Court File and Parties

COURT FILE NO.: CV-09-390257 DATE: 20170306

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KEVIN PEPPER Plaintiff – and – SANMINA-SCI SYSTEMS (CANADA) INC. and THE STANDARD LIFE ASSURANCE COMPANY OF CANADA Defendants

COUNSEL: Brian A. Pickard for the Plaintiff Elizabeth Bennett-Martin and Stephen Simpson for the Defendant The Standard Life Assurance Company of Canada

HEARD: February 21, 2017

PERELL, J.

REASONS FOR DECISION

A. Introduction

[1] On February 17, 2010, Kevin Pepper sued The Standard Life Assurance Company of Canada (“Standard Life”) for payment of long-term disability (“LTD”) benefits. Standard Life brings a summary judgment motion to have the action as against it dismissed as statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.

[2] Mr. Pepper brings a cross-motion for a declaration that his action against Standard Life is not statute-barred and for a judgment dismissing Standard Life’s limitation period defence.

[3] For the reasons that follow, I grant Mr. Pepper’s cross-motion and I dismiss Standard Life’s motion.

B. Evidentiary Background

[4] Standard Life’s motion was supported by the affidavit of Laura Finlayson sworn October 28, 2016. Ms. Finlayson is a Senior Claims Consultant at The Manufacturer's Life Insurance Company, which is the successor to Standard Life. She was cross-examined.

[5] Mr. Pepper’s cross-motion was supported by his affidavit sworn November 24, 2016, and the affidavit of Richard Levin sworn November 24, 2016. Mr. Levin is the lawyer who was retained to prosecute Mr. Pepper’s claim against Standard Life. Messrs. Pepper and Levin were cross-examined.

[6] For the purposes of the summary judgment motions, Mr. Pepper also relied on evidence from the examination for discovery of Marie-Jose Poirier, a representative of Standard Life.

C. Factual and Procedural Background

1. The Accident

[7] Mr. Pepper was employed as a punch-press operator at Sanmina-Sci Systems (Canada) Inc. (“Sanmina-Sci”), and he was an insured under Standard Life Group Policy No. 14913, which provided disability benefits, including short-term disability (“STD”) benefits and LTD benefits.

[8] On March 13, 2005, Mr. Pepper fell out of a chair and struck his spine on a raised platform. As a result of the accident, he was unable to work, and he alleges that he suffers from chronic pain syndrome and is unable to return to work.

2. The Claim for STD Benefits

[9] Standard Life initially refused to provide Mr. Pepper with STD benefits, but ultimately it paid STD benefits retroactively from March 21, 2005 to September 18, 2005, and then it progressively paid STD from September 18, 2005 to May 2007.

[10] More precisely, on January 7, 2005, Standard Life sent Mr. Pepper a letter denying his claim for STD; the letter stated:

Should you wish to appeal our decision, please forward written notification of your intent to appeal to our office including the reasons why you disagree with our decision. Your appeal should include additional information that is not currently on file, such as any office notes from your family doctor or other physicians that you have seen, specialists’ notes, detailed narratives, signs and symptoms of your condition, test results and treatment plans and frequency of treatment, etc. Please be advised that any expenses incurred obtaining this information are your responsibility.

[11] Here it should be noted that there is nothing in this particular Standard Life group insurance policy that provides a right to appeal or any appeal process for claimants that are denied benefits and so there was no contractual obligation on Standard Life to allow appeals or an alternative dispute resolution process, apart perhaps from an insurer’s good faith obligation to respond to appeals of its decision about benefits.

[12] Between June 7, 2005 and May 8, 2006, Mr. Pepper took up the invitation to provide additional information about his disability and, notwithstanding the denial of the claim, Standard Life advised Mr. Pepper to continue to submit more information. The letters to Mr. Pepper typically stated:

Once we have received and reviewed all of the requested information we will notify you of our decision. In the meantime, your file remains closed.

[13] On Standard Life’s discovery, Ms. Poirier stated that the “closed file” reference, was “only a technical status in the system,” and file status could be changed at any time.

