Court File and Parties

Court of Appeal for Ontario Date: 20210528 Docket: C68481

Rouleau, Benotto and Thorburn JJ.A.

Between:

Bibi Saffora Rooplal Plaintiff (Respondent)

and

Leslie Patrick Fodor, Toronto Transit Commission, John Doe Driver, John Doe Owner and Novex Insurance Company Defendants (Appellants / Respondent)

Counsel: J. Thomas Curry, Adam H. Kanji, and Chad Townsend, for the appellants, Leslie Patrick Fodor, Toronto Transit Commission, and Toronto Transit Commission Insurance Robert R. Patterson and Naresh C. Misir, for the respondent, Bibi Saffora Rooplal Maseeh M. Sidky, for the respondent, Novex Insurance Company

Heard: February 3, 2021 by video conference

On appeal from the order of the Divisional Court (Justices Harriet E. Sachs, Todd Ducharme, and William M. LeMay), dated December 11, 2019, with reasons reported at 2019 ONSC 7211, 59 M.V.R. (7th) 40, affirming the order of Justice Victoria R. Chiappetta of the Superior Court of Justice, dated August 20, 2018, with reasons reported at 2018 ONSC 4985, 143 O.R. (3d) 149.

Thorburn J.A.:

Overview

[1] The respondent, Bibi Saffora Rooplal, was injured while riding a Toronto Transit Commission (“TTC”) bus. She was told by the bus driver that the accident was caused by an unidentified motorist.

[2] Ms. Rooplal brought a claim against the unidentified motorist, the TTC, and the bus driver, Leslie Fodor, for damages resulting from the accident. In the same action she brought a claim against her insurer, Novex Insurance Company (“Novex”), for declaratory relief and to indemnify her for damages caused by the unidentified motorist.

[3] She later sought to add the appellant Toronto Transit Commission Insurance (“TTC Insurance”) as a party defendant, seeking declaratory relief and indemnification for damages caused by the unidentified motorist pursuant to s. 265 of the Insurance Act, R.S.O. 1990, c. I.8 and Uninsured Automobile Coverage, R.R.O. 1990, Reg. 676 (“Regulation 676”). TTC Insurance took the position that this should not be permitted as the claim against TTC Insurance was statute-barred by s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (“the Limitations Act”).

[4] The motion judge permitted the claim against TTC Insurance to proceed on the basis that the two-year limitation period for commencing a claim set out in s. 4 of the Limitations Act had not expired as, under the criteria set out in s. 5, Ms. Rooplal had not yet discovered her claim against the insurer.

[5] The motion judge held that the limitation period for the indemnification claim against TTC Insurance does not begin to run until “the day after [Ms. Rooplal] made an indemnification claim which [TTC Insurance] failed to satisfy. Since [Ms. Rooplal] made her motion to add [TTC Insurance] as a defendant before making a claim that [TTC Insurance] failed to satisfy, the limitation period has not expired.” That decision was upheld by the Divisional Court, adopting the reasons of the motion judge.

[6] Leslie Fodor, the TTC, and TTC Insurance appeal the decision of the Divisional Court.

[7] The issue on this appeal is when the limitation period begins to run on the claim for indemnification against TTC Insurance.

[8] TTC Insurance submits that the limitation period begins to run when Ms. Rooplal knew or ought to have known the unidentified motorist was at fault. TTC says this was when she received the police report.

[9] Ms. Rooplal claims the two-year limitation period does not begin to run until the insurer denies her claim for indemnification under the contract of insurance. In the alternative, she claims that even if the limitation period began to run when she knew or ought to have known there was a tort claim against the unidentified motorist, she did not have evidence of how the accident happened until the TTC bus driver was examined for discovery. Ms. Rooplal served her motion to add TTC Insurance less than two years thereafter. Novex makes no submissions on the appeal.

[10] For the reasons that follow, I find that the limitation period for bringing a claim against TTC Insurance for declaratory relief and indemnification for damages caused by the unidentified motorist has not expired.

[11] Before conducting the legal analysis, I will briefly outline the underlying accident, the pleadings, the terms of insurance, and the relevant provisions of the Limitations Act.

Background

(1) The Accident

[12] On May 4, 2012, Ms. Rooplal was a passenger in a TTC bus driven by Leslie Fodor. The bus braked sharply, causing Ms. Rooplal to be propelled forward and strike her head on an interior bar pole. She was told by the TTC that the bus stopped suddenly as another car cut it off.

[13] On February 24, 2014, Ms. Rooplal’s counsel received the accident report from the Toronto Police Service. The report cites the information provided by the TTC driver and provides that the accident occurred when an unidentified vehicle caused the TTC bus to brake suddenly to avoid a collision.

[14] At the time of the accident, Ms. Rooplal had a valid motor vehicle insurance policy with Novex, which included a family protection coverage endorsement under Ontario Policy Change Form 44R (“OPCF-44R”). TTC was self-insured by TTC Insurance.

