Neutral Citation: 2017 ONFSCDRS 105 FSCO A14-005390

BETWEEN:

DHARAM SIDHU Applicant

and

PROGRESSIVE CASUALTY INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Barry S. Arbus, Q.C.

Heard: By written submissions due January 31, 2017

Appearances: Mr. Kevin Doan for Mr. Dharam Sidhu Mr. Debbie Orth for Progressive Casualty Insurance Company of Canada

Issues:

The Applicant, Mr. Dharam Sidhu, was injured in a motor vehicle accident which occurred on March 10, 1997. He applied for statutory accident benefits from Progressive Casualty Insurance Company of Canada (“Progressive”) payable under the SABS.¹ The parties were unable to resolve their disputes through mediation and the Applicant applied for arbitration at the Financial Services Commission of Ontario (“FSCO”) under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

The FSCO Mediation took place on June 1, 2004, where the parties agreed to resolve all claims for statutory accident benefits based on Progressive paying to the Applicant the sum of $27,500.00, and the Applicant was to provide a Full and Final Release of all claims to statutory accident benefits as a result of the motor vehicle accident in question.

On June 10, 2014, counsel for the Applicant notified Progressive that the Applicant rescinded the 2004 settlement and applied for Arbitration by way of a new Application for Arbitration claiming various medical benefits.

The issue in this Preliminary Issue Hearing is:

Is the Applicant precluded from proceeding to Arbitration and should his application be dismissed by virtue of the Doctrine of Laches?

Result:

The Applicant is not precluded from proceeding to Arbitration by virtue of the Doctrine of Laches.

EVIDENCE AND ANALYSIS:

Background

The Applicant was involved in a motor vehicle accident on March 10, 1997. He applied to the Insurer for accident benefits. On June 24, 2004, the parties reached an apparent full and final settlement in an amount of $27,500.00.

There is a question as to whether a Settlement Disclosure Notice (“SDN”) was provided by the Insurer as required by the Settlement Regulation. Ten years after the apparent settlement, on June 10, 2014, the Applicant, represented by his current counsel, purported to rescind the settlement and applied for Arbitration for statutory benefits under the Insurance Act, as amended.

The Insurer’s Position

Progressive claims that it no longer has a complete file to consult with respect to the 1997 accident, a number of crucial witnesses and documents are no longer available, and it has lost the opportunity to conduct timely medical examinations. Progressive states that it has tried, but has been unable to locate its records for the 1997 accident.

Progressive also states that the Applicant has failed to provide any explanation for his delay in rescinding the Settlement Agreement achieved in 2004.

Accordingly, Progressive feels that the Applicant should not be allowed to proceed to Arbitration, relying on the equitable Doctrine of Laches.

The Applicant’s Position

The Applicant takes the position that in exercising his legal rights under the relevant sections of the SABS, the Dispute Resolution Practice Code, and Ontario Regulation 664, he is not exercising an equitable claim but is, in fact, exercising his legal rights under the Insurance Act and therefore the Doctrine of Laches has no application.

Analysis and the Law

The relevant sections of the applicable legislation are section 9.1 and 9.2 of Ontario Regulation 664 (R.R.O. 1990, Reg. 664) which applies to settlements made on or after March 1, 2002. Section 9.1(2) provides that, “the insurer shall give the insured person a written disclosure notice, signed by the insurer, with respect to the settlement.” Section 9.1(4) provides, “the insured person may rescind the settlement within two business days after the later of the day the insured person signs the disclosure notice and the day the insured person signs the release.” Section 9.1(5) provides that, “the insured person may rescind the settlement…if the insurer has not complied with subsections (2) and (3).”