[14] During the period between June 2005 and May 2006, Standard Life wrote Mr. Pepper as follows: (a) on June 7, 2005, it wrote that it was denying STD benefits, but Mr. Pepper could appeal; (b) on June 22, 2005, it wrote to advise that his claim was under review; (c) on July 18, 2005, it wrote him to advise that its decision was unchanged, but the decision could be appealed; (d) on August 25, 2005, it wrote him to advise that his claim was under review; (e) on September 21, 2005, it wrote him again to say that its decision was unchanged, but he could make a further appeal; (f) on November 14, 2005, it advised him that it will conduct a review of his claim; (g) on November 25, 2005, it wrote requesting more information to review its decision; (h) on March 2, 2006, it wrote to advise that his claim was still under review; (i) on March 6, 2006, it wrote him to advise that it was arranging a Functional Abilities Evaluation and an Independent Medical Examination; (j) on May 1, 2006, it advised Dr. Axler, Mr. Pepper’s doctor, that it was assessing Mr. Pepper’s claim; and (k) on May 8, 2006, it advised Mr. Pepper that it was reversing its decision and re-instating his STD claim.

[15] In the result, Mr. Pepper received STD benefits, some retrospectively and some progressively.

[16] On the summary judgment motion, Mr. Pepper deposed that he believed that there had never been a denial of his STD claim because Standard Life was always continuing to review it.

3. The Claim for LTD Benefits

[17] On May 17, 2006, Standard Life wrote Mr. Pepper and advised him that his LTD claim had been approved. Thus, his STD benefits became LTD benefits.

[18] About nine months passed, and on February 13, 2007, Standard Life advised Mr. Pepper that it was arranging for a return to work program for him.

[19] On February 20, 2007, Standard Life wrote Mr. Pepper and advised that it had not determined whether he would continue to qualify for LTD after September 19, 2007. The letter stated:

This letter is written with reference to your claim for Long Term Disability (LTD) benefits.

As previously communicated to you, the definition of Total Disability changes on September 19, 2007 to "any occupation" basis. At this time, with the medical evidence on file, we are unable to determine whether or not you will meet the change of definition and be eligible for benefits beyond September 19, 2007.

In order to assess your claim for disability benefits beyond the definition change date, we will be reviewing your vocational history in conjunction with medical information available on file. As part of our ongoing review of your claim, we continue to look for medical management and rehabilitation opportunities and services that will contribute to your recovery. To accomplish this, our Rehab Specialist is actively involved and coordinating your rehabilitation program that has a final goal of improving your ability to function and return to gainful employment.

[20] On April 10, 2007, Standard Life wrote to advise that it was still evaluating his claim, but would continue to pay him LTD benefits in the meantime.

[21] By letter dated August 15, 2007, Standard Life advised Mr. Pepper that he no longer met the definition of “total disability” under the insurance policy and, therefore, did not qualify for LTD.

[22] The August 15, 2007 letter indicated that there were no medically supported or impairment based restrictions and limitations that would prevent or preclude Mr. Pepper from working and that his claim for LTD benefits was terminated beyond September 19, 2007. The letter stated:

We are writing to advise you of the status of your claim for Long Term Disability benefits.

We advised you in previous correspondence that on September 19, 2007, the "any occupation" definition of total disability under your policy would take effect.

We have completed our review of your file for ongoing eligibility for Long Term Disability (LTD) and Waiver of Premium benefits based upon the entire medical documentation available on file, the Independent Medical Examination (IME) report of June 21, 2007 and relevant provisions. It is our determination that you no longer meet the definition of total disability for own occupation and subsequently to the extent required by the “any occupation" definition of total disability under your po1icy. Therefore, your claim for disability benefits beyond September 19, 2007 has been terminated.

Our decision was based on the medical and occupational information available on file, which did not provide evidence of physical impairment to prevent you from resuming your pre-disability occupation.