(2) The Pleadings

[15] On March 26, 2014, Ms. Rooplal filed her Statement of Claim against the unidentified motorist, the unidentified owner, the TTC, and the TTC bus driver for damages caused by the accident. She also sought a declaration and indemnification from her insurer, Novex, “up to the full policy limits, including but not limited to OPCF-44R family protection coverage, for any and all damages, injuries and losses resulting from the motor vehicle accident”. Ms. Rooplal claims she suffered permanent and serious injuries as a result of the accident and seeks damages in the amount of $800,000.

[16] Ms. Rooplal claimed that her Family Protection Coverage endorsement with Novex, under the OPCF-44R, “provides coverage to persons insured under the contract for loss and injuries sustained as a result of the actions of an unknown operator of an unidentified motor vehicle pursuant to section 265(1) of the Insurance Act, R.S.O. 1990, c. 1.8.” She also pleads that “the incident was caused or contributed to by the negligence of the owner and/or operator of the [unidentified] Doe Vehicle.”

[17] On September 11, 2014, Novex served its Statement of Defence and Crossclaim against the TTC and its driver denying Ms. Rooplal’s claim for unidentified motorist insurance. At para. 5 of the Statement of Defence (para. 7, in the amended pleading) Novex pleads that Ms. Rooplal has no “cause of action as against it, until she obtains judgment as against any of the co-defendants, a determination is made that any of the co-defendants are uninsured and the plaintiff is unable to satisfy the said judgment as against the assets of any of the other co‑defendants.”

[18] On May 7, 2015, examinations for discovery were completed. On December 10, 2015, counsel for Novex wrote to Ms. Rooplal’s counsel, copying TTC’s counsel, and stated that “it was my understanding that plaintiff’s counsel would be amending his client’s claim to include the TTC insurer to the action. Can you please confirm that this is the case?”

[19] On March 16, 2017, Novex amended its Statement of Defence and Crossclaim to plead that:

5. This defendant specifically denies that it is the insurer for the purposes of coverage for incidents or accidents caused by or contributed to by the negligence of the owner and/or operator of an unidentified and/or uninsured motor vehicle.
6. Further, this defendant states that the plaintiff was a passenger/occupant in the co-defendant TTC vehicle and any claims pursuant to unidentified and uninsured provisions and/or section 265 of the Insurance Act, R.S.O. 1990, c. I.8 ought to be against the co-defendant TTC vehicle's policy and not this defendant. [Emphasis omitted.]

[20] Shortly thereafter, Ms. Rooplal brought a motion to amend her Statement of Claim to add TTC Insurance as a party defendant. TTC Insurance opposed the motion on the grounds that the limitation period had expired.

[21] The proposed claim against TTC Insurance is for a declaration that, at the time of the accident, Ms. Rooplal was an occupant of a vehicle insured by TTC Insurance and an insured pursuant to that policy, and that TTC Insurance must indemnify her for all damages caused by the unidentified motorist up to the policy limits.

(3) The Terms of Insurance

[22] Where an unidentified motorist is at fault, there may be no means of securing compensation for an injury from the unidentified motorist, as the motorist and the motorist’s insurer may never be identified. In Ontario, there are two means of addressing this gap in coverage: (i) mandatory uninsured/unidentified motorist coverage, under s. 265 of the Insurance Act; and (ii) optional OPCF-44R family protection coverage.

Section 265 unidentified automobile insurance

[23] The Insurance Act requires that all automobile insurance policies provide coverage for accidents involving an unidentified motorist. Section 265(1) of the Insurance Act provides that:

Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that, (a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile; … subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations. [Emphasis added.]

[24] Section 265(2) of the Insurance Act defines “person insured under the contract” for the purpose of a claim for bodily injuries as, among other things, “any person while an occupant of the insured automobile”.

Regulation 676 of the Insurance Act

[25] Regulation 676 sets out additional obligations on insureds seeking to pursue a claim for indemnification pursuant to s. 265 Insurance Act in the attached Schedule “Uninsured Automobile Coverage” (“the Schedule”): R.R.O. 1990, Reg. 676.

[26] Section 1 of Regulation 676 provides that:

The terms, conditions, provisions, exclusions and limits set out in the following Schedule apply to payments under a motor vehicle liability policy under subsection 265 (1) of the Act and shall be attached to or included in every motor vehicle liability policy, as a Schedule in or to the policy.

[27] The Schedule referred to in s. 1 of Regulation 676 provides, at s. 8 (“Limitations”), that “[n]o person is entitled to bring an action to recover an amount provided for under the contract, as required by subsection 265 (1) of the Act, unless the requirements of this Schedule with respect to the claim have been complied with”. The requirements include the following:

