that the 1998 accident occurred when another vehicle ran a stop sign into the path of the plaintiff's vehicle resulting in a collision that caused injury to the plaintiff. Although the plaintiff claimed damages against the defendant/respondent, State Farm, pursuant to the unidentified motorist provisions of her policy in respect of the 1999 accident, she did not make any claim against the motorist or State Farm in respect of the 1998 accident. She claims in respect of this accident against her former solicitor, the defendant, Carlos Pereira, and pleads in para. 8 that "[Pereira] failed to issue a statement of claim against the tortfeasors within the two years from the date that the plaintiff discovered that her injuries had resulted in a serious impairment sufficient to pierce the statu tory immunity".
[3] In July 2003, the plaintiff served a motion record seeking to add a claim against State Farm in respect of the 1998 accident. Master Dash determined that the action against State Farm was statute-barred. As the pleading was not tenable at law, he refused to permit the amendments. The defendant, Pereira, appeals.
[4] The elements of a direct cause of action against an insurer are: (1) a person insured [(2)] who is legally entitled to recover damages from the owner or driver of (3) an uninsured motorist. The cause of action arises when the plaintiff discovers or ought to have discovered through reasonable diligence these material facts: Johnson v. Wunderlich (1986), 1986 2618 (ON CA), 57 O.R. (2d) 600, [1986] O.J. No. 1251 (C.A.).
[5] Master Dash determined that the plaintiff had admitted the first and third elements of the cause of action. The appellant takes no issue with this. With respect to the second element, that is, whether or not the plaintiff has shown that she is "legally entitled to recover damages", he referred to para. 8 of the Statement of Claim and determined that this established the second element. The appellant submits that he erred in so finding.
[6] The phrase "legally entitled to recover damages" was considered in Johnson, supra, where the majority of the Court of Appeal held at p. 609 O.R. that that these words do not import a requirement that there must be prior judicial determination of [page436] the issue. The court goes on to say that the words mean"simply that the person insured must establish that the uninsured or unidentified owner or driver is at fault and the amount of the damages". In Somersall v. Friedman, 2002 SCC 59, [2002] 3 S.C.R. 109, [2002] S.C.J. No. 60, the court explains that Johnson reduced an insured's obligation to a "mere showing" that she was legally entitled to recover damages from the tortfeasor. There is no requirement of an actual determination of fault and damages and a corresponding award. Otherwise, there would be no purpose in having a direct action.
[7] The appellant's position is that before a limitation period can operate against an insurer, the plaintiff must establish that she is "legally entitled to recover damages". Counsel for the appellant suggested that the plaintiff could show this through an agreement with the insured, a stipulation by the insured or arbitration. This submission confuses the obligation of an insured to establish the constituent elements of a cause of action in the course of an action against the insurer with the determination of the operation of a limitation period against the insurer. They are different matters.
[8] The relevant time for determining the limitation period against the insurer is when the insured knew or ought reasonably to have known the material facts of the cause of action against the tortfeasor, i.e., that the tortfeasor was uninsured: Somersall, supra, at para. 22. Morden J.A. states in Johnson, at p. 60 O.R. that"... the cause of action relating to a direct action for recovery against the insurer arises: when the plaintiff, the person insured, has discovered or ought to have discovered with the exercise of reasonable diligence that he has a claim against his insurer based on the fault of the driver of an uninsured automobile". See also, Chambo v. Musseau (1993), 1993 8680 (ON CA), 15 O.R. (3d) 305, [1993] O.J. No. 2140 (C.A.), where the insured had not sued the tortfeasor within time. The court held that the time for an action against an insurer does not run from the date of the accident unless the insured person knew, or ought to have known, at that time that the tortfeasor was uninsured.
[9] These cases stand for the proposition that the operation of limitation periods against the tortfeasor is irrelevant to the availability of a direct action against the insurer. In other words, the plaintiff may bring an action against the insurer without first establishing that she could have brought an action against the tortfeasor. In an action against the insurer, the plaintiff must establish the three elements of the cause of action referred to in Johnson. The second element is established if the plaintiff can show that the tortfeasor was at fault and the amount of the [page437] damages. Presumably, if the insured is unable to show this, the action against the insurer will be dismissed. However, this is irrelevant to the determination of the operation of a limitation period in an action brought by an insured against the insurer. The proper question was not whether the plaintiff satisfied the elements of the cause of action against the insurer, but when she knew or ought to have known that she had a claim based on the fault of an uninsured motorist.
[10] In this case, the plaintiff admits that State Farm informed her in 1998 that the alleged tortfeasor was uninsured. She testified on her examination for discovery that when she retained Mr. Pereira on August 11, 1999, she informed him of this. In the Statement of Claim, she alleges that Mr. Pereira failed to commence an action within two years of the applicable limitation period against the uninsured motorist. Mr. Pereira disputes the extent of his retainer, but there can be no doubt that the plaintiff knew that she had a claim based on the fault of an uninsured motorist more than two years before she sought to amend the Statement of Claim in July 2003.
[11] Master Dash came to the correct result in concluding that the limitation period against State Farm had expired. I would not interfere with his decision or grant the alternative relief set out in the Notice of Appeal. The appeal is therefore dismissed.
[12] At the conclusion of the argument, I neglected to ask counsel to provide me with their respective Costs Outlines. If I receive these within five days, I will fix the costs of the appeal. Otherwise, I will assume that costs are agreed.
Appeal dismissed.