Under the terms of the above policy, the participant is entitled to LTD benefits, if he/she is in a state of complete and continuous incapacity, resulting from illness or accidental injury, which wholly prevents the participant from performing:

1. Each and every function of his regular employment during the elimination period and during the twenty-four months immediately following without regard to the availability of such occupation; and

2. Afterwards, any remunerated function or work for which he is or may become reasonably fitted by training, education or experience.

Benefits are considered during the first 24 months of disability on the basis that you are continuously and totally disabled to the extent that you cannot perform the essential and material duties of your regular occupation. On September 19, 2007 the definition of Total Disability will change to an “any occupation" basis which means that in order to continue to be eligible for benefits, you must be continuously and totally disabled to the extent that you cannot perform the essential and material duties of any occupation for which you are or may become reasonably fitted by training, education or experience.

In an effort to assist you with improving your functional ability and fitness, Standard Life enlisted and provided you with rehabilitation related programs conducted by several recognized rehab providers: Toronto Western Hospital's Functional Restoration Program, Occupational Rehabilitation Program at the CBI.

We determined that the medical evidence currently on file does not support disability to the extent required by the “own occupation" and consequently by “any occupation" definition of total disability under your policy. With no medically supported or impairment based restrictions and limitations, and no medical contraindications present that would prevent or preclude you from returning to your job as CNC Machine Operator your claim for Long Term Disability benefits and Waiver of Premium will be terminated effective September 19, 2007.

Our Rehab Specialist already contacted your employer to make the necessary return to work arrangements. A letter in this regard will be sent you under separate cover.

To assist with your return to work process we offer you a transitional benefit equal to LTD benefits for period of September 19, 2007 through to October 31, 2007. This lump sum transitional benefit will be directly deposited into your account.

Should you wish to appeal this decision you must provide written notification of your intent to appeal and the reasons for your disagreement with the decision. The appeal should include additional medical information not currently on file such as consultation reports from all specialists, test results, and treatment records from all your treating physicians, a detailed and objectively supported list of your restrictions and limitations. Please note that any expenses incurred obtaining this information are your responsibility.

Should you require clarification or further information, please do not hesitate to contact ….

[23] As may be noted, Standard Life indicated that it would pay a transitional benefit to October 31, 2007 to assist with Mr. Pepper’s return to work. The letter indicated that Mr. Pepper had the right to appeal the termination of benefits decision by submitting additional medical information.

[24] On August 28, 2007, Standard Life advised Mr. Pepper that it had arranged a meeting with his employer to implement the return to work program.

[25] On October 31, 2007, Mr. Pepper appealed the termination of his LTD benefits, and he provided medical information from a Dr. Aldridge.

[26] On November 19, 2007, Mr. Pepper’s appeal was denied, but by letter of the same date, Standard Life advised him of a right to appeal the decision. In its letter, Standard Life advised Mr. Pepper that it needed more information to process his claim, and it advised him that he could provide them with additional information. The letter stated:

We are writing to acknowledge receipt of correspondence including a consultation report from Dr. Chris Aldridge dated October 12, 2007.

We determined that the medical evidence submitted to Standard Life for review does not support disability to the extent required by the "any occupation" definition of total disability under your policy. Therefore, your claim for Long Term Disability benefits remains closed.

Should you wish to pursue your claim for Long Term Disability benefits you must provide written notification of your intent to appeal and the reasons for your disagreement with the decision. The appeal should include additional medical information not currently on file such as consultation reports from all specialists, test results, and treatment records from all your treating physicians, a detailed and objectively supported list of your restrictions and limitations. Please note that any expenses incurred obtaining this information are your responsibility.

Should you require clarification or further information, please do not hesitate to contact us. ….

[27] On December 11, 2007, Mr. Pepper wrote to Standard Life to provide it with further medical records, including a report from Dr. Wiley dated April 13, 2007 and a recent report from Dr. Axler dated December 5, 2007. However, without waiting for a decision, on January 4, 2008, Mr. Pepper retained Mr. Levin.