• Section 2(1)(c): The s. 265 insurer is not liable to pay the claim if the insured “is entitled to recover money under the third-party liability section of a motor vehicle liability policy.” This is known as “the 1% rule” as, if another insured is found to be even 1% liable for the accident, the s. 265 insurer is exempt from liability. In other words, the s. 265 insurer is only liable in the last resort.
• Section 3: The person injured in an unidentified motorist accident must report the accident to police in a timely manner and notify the s. 265 issuer within 30 days of the accident or as soon as is practicable and provide certain details to the s. 265 insurer.
• Section 4(1)(c): The determination of whether the insured is entitled to damages and, if so, the amount, may be determined by the courts. Unless a liability determination has already been made by another court, the insurer may defend both liability and damages.
• Section 5(1): Where an insured commences a tort action for damages against a person involved in the accident, a copy of the writ of summons or other proceeding shall be delivered or sent by registered mail immediately to the insurer.
• Section 5(2): If the claimant obtains a judgment against the other person but is unable to recover or fully recover the amount of that judgment, subject to the 1% rule discussed above, the s. 265 insurer must make the claimant whole. This section also permits the s. 265 insurer to require the assignment of the judgment prior to paying the claimant.
• Section 6: A person making a claim shall do so by (i) giving written notice to the insurer within 30 days of the accident or as soon as is practicable after that date; (ii) giving the insurer proof of the accident, the resulting loss, and the claim within 90 days of the accident or as soon as is practicable; (iii) providing the insurer with a certificate stating the cause of injury or death and the nature of the injury, and the expected duration of any disability; and (iv) providing the details of any other insurance policy, other than life insurance, to which the claimant may have recourse.

[28] Any claim brought pursuant to s. 265 of the Insurance Act must comply with the notification requirements set out in the Schedule contained in Regulation 676.

OPCF-44R Family Protection Coverage

[29] In addition to the mandatory statutory unidentified motorist insurance, an insured may elect to purchase OPCF-44R insurance coverage, which may be purchased as an endorsement to the standard Ontario motor vehicle insurance Owner’s Policy.

[30] The OPCF-44R endorsement provides additional coverage for the named insured and their family, including for unidentified motorist claims. As “the occupant of any other vehicle” in an accident caused by an unidentified motorist, an insured may seek indemnification under an OPCF-44R policy for the injuries sustained in an accident caused by an unidentified motorist.

[31] However, and importantly for the purpose of the underlying action, s. 7 of the OPCF-44R provides that coverage under this policy is excess to any amount received elsewhere and to other amounts available from uninsured automobile coverage under any other valid motor vehicle policy.

(4) The Limitations Act

[32] Section 4 of the Limitations Act, 2002 provides that “a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered”, unless the Act provides otherwise.

[33] Section 5(1) of the Act provides that:

A claim is discovered on the earlier of (a) The day on which the person with the claim first knew, (i) that the injury, loss or damage had occurred, (ii) that the injury, loss or 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, and (iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate remedy to seek to remedy it; and (b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

[34] The requirements under s. 5(1)(a) are conjunctive, and all must be met for a claim to be discovered: Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, 323 O.A.C. 246, at para. 41; Apotex Inc. v. Nordion (Canada) Inc., 2019 ONCA 23, 431 D.L.R. (4th) 262, at para. 78.

The Issue

[35] The issue for this court is a narrow one: Is Ms. Rooplal’s claim against TTC Insurance for unidentified motorist coverage, statute-barred by ss. 4 and 5 of the Limitations Act? Resolving this question requires this court to determine when Ms. Rooplal discovered, or ought to have discovered, her claim against the purported s. 265 insurer, TTC Insurance. In other words, what is the act or omission of TTC Insurance that caused the plaintiff’s loss?

The Decision Below

[36] The motion judge considered this court’s pre-Limitations Act jurisprudence and then outlined the changes occasioned by the Limitations Act.

[37] The motion judge referred to July v. Neal (1986), 32 D.L.R. (4th) 463 (Ont. C.A.), a case heard before the changes to the Limitations Act. July was a passenger in a three-party collision including an unidentified motorist. MacKinnon A.C.J.O, for the majority, held that the limitation period began when “the cause of action against the insurer arose” meaning “when the material facts on which the claim is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence”: p. 469.

[38] The motion judge in this case noted that the test changed with the 2002 enactment of the Limitations Act.

[39] She referred to Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, 109 O.R. (3d) 652, the leading case interpreting the limitation period under s. 4 of the Limitations Act in the context of the Insurance Act. Markel was a loss-transfer claim between two insurers, for indemnification for statutory accident benefits paid to an insured. In that case, the limitation period did not begin until the first insurer’s request for indemnification was received by the second insurer.

[40] She also referred to the decision of this court in Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88, 118 O.R. (3d) 694, leave to appeal refused, [2014] S.C.C.A. No. 143, a case involving an insured’s claim against their own insurer under the OPCF-44R endorsement. The court in Schmitz held that the reasoning in Markel was “dispositive” of the limitations issue such that claim for indemnity under the OPCF-44R did not start to run until there is a demand for indemnity and default of the obligation to indemnify the insured.

[41] After reviewing the changes in the law, the motion judge observed, at para. 29, that:

The Limitations Act discoverability provisions are based upon the common law principles of discoverability. However, the statute provides a discoverability definition that is much more nuanced and complex. The detailed discoverability definition was not before the Court of Appeal nor contemplated by it in July. While the general discoverability doctrine set out in July remains unchanged by the Limitations Act pronouncement, the discoverability definition in the test enunciated by MacKinnon J. must now be interpreted in accordance with the Limitations Act's definition of "discovered". In this regard, the Court of Appeal's analysis in Markel and Schmitz cannot be ignored. It is binding on this court. [Emphasis added.]