The Doctrine of Laches is a defence to an equitable action that bars recovery by a plaintiff because of the plaintiff’s undue delay in seeking relief. Cases in equity are distinguished from cases at law by the type of remedy, or judicial relief, sought by the plaintiff. Types of equitable relief include injunctions and claims for an accounting, where the court has the complete discretion in reviewing the facts of each case to determine whether relief is warranted. The Doctrine of Laches recognizes that a party to an action can lose evidence, witnesses disappear and a defendant does not have a fair chance to defend him or herself after the passage of time. The Doctrine of Laches is not to be confused with the “Statute of Limitations”, which sets specific periods within which to file a lawsuit for certain types of claims.

The Insurer relies on the case of Louis v. Lastman,² which is an Ontario Court of Appeal Decision where Justice Rosenberg stated that, “There is no statutory limitation period in Ontario for equitable claims such as rescission. However, equitable claims are to be brought promptly.” Justice Rosenberg then quotes Justice LaForest in M.K. v. M.H.³ where he stated, “Ultimately laches must be resolved as a matter of justice as between the parties, as is the case with any equitable doctrine.”

The Insurer states that it is being prejudiced because of the delay in the Applicant rescinding the settlement. In addition, the Insurer states that I, as the adjudicator, must consider the fact that adjusters who worked on the file originally are no longer working for the Insurer and their whereabouts are unknown. The Insurer states that its files are incomplete and there has been death of critical witnesses, all of which act to prejudice the Insurer.

It is important to note that Laches is ordinarily implied only to claims for equitable relief (such as injunctions), and not to claims for legal relief (such as damages). It is important, I believe, to differentiate claims for equitable relief to legal claims where the courts have held that the Doctrine of Laches does not apply.

The Applicant takes the position that in exercising his legal rights under sections 9.1 and 9.2 of the Regulations, he is not exercising an equitable claim but, in fact, is exercising his legal rights under the Insurance Act and therefore the Doctrine of Laches has no application.

The Applicant cites Intact v. Lombard,⁴ where the Court found that the defence of Laches could not be raised to defeat claims for legal relief.

In Aviva Canada Inc. and Cathy Tew,⁵ Director’s Delegate Richard Feldman stated that, “if it was intended that there be a time limit on such claims, it would be found in the Insurance Act and the Regulations thereunder. The Settlement Regulation provides no time limit on the right to rescind and it could easily have done so.”

The Applicant’s position is that if the legislature had intended there to be a time limit on the right to rescind a settlement by virtue of failure to comply with the Settlement Regulation in section 9, it would have inserted a time limit. It should be noted that an Applicant has two business days to rescind a settlement after completion of the Release and delivery of the SDN but no time limit has been inserted where there has been a failure to deliver the SDN.

Director’s Delegate Feldman quoted Justice Lederman in Navage v Pilot,⁶ where Justice Lederman stated that, “(1) There is no time limit on an insured’s right to rescind a settlement of statutory accident benefits; and, (2) because no action need be commenced to rescind such a settlement, the Limitations Act has no application to the exercise of this rescission right.”

The cases quoted by the Insurer all relate to attempts by one of the parties to apply for equitable relief where statutory limitation periods appear to be in place and the parties have requested the Courts to apply equitable relief to reopen a settlement or otherwise. The Insurer states that Laches can be relied upon to strike out an equitable claim. In the present case, the Applicant’s claim is not an equitable claim but is a legal claim based on a statute. In fact, it is the Insurer who is seeking to apply the equitable claim of Laches against the Applicant by virtue of the Applicant’s legal claim under the provisions of the Insurance Act.

Although I have sympathy for the Insurer because of its difficulty in collecting the appropriate material to deal with this incident 20 years after the fact, I conclude that the Doctrine of Laches with respect to the Applicant’s claim to rescind the Applicant’s Settlement Agreement has no validity.

Conclusion

In conclusion, I am satisfied that the Applicant’s Application for Arbitration should not be dismissed by virtue of the Doctrine of Laches.

EXPENSES:

The question of expenses related to this Preliminary Issue Hearing is deferred to the Hearing Arbitrator.

April 10, 2017

Barry S. Arbus, Q.C. Arbitrator

Date

Financial Services Commission of Ontario