[28] On January 29, 2008, Mr. Levin wrote to Standard Life to advise that he had been retained with respect to the denials of Mr. Pepper’s application for LTD. He asked for a copy of Mr. Pepper’s file.

[29] On February 25, 2008, Standard Life sent Mr. Pepper a letter advising him that it had not changed its decision with respect to the LTD. The letter stated:

Dear Mr. Pepper

This letter is in regard to your Long Term Disability Claim. We acknowledge receipt of your letter and additional medical reports submitted as an appeal to our decision to decline your Long Term Disability claim beyond September 19, 2007.

The medical documentation provided was insufficient to change our decision on your claim. If you would like to pursue your appeal please provide our office with additional medical information for further evaluation, including copies of Dr. John Axler’s clinical notes and records subsequent to December 2, 2005 to present, the entire copy of Dr. Chris Aldridge’s clinical notes along with medical records from all your treating specialists, test and investigation results from December 2005 to present.

Once we have received and reviewed all of the above requested information we will notify you of our decision. In the meantime, your file remains closed.

[30] Mr. Pepper deposed that based on the letter of February 25, 2008, he believed that Standard Life was still adjudicating his claim and no final decision to terminate benefits had been made and would not be made until he submitted the information requested in the letter.

[31] On her examination for discovery for Standard Life, Ms. Poirier’s evidence was that there had been no final denial of Mr. Pepper’s LTD claim and that Standard Life was continuing to adjudicate it.

[32] In any event, Mr. Pepper personally did not follow up on the letter of February 25, 2008. He did not submit any additional information, and rather he left the matter to be resolved by his lawyer, Mr. Levin.

[33] On November, 4, 2009, following a request by Mr. Levin, Standard Life sent him the payment summary for Mr. Pepper’s disability insurance claim.

[34] Nothing appears to have happened between November 4, 2009 and February 17, 2010, when Mr. Pepper commenced his action against Standard Life.

4. The Action against Standard Life

[35] In 2009, Mr. Pepper commenced a wrongful dismissal action against his employer, Sanmina-Sci.

[36] On February 17, 2010, Mr. Pepper sued Standard Life for payment of LTD benefits.

[37] On Apri110, 2010, Standard Life delivered its Statement of Defence. It did not plead a limitation period defence.

[38] Master Dash consolidated Mr. Pepper’s action against Standard Life with his action against Sanmina-Sci and Mr. Pepper delivered a Consolidated Statement of Claim dated March 29, 2012.

[39] Standard Life delivered a Consolidated Statement of Defence in June 2012.

[40] There were examinations for discovery and several years passed until 2016 when Standard Life was granted leave to amend its Statement of Defence to allege that Mr. Pepper’s action is statute-barred.

[41] Standard Life delivered an Amended Consolidated Statement of Defence dated July 13, 2016.

[42] On August 2, 2016, Mr. Pepper delivered his Reply, and he disputed that his action was statute-barred.

5. Is the Case Appropriate for Summary Judgment?

[43] Both parties seek a summary judgment on the matter of the limitation period defence and there has been ample evidence and argument to justly and fairly determine that issue. The case at bar is an appropriate case for a summary judgment on the limitation period defence.

D. Discussion and Analysis

1. The Position of the Parties

[44] The position of both parties is that the claim for LTD benefits is subject to a standard limitation period analysis and that the case at bar does not involve what is known as a rolling limitation period, where there is periodic denial of payments that are due periodically.

[45] During the argument of the motion, it also emerged that the parties agree that the case does not turn on some form of estoppel. In other words, the parties agree that Standard Life is not estopped from asserting that the limitation period began to run simply because it considered Mr. Pepper’s appeal of the decision to terminate the benefits under the policy.

[46] Therefore, I will analyze the case at bar on the basis that Mr. Pepper’s action is subject to a conventional single limitation period of two years’ duration from the discovery of the claim.