[42] The motion judge held that, although this is not a loss-transfer case or a claim against the OPCF-44R insurer, the analysis in Markel and Schmitz applies. In her view, Ms. Rooplal could not be said to know that there is a loss “caused” by an “omission” of the unidentified motorist insurer, i.e. TTC Insurance, until she asserted a claim for indemnification against TCC Insurance: see Limitations Act, ss. 5(1)(a)(i)-(iii). The motion judge concluded that “the limitation period begins to run … on the first day of default after the demand for indemnification is made.” Accordingly, Ms. Rooplal’s claim against TTC Insurance was not statute-barred.

[43] The appeal to the Divisional Court was dismissed for the reasons of the motion judge.

Analysis

(1) The Standard of Review

[44] Whether Ms. Rooplal’s claim against TTC Insurance is statute-barred requires this court to interpret both the Limitations Act and the Insurance Act’s unidentified motorist provisions. All parties agree that this is a question of law, subject to correctness review: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at paras. 8-9.

(2) The Parties’ Positions

[45] The appellant TTC Insurance’s position is that the motion judge and the Divisional Court erred in finding that this court’s pre-Limitations Act jurisprudence no longer governs a claim brought against a s. 265 insurer for unidentified motorist coverage. TTC Insurance submits that the framework developed in Markel and Schmitz was not meant to apply to such claims and both cases are readily distinguishable. Moreover, in TTC Insurance’s view, “[t]o hold that the limitation period does not commence until the Plaintiff has made an indemnification demand to the TTC Insurance would produce an absurd result”, namely that the plaintiff could potentially lie in wait indefinitely before bringing a claim against the s. 265 insurer.

[46] Several other lower court decisions applied the same reasoning as the motion judge and TTC submits these decisions are wrongly decided: see e.g. Chahine and Al-Dahak v. Grybas, 2014 ONSC 4698, 38 C.C.L.I. (5th) 282; Platero v. Pollock, 2015 ONSC 2922, 49 C.C.L.I. (5th) 212; Sukhu v. Bascombe, 2018 ONSC 2878.

[47] The respondent, Ms. Rooplal, submits that the analysis in Markel and Schmitz applies and no absurdity arises from the motion judge’s decision. First, this is not a stale claim as TTC Insurance and the TCC are effectively indistinguishable, sharing the same premises and counsel. Furthermore, s. 6 of the Schedule contained in Regulation 676 sets out notice requirements for any claim brought against a s. 265 insurer.

(3) The pre-Limitations Act Jurisprudence

[48] Before the Limitations Act, the courts applied a limitation period contained in the then-current regulations to the Insurance Act. Section 8(2) of the relevant schedule held that the limitation period for claims for damages caused by an unidentified motorist was “two years from the date on which the cause of action against the insurer arose”. [1] This court found that the plaintiff discovered that “the cause of action arose” when the material facts on which an action is based were discovered or ought to have been discovered by the plaintiff’s exercise of reasonable diligence: see July; Johnson v. Wunderlich (1986), 34 D.L.R. (4th) 120 (Ont. C.A.); Hier v. Allstate Insurance Co. of Canada (1988), 51 D.L.R. (4th) 1 (Ont. C.A.); and Chambo v. Musseau (1993), 106 D.L.R. (4th) 757 (Ont. C.A.).

[49] In July v. Neal, the plaintiff was a passenger in a vehicle owned and operated by a family member named Neal. Neal’s vehicle was in an accident involving two other vehicles. The driver of one of those other vehicles was unidentified. The accident report stated that an unidentified vehicle was involved in the accident. After the examinations for discovery, counsel for the plaintiff wrote the plaintiff’s insurer to advise that the plaintiff would be looking to it for the “loss that may be found to be caused by the hit and run driver”.

[50] The plaintiff brought a claim against Neal within two years of the accident but waited more than two years to bring a claim for unidentified motorist coverage against the insurer. MacKinnon, A.C.J.O. observed at pp. 466-7 that in cases where both an unidentified driver and a third-party identified driver may be at fault:

I have had great difficulty in interpreting the intended effect of the relevant legislation and regulation. It seems to me that the drafters of the legislation were considering the usual case of an insured motorist involved in an accident with a hit-and-run driver. There is no difficulty in such cases in requiring the motorist to commence his action within the two-year-time-limit from the date of the accident. The complicating factor in the instant case … is the existence of an identified motorist, Neal, who was involved in the accident and who is a defendant.

[51] He concluded that the limitation period begins to run, “when the material facts on which the claim is based have been discovered or ought to have been discovered” and held that it would be up to the trial judge, after hearing the evidence, to determine when the material facts, including the potential liability of an unidentified motorist or its insurer, ought to have been discovered. Under the 1% rule, if any liability rested with another defendant, the s. 265 insurer would not be required to indemnify the plaintiff.

[52] Later that year, in Johnson v. Wunderlich (1986), this court applied a similar analysis to an uninsured motorist accident. The plaintiffs, Lionel and David Johnson, were involved in an accident with a vehicle owned by Linda Wunderlich and operated by Michael Wunderlich. Both Johnsons and Mr. Wunderlich were killed in the accident and no appearance was entered by the defendants. The defendants’ motor vehicle was uninsured. The plaintiffs moved to add their insurer as a party more than two years after the accident. The insurer sought a declaration that the claim was time-barred.

[53] Morden J.A. (as he then was) rejected the plaintiffs’ argument that the plaintiffs were simply enforcing the judgment against the tortfeasor in seeking indemnity from the insurer, such that the limitation period did not begin to run until all of the conditions precedent for a claim against the insurer had been satisfied, namely: submission of the notice and proof of claim; determination of legal liability and the amount of damages; a finding that the plaintiffs were entitled to damages from the owner or driver of the uninsured automobile; the judgment remained unsatisfied; and a request for payment from the insurer had been made and refused. Instead, at pp. 128-129, he held that this was a ‘direct action’ against the insurer, and that:

[T]he elements of this cause of action are (1) a person insured (2) who is legally entitled to recover damages from the owner or driver of (3) an uninsured or unidentified automobile. (Implicit in this is that the damages have resulted from an accident involving the automobile.) The cause of action accrues when the plaintiff (the person insured) has discovered these material facts or ought to have discovered them by the exercise of reasonable diligence. See July v. Neal (1986), 57 O.R. (2d) 218, 44 M.V.R. 1, 19 C.C.L.I. 230, 12 C.P.C. (2d) 303, (Ont. C.A.).

[T]he appellants did not submit that the cause of action does not arise until the insurer has denied liability on the contract. Notwithstanding that the form of the insurer’s obligation is contractual (legislatively imposed) I do not read the relevant provisions as making a denial of liability a constituent element of the direct claim. In other words, an action commenced before denial of liability would not be premature from a cause-of-action perspective.

[54] Morden J.A. concluded, however, that “it cannot be determined that an action for recovery is barred by the terms of s. 8(2) of the Schedule,” because it was unclear whether the plaintiffs’ action was for declaratory relief or for recovery against the insurer, and actions for declaratory relief were not subject to the two-year limitation period in s. 8(2) of the Schedule at that time. Accordingly, he dismissed the insurer’s argument on the limitation period.

[55] Finlayson J.A. agreed in the result but would have found that the limitation period had not expired. At p. 137, he explained:

While the matter is not free from doubt, it is my opinion that an action against the insurer is an action for breach of contract and the cause of action arises from the date of the breach. This breach occurs when the insurer denies liability or the insured knows or ought to know that his claim will not be honoured.

[56] The case of Hier v. Allstate Insurance Co. of Canada (1988), involved a two‑party hit-and-run accident. There was no question that the insured knew on the day of the accident that his vehicle was hit and was entitled to damages from the unidentified motorist. Goodman J.A. held, at p. 12, that:

In the case at bar the respondent (plaintiff) was insured by Allstate's policy, he was according to the trial judge, legally entitled to recover damages from the unidentified automobile, and he was aware on the date of the accident that the other motor vehicle involved, its owner and operator were all unidentified. On those facts, it is my opinion, that the limitation period commenced to run from the date of the accident and the respondent’s action was barred under s. 8(2). All of the necessary elements to establish a “cause of action” were established and as such, the action against the insurer, brought more than two years after the accident, was time-barred. [Emphasis added.]

[57] Finally, in Chambo v. Musseau (1993), the plaintiff was injured in an accident she claimed was caused by another driver who was uninsured. Her claim against the insurer was brought more than two years after the accident. In that case, Osborne J.A. allowed the plaintiff’s appeal and order that the action proceed to trial. In so doing, he distinguished an action against the uninsured motorist from an action for coverage brought against the insurer. At p. 765, he explained:

[I]t makes no difference whether the insurer and the tortfeasor are sued in the same action, or whether the insurer alone is named as a defendant (as happened here). Nor does it matter if, as occurred in Johnson v. Wunderlich, the insurer is added as a defendant after the commencement of the action against the tortfeasor. If the uninsured owner/driver and the insurer are both sued, the cause of action asserted against the tortfeasor is different from the cause of action asserted against the insurer. The former is in negligence; the latter is for payment under a contract, albeit one imposed by statute. Different limitation periods apply. … The s. 8(2) limitation period [for a claim against the insurer] is two years from the date on which the insured person knew, or with the exercise of reasonable diligence could have established, that the tortfeasor’s motor vehicle was uninsured. [Emphasis added; see also p. 766.]

[58] In sum, prior to the Limitations Act, 2002, the two-year limitation period for a claim for indemnification was triggered when the person knew or ought to have known the material facts giving rise to the cause of action, namely: (1) the plaintiff was injured and (2) was legally entitled to recover damages from the owner or driver of (3) an uninsured or unidentified automobile. It was recognized that determining when the cause of action arose on a claim for indemnification was more difficult where there were multiple possible tortfeasors one of whom was unidentified or uninsured. The claim against the insurer is a claim founded in the insurance contract imposed by statute, not a tort action, and dependant on the plaintiff knowing or with reasonable diligence being able to establish that no other tortfeasor is even 1% liable. As such, (except in Hier, where the insured knew on the day of the accident that he was entitled to damages only from the unidentified motorist and therefore a claim could be brought against the insurer), the appellate cases from this court found that the commencement of the limitation period was a factual matter to be resolved by the trial judge.