[47] Under a convention single limitation period analysis, Standard Life submits that the limitation period for Mr. Pepper’s claim began to run on November 1, 2007, when Standard Life stopped making any LTD payments and, thus, the February 17, 2010 Statement of Claim is untimely because Mr. Pepper’s claim is statute-barred.

[48] Standard Life also submits that this conclusion is supported by Mr. Pepper’s allegations in his Statement of Claim and by his testimony where he admits that he knew that Standard Life was denying him LTD benefits by the late summer and into the fall of 2007. Standard Life submits that by this time, Mr. Pepper was aware that Standard Life had decided that he was not totally disabled and that it would not and, in fact, did not continue paying LTD.

[49] In the alternative, Standard Life submits that Mr. Pepper discovered his claim by January 2008, by which time he had retained a lawyer and had the medical information from Dr. Aldridge’s October 12, 2007 and January 9, 2008 reports and Dr. Axler’s December 5, 2007 report.

[50] Under its alternative argument, Standard Life submits that any action against it was discovered by the end of January 2008 and, therefore, the February 17, 2010 Statement of Claim was untimely.

[51] In resisting Standard Life’s summary judgment motion, Mr. Pepper submits that the limitation period began to run around the end of March 2008 because, before that time, Standard Life never made a clear and unequivocal denial of his LTD claim. Rather, he submits that in the circumstances of this case, he reasonably believed that there had not been a denial of his LTD claim that would have made litigation an appropriate recourse.

[52] Mr. Pepper submits that until the end of March 2008, he reasonably believed that if he provided the information that he was invited to submit, that his LTD claim would be recognized just as his STD claim had been recognized. Further, Mr. Pepper submits that having regard to the nature of the claim, a proceeding would not have been an appropriate means to seek a remedy until March or April 2008.

2. The Significance of the Allegations in the Statement of Claim

[53] In support of its argument that Mr. Pepper’s claim is statute-barred, Standard Life relies on the temporal narrative of Mr. Pepper’s Statement of Claim as describing when he and his legal adviser discovered his claim. I give no weight to this argument. Read in its entirety and in context, Mr. Pepper’s Statement of Claim contains no admission that his claim is statute-barred.

[54] Further, if it was that clear that, based on the pleadings, Mr. Pepper’s claim was statute-barred, one would have expected that Standard Life would have not waited six years to amend its Statement of Defence and plead that the claim was statute-barred.

3. The Significance of the Discovery Evidence from Standard Life

[55] The predominant issue in the case at bar is what Mr. Pepper knew or ought to have known about commencing a claim against Standard Life. In making his argument about his subjective and objective knowledge, Mr. Pepper relies on the discovery evidence of Standard Life’s representative about whether the LTD file was open or closed and about whether Standard Life had made a clear and unequivocal denial of his LTD claim.

[56] I agree that this evidence is relevant; however, this largely after-the-fact testimony has little weight or substance when considered in the context of what Standard Life actually did and wrote at the time when it denied and then provided STD benefits, and when it provided, and then denied, LTD benefits.

[57] To foreshadow the analysis below, I believe that based on what Standard Life did and said, that Mr. Pepper subjectively did not discover his claim against Standard Life until after he left the matter in Mr. Levin’s hands to prosecute a claim. Objectively, however, based on what Standard Life did and said, Mr. Pepper ought to have discovered his claim as of around the end of February, 2008. In my opinion, based on the evidentiary record, Mr. Pepper ought to have known that his claim under the insurance policy would become statute-barred on or about March 1, 2009. Therefore, the February 17, 2010 Statement of Claim was timely and the claim is not statute-barred.

4. Limitations Act, 2002 – General Principles

[58] The relevant provisions of the Limitations Act, 2002 are sections 1, 4, and 5, which state:

Definitions

1. In this Act,

“claim” means a claim to remedy an injury, loss or damage that occurred as a result of an act or omission; ….