(4) The Limitations Act and Related Jurisprudence

[59] The Limitations Act, 2002 supersedes the limitation period set out in s. 8(2) of the Schedule contained in Regulation 676: see Limitations Act, s. 19(1). The two-year limitation period set out in s. 4 of the Limitations Act does not refer to “when the cause of action arises”. Rather, the wording is when the “claim [is] discovered.”

[60] Section 5 of Act determines when a claim is discovered. It provides that a claim is discovered when the plaintiff knows or ought to have known (i) that they have suffered injury or loss (ii) by an act or omission that is (iii) “that of the person against whom the claim is made” and (iv) it is appropriate to commence a legal proceeding.

[61] Of particular note is the requirement of s. 5(1)(a)(iii): the claim discovered only when a plaintiff learns that their injury was caused by the acts or omissions of the person against whom the claim is made. In other contexts, this court has held it is an error to overlook this particular requirement imposed by s. 5(a)(iii): see Morrison v. Barzo, 2018 ONCA 979, 144 O.R. (3d) 600, at paras. 35, 47.

[62] The consequences of this requirement are illustrated by Markel Insurance Company of Canada v. ING Insurance Company of Canada (2012) and Schmitz v. Lombard General Insurance Company of Canada (2014). Those cases stand for the proposition that the plaintiff suffers a loss when the insurer fails to satisfy its legal obligation under the policy.

[63] Markel concerned two collisions, both of which involved an automobile and a tractor-trailer. In both cases, the insureds’ right to insurance benefits was not in issue. The dispute was which insurer was responsible for payment of the benefits to the insured under s. 275 of the Insurance Act. [2] The plaintiff drivers’ insurers asked the tractor-trailers’ insurers to indemnify them for some of the payments made to the insured. The tractor-trailer insurers did not make the payments requested. Both tractor-trailer insurers claimed that the limitation period for the loss-transfer claims had passed.

[64] Sharpe J.A. reviewed the discoverability requirements of the Limitations Act. He noted that the new limitations regime required him to focus his analysis on the four elements of s. 5(1)(a). At para. 24, he observed:

Items (ii) and (iii) require that the second party insurer must have done or omitted to do something that can be said to have caused a loss. The second party insurer cannot be said to have omitted to indemnify if there was no request for indemnification. It follows that items (ii) and (iii) cannot be satisfied until the first party insurer has asserted the loss transfer claim against the second party insurer to trigger a legally enforceable claim or obligation.

[65] With this in mind, he reasoned that, once the request for indemnification has been sent, “[a]ll the facts are present to trigger the legal obligation of the part of the second party insurer to indemnify the first party insurer for the loss. The situation has crystallized into a complete and valid legal claim that is immediately enforceable against the second party insurer.” According, he held, at para. 27, that the first-party insurer ‘discovers’ the loss caused by the second-party insurer “the moment the second party insurer can be said to have failed to satisfy its legal obligation to satisfy the loss transfer claim … [which is] the day after the Request for Indemnification is made.”

[66] In other words, the party demanding indemnification did not know it had a loss resulting from the second insurer’s wrongdoing and that it was appropriate to commence a proceeding until a demand for indemnification was made that was not satisfied by the insurer. Until then, the claim was not “discovered” within the meaning of the Limitations Act.

[67] Schmitz involved a claim for indemnity for underinsured motorist coverage pursuant to an optional OPCF-44R endorsement. The plaintiff brought a claim against the underinsured tortfeasor in a timely manner but did not bring a claim against the OPCF-44R insurer for excess damages until nearly four years after the accident. On appeal, the OPCF-44R insurer argued that two-year limitation period under s. 4 of the Limitations Act began to run at the time the plaintiff knew or ought to know that their claim against the uninsured tortfeasor exceeded the limitations of the tortfeasor’s coverage.

[68] The court rejected the insurer’s argument, holding that “this court’s recent decision in Markel is dispositive of the issue of when the s. 5 limitation period begins to run in respect of a claim under the OPCF 44R.” The court did not accept that this would result in prejudice to the insurer, observing that “[t]here are a number of ways in which underinsurers can protect their interests including … a provision requiring the insured to provide timely notice to the insurer when he knew or ought to have known he was underinsured.”

(5) Analysis and Application of the Law

[69] TTC Insurance asks this court to distinguish Markel and Schmitz. Notwithstanding the language in s. 5 of the Limitations Act, they argue that Ms. Rooplal discovered her claim against TTC Insurance when she learned of the involvement of an unidentified driver who was potentially liable for her injuries.

[70] TCC Insurance urges that Markel and Schmitz “are appropriate for their own unique contextual circumstances” but inapt for claims against s. 265 insurers. TTC Insurance points out that this case is different from Markel as there the only issue to be determined was which of two insurers was responsible for the payment. Similarly, Schmitz concerned a contractual dispute between insured and insurer, not the statutory provisions in s. 265, so the contract-based framework articulated in Markel was arguably more appropriately adopted there than in this case.

[71] In July and this case, by contrast, tort liability had not been determined among the defendants and the s. 265 insurer’s liability depended on a finding that no other party was even 1% liable. In July, this court held that discovery of the cause of action could only be decided by the trial judge after hearing evidence.

[72] Section 5 of the Limitations Act, 2002 was enacted to bring greater clarity and certainty to the determination of when a limitation period commences, as described in the recommendations of Limitations Act Consultation Group: see Recommendations for a New Limitations Act (Toronto: Ministry of the Attorney General of Ontario, 1991). Unless the Limitations Act provides otherwise, a proceeding must be commenced within two years of when “a claim is discovered”, that is, when the plaintiff knows, or ought to have known they have suffered loss, injury or damage caused by or contributed to by the acts or omissions “of the person against whom the claim is made” (emphasis added) and that it is appropriate to commence a proceeding: ss. 4 and 5(1).

[73] The importance of isolating the wrongful act of each particular defendant has been emphasized by this court. It is not enough that the plaintiff has suffered some loss from some act or omission. As Strathy C.J.O. explained in Apotex, at para. 86, discovery requires that the person with the claim “know that the ‘injury, loss or damage had occurred’ (s. 5(1)(a)(i)), that it was caused or contributed to by the act or omission (the breach of contract) (s. 5 (i)(a)(ii)), and that the act or omission was that of the defendant (s. 5(1)(a)(iii))” (emphasis in original).

Has Ms. Rooplal discovered her claim under s. 5 of the Limitations Act?

[74] Ms. Rooplal’s proposed Amended Statement of Claim asserts a claim in negligence against the unidentified motorist, the TTC, and the TTC driver; and a claim for declaratory relief and indemnity in contract against TTC Insurance for damages resulting from the actions of the unidentified motorist up to the s. 265 policy limit.

[75] There is a distinction to be drawn between knowledge of the act or omission of the unidentified motorist, for which (but for practical impediments) damages in tort may be sought, and the act or omission of the insurer for which indemnification pursuant to the insurance policy is sought. TTC Insurance suggests that this court should ignore this distinction as, in effect, “the insurer stands in the shoes of the uninsured or unidentified tortfeasor” in a claim brought under s. 265 of the Insurance Act: quoting Kosanovic v. Wawanesa Mutual Insurance Co. (2004), 237 D.L.R. (4th) 441 (Ont. C.A.), at para. 7. TTC Insurance also directs this court’s attention to several other post-Limitations Act, 2002 decisions from the lower courts, which have applied the July discovery rules to unidentified motorist cases: see Galego v. Pereira (2005), 207 O.A.C. 384 (Div. Ct.); Bhatt v. Doe, 2018 ONSC 950; Wilkinson v. Braithwaite, 2011 ONSC 2356.

[76] I disagree.

[77] Section 5(1)(a)(iii) of the Limitations Act makes clear that Ms. Rooplal only “discovers” her claim against TTC Insurance when she knows or ought to know that TTC Insurance did or omitted to do something that caused her loss or damage. Only then is her claim “discovered” such that the two-year limitation period under s. 4 of the Limitations Act begins to run. The requirements of s. 5(1)(a) are conjunctive: Longo at para. 41. In this case, there is no evidence Ms. Rooplal has made any demand for indemnification.

[78] I note that Kosanovic does not assist TTC Insurance as that case did not concern limitation periods and the quoted language was only a shorthand summary of the s. 265 scheme. Nor does Galego address the Limitations Act. Bhatt and Wilkinson do not address the s. 5 criteria for discovery of a claim.

Does public policy warrant the maintenance of the July framework?

[79] In resisting this conclusion, TTC Insurance invites this court to depart from the wording of the Limitations Act and suggests that “[p]ublic policy surrounding the use of limitation period favours using the tortfeasor’s ‘act or omission’ … as the relevant benchmark for the discover of a claim under s. 265.”

[80] I do not accept this submission.

[81] The modern principle of statutory interpretation provides that “the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, at para. 21, quoting Elmer A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), at p. 87.

[82] The ordinary sense of s. 5(1) of the Limitations Act is clear. A claim is discovered when plaintiff knows, or ought to have known, that the act or omission causing the plaintiff’s loss “was that of the person against whom the claim is made” (emphasis added). Ms. Rooplal’s claim is not against the unidentified tortfeasor, it is against TTC Insurance.

[83] The Limitations Act was intended to provide a comprehensive limitations scheme that applies to all court proceedings “[u]nless this Act provides otherwise”: s. 4. There is no evidence that the legislature intended to permit exceptions to the s. 5 discovery rules other than those identified by the Act. Indeed, some provisions in the Insurance Act are specifically excluded from the Limitations Act’s ambit: see Limitations Act, s. 19(1) and schedule. There is no such exclusion for claims under the contractual provisions mandated by s. 265.

[84] This court is not free to depart from the Limitations Act simply because it may reflect poor policy. There is however a presumption against absurdity.

[85] TTC Insurance claims the requirements of s. 5 of the Limitations Act may, at first glance, appear to create a seemingly undesirable outcome: The plaintiff could control the limitation period by delaying her demand to indemnify. Further, as noted above, the insurer need only indemnify the plaintiff if no other party is even 1% liable. TTC Insurance asserts that, if the limitation period on the plaintiff’s claim against the s. 265 insurer does not begin to run until the plaintiff demands indemnification, the plaintiff can delay bringing the claim against the insurer until after the tort action against other potentially liable parties has been determined. This could result in a multiplicity of proceedings, as TTC Insurance is permitted to defend liability on the request for indemnification under Regulation 676: Schedule, s. 4(1)(c).

[86] However, the consequences of the limitation analysis must be considered harmoniously with the scheme of the Insurance Act as a whole. In this case, the requirements set out in s. 8(1) of the Schedule contained in Regulation 676 provide that:

No person is entitled to bring an action to recover an amount provided for under the contract, as required by subsection 265 (1) of the [Insurance Act] unless the requirements of this Schedule with respect to the claim have been complied with.

[87] Whether or not a party chooses to commence a claim against the insurer, insurers must be provided with knowledge of the underlying accident, as Regulation 676 and the Schedule are terms and conditions of the contract of insurance. Among other things, the Schedule requires a potential claimant for unidentified motorist coverage to provide the purported s. 265 insurer with: (a) a statement setting out the details of the accident including whether it was caused by an unidentified motorist and what damages were suffered within 30 days or as soon as practicable (s. 3); (b) written notice of the claim against the insurer and the circumstances thereof within 30 days or as soon as practicable (s. 6).

[88] Read as a whole, therefore, the statutory scheme provides some safeguards against the threats identified by TTC Insurance. As Hoegg J.A. for the Newfoundland and Labrador Court of Appeal observed in Tucker v. Unknown Person, 2015 NLCA 21, 365 Nfld. & P.E.I.R. 307, leave to appeal refused, [2015] S.C.C.A. No. 250, at paras. 22-23, an insurer faced with a potential unidentified motorist claim may begin the limitation period by refusing to indemnify a s. 265 claimant after receipt of timely notice, as required by the regulation. In this manner, the insurer retains control of the limitation period.

[89] Ms. Rooplal served her motion to add TTC Insurance as a defendant to the action on May 4, 2017, five years after the accident and three years after she commenced her claim against the TTC, the TTC driver, and her own insurer.

[90] Although the two-year limitation period for her claim against TTC Insurance has not expired, it is not clear from the record whether Ms. Rooplal fulfilled the notice obligations set out in the Schedule contained in Regulation 676 and Ms. Rooplal’s compliance with those requirements is not before this court.

Summary and Disposition

[91] Ms. Rooplal pleads that she is an insured under the TTC Insurance policy for unidentified motorist coverage pursuant to s. 265 of the Insurance Act.

[92] Section 5 of the Limitations Act determines when a claim is discovered. It provides that a claim is discovered when the plaintiff knows or ought to know: (a) she has suffered a loss or injury, (b) by an act or omission that is, (c) “that of the person against whom the claim is made”, and (d) it is appropriate to commence a legal proceeding.

[93] In her tort claim against the unidentified motorist “John Doe”, the unidentified owner “John Doe”, the TTC, and the TTC driver, Ms. Rooplal pleaded that “the incident was caused or contributed to by the negligence of the owner and/or operator of the [unidentified] Doe vehicle”.

[94] If either the TTC or the TTC bus driver is in any way contributorily negligent for even 1% of her losses, Ms. Rooplal has no right to declaratory relief or indemnification from TTC Insurance.

[95] Ms. Rooplal “discovers” her claim against TTC Insurance when she knows or ought to know that TTC Insurance did or omitted to do something that caused her loss or damage. The act or omission is the failure to indemnify her for the damage caused by the unidentified driver as required by the policy of insurance.

[96] The public policy concerns expressed by TTC Insurance are addressed in the Schedule contained in Regulation 676 which requires an insured who commences a legal action for damages against any person owning or operating an automobile involved in the accident provide a copy of the writ of summons to the insurer and written notice of the claim within thirty days after the accident or as soon as is practicable after that date: Regulation 676, Schedule, ss. 5 and 6. The insurer is therefore apprised of the claim against unidentified motorist and can take appropriate steps to protect its interests in the proceeding.

[97] For the above reasons, the limitation period has not expired and, as a result, I would dismiss the appeal.

[98] In accordance with the agreement between the parties to this appeal, costs to the respondent Ms. Rooplal in the amount of $15,000 for the appeal on the merits in addition to $800 for the leave to appeal.

Released: May 28, 2021 “P.R.” “J.A. Thorburn J.A.” “I agree. Paul Rouleau J.A.” “I agree. M.L. Benotto J.A.”

Corrected Decision

Corrections made June 4, 2021: The title of proceedings was amended to include Novex Insurance Company as a respondent. Paragraph 9 was amended to indicate that Novex made no submissions on the appeal and para. 98 was amended to clarify that costs are payable only to the respondent Bibi Saffora Rooplal.

Correction made July 5, 2021: Paragraph 98 was corrected to award costs of $800 to the respondent Ms. Rooplal for the leave to appeal, in accordance with the agreement between the parties.

Footnotes

[1] Prior to the enactment of Regulation 676 in 1990, the relevant regulation was R.R.O. 1980, Reg. 535.

[2] Section 275 and the regulations permit the payor insurer to recover from the insurer of the other vehicle involved in the collision where that other vehicle is a heavy commercial vehicle at fault.