BASIC LIMITATION PERIOD

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

Discovery

5. (1) 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 means 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).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[59] When a limitation period defence is raised, the onus is on the plaintiff to show that its claim is not statute-barred and that it behaved as a reasonable person in the same or similar circumstances using reasonable diligence in discovering the facts relating to the wrongdoing: Soper v. Southcott (1998), 1998 ONCA 5359, 39 O.R. (3d) 737 (C.A.) at para. 13; Bolton Oak Inc. v. McColl-Frontenac Inc., 2011 ONSC 6657 at paras. 12-14; Durham (Regional Municipality) v. Oshawa (City), 2012 ONSC 5803 at paras. 35-41. That the onus is on the plaintiff accords with the presumption in s. 5(2) of the Act that a person with a claim shall be presumed to have discovered the claim on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[60] The discoverability principle, which has been largely codified by s. 5 of the Limitations Act, 2002, governs the commencement of a limitation period and stipulates that a limitation period begins to run only after the plaintiff has the knowledge, or the means of acquiring the knowledge, of the existence of the facts that would support a claim for relief: Kamloops v. Nielson (1984), 1984 SCC 21, 10 DLR (4th) 641 (S.C.C.); Central Trust Co. v. Rafuse (1986), 1986 SCC 29, 31 DLR (4th) 481 (S.C.C.); Peixeiro v. Haberman, 1997 SCC 325, [1997] 3 S.C.R. 549. Thus, a limitation period commences when the plaintiff discovers the underlying material facts or, alternatively, when the plaintiff ought to have discovered those facts by the exercise of reasonable diligence.

[61] Section 1 of the Limitations Act, 2002 defines "claim" to mean: "a claim to remedy an injury, loss or damage that occurred as a result of an act or omission." A claim is a cause of action, which is the fact or facts which give a person a right to judicial redress or relief against another. See: Lawless v. Anderson, 2011 ONCA 102 at para. 22; Aguonie v. Galion Solid Waste Material Inc. (1998), 1998 ONCA 954, 38 O.R. (3d) 161 (C.A.) at p. 170. In Lawless v. Anderson, supra, the Court of Appeal stated at paras. 22-23:

22. The principle of discoverability provides that "a cause of action arises for the purposes of a limitation period when the material facts on which it is based have been discovered, or ought to have been discovered, by the plaintiff by the exercise of reasonable diligence. This principle conforms with the generally accepted definition of the term 'cause of action' -- the fact or facts which give a person a right to judicial redress or relief against another"....

23. Determining whether a person has discovered a claim is a fact-based analysis. The question to be posed is whether the prospective plaintiff knows enough facts on which to base an allegation of negligence against the defendant. If the plaintiff does, then the claim has been "discovered", and the limitation period begins to run: see Soper v. Southcott (1998), 1998 ONCA 5359, 39 O.R. (3d) 737 (C.A.) and McSween v. Louis (2000), 2000 ONCA 5744, 132 O.A.C. 304 (C.A.).

[62] With respect to the basic limitation period of two years under the Limitations Act, 2002, a claim is “discovered” on the earlier of the date the claimant knew — a subjective criterion — or ought to have known — an objective criterion — about the claim: Ferrara v. Lorenzetti, Wolfe Barristers and Solicitors, 2012 ONCA 851 at paras. 33 and 70. In determining whether a plaintiff knew or ought to have known of the facts giving rise to a claim, the knowledge of his or her solicitors is imputed to the plaintiff. Soper v. Southcott, supra; Davenport v. Roughley Estate, [2003] O.J. No. 679 (Master); Biancale v. Vieyra, [2007] O.J. No. 1579 (S.C.J.).

[63] The discoverability of a claim for relief involves the identification of the wrongdoer and also the discovery of his or her acts or omissions that constitute liability: Aguonie v. Galion Solid Waste Material Inc., supra; Ladd v. Brantford General Hospital (2007), 2007 ONSC 45921, 88 O.R. (3d) 124 (S.C.J.).

[64] It is not enough that the plaintiff has suffered a loss and has knowledge that someone might be responsible; the identity and culpable acts of the wrongdoer must be known or knowable with reasonable diligence: Mark v. Guelph (City) (2011), 2010 ONSC 6034, 104 O.R. (3d) 471 (S.C.J.); Zurba v. Lakeridge Health Corp. (2010), 2010 ONSC 318, 99 O.R. (3d) 596 (S.C.J.); Greenway v. Ontario (Minister of Transportation) (1999), 1999 ONSC 14797, 44 O.R. (3d) 296 (Gen. Div.).

[65] Section 5(1)(a)(iv) of the Limitations Act, 2002 can have the effect of delaying the commencement of the running of limitation period. Where a person knows that he or she has suffered harm; i.e., when the plaintiff knows the elements of s. 5(1)(a)(i), (ii) and (iii), the delay lasts until the day when a proceeding would be an “appropriate” means to remedy the harm having regard to the nature of the injury, loss or damage. However, to have this delaying effect, there must be a juridical reason for the person to wait; i.e., there must be an explanation rooted in law as to why commencing a proceeding was not yet appropriate: Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218; Federation Insurance Co. of Canada v. Kingsway General Insurance Co., 2012 ONCA 218.

[66] In Markel Insurance Co. of Canada, under the statutory benefits scheme of the Insurance Act, R.S.O. 1990, c. I.8, an insurer was required to pay accident benefits but it claimed an entitlement to be indemnified by another insurer in accordance with loss transfer rules. The issue in Markel Insurance Co. of Canada was when did the two-year limitation period of the Limitations Act, 2002 commence to run for loss transfer claims between insurers. The Court of Appeal concluded that the limitation period began to run from the date that the insurer had a perfected claim for indemnification and not from the date when a demand for reimbursement was refused or from the date when the insurers disagreed about who was responsible to pay the statutory benefits. In the course of his analysis of when the limitation period began to run, Justice Sharpe discussed the operation of s. 5(1)(a)(iv) and stated at para. 34:

34. This brings me to the question of when it would be "appropriate" to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s.5(1)(a)(iv) states that a claim is "discovered" only when "having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it", the word "appropriate" must mean legally appropriate. To give "appropriate" an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.

[67] In 407 ETR Concession Co. v. Day, 2016 ONCA 709, rev’g 2014 ONSC 6409, the Court of Appeal considered the operation of s. 5(1)(a)(iv) of the Limitations Act, 2002. The facts were that 407 ETR Concession Co., which pursuant to special legislation was the operator of a public toll highway, sued Mr. Day for approximately $14,000 for unpaid tolls. Mr. Day argued that 407 ETR’s claim was statute-barred. One of the issues for the Court was when had 407 ETR discovered its claim so as to trigger the running of the limitation period. Five dates were suggested, and in the result, the Court of Appeal picked a date that responded to the imperatives of the statutory scheme under which 407 ETR operated.

[68] Justice Laskin, who wrote the judgment for the Court (Justices MacFarland and Roberts concurring), noted that s. 5(1)(a)(iv) altered the operation of the common law discovery principle and might have the effect of delaying the commencement of the running of a limitation period. The commencement of the running of the limitation period might be delayed because there might be a lag between the time when the plaintiff discovered the material facts of his or her cause of action and when “having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.” Justice Laskin observed that when resort to litigation would be appropriate depends on the specific factual or statutory setting of each individual case, including taking into account the particular interests and circumstances of the plaintiff.

[69] Appropriateness must be assessed on the facts of each case, and case law applying s. 5(1)(a)(iv) is of limited assistance: Brown v. Baum, 2016 ONCA 325 at para. 41; Independence Plaza 1 Associates, L.L.C. v. Figliolini, 2017 ONCA 44.

[70] When resort to litigation would be appropriate depends on the specific factual or statutory setting of each individual case, including taking into account the particular interests and circumstances of the plaintiff: 407 ETR Concession Co. v. Day, supra; Unicorr Limited v. Minuk Construction & Engineering Limited, 2016 ONSC 7350. However, courts have held that a proceeding is not legally appropriate until other dispute resolution mechanisms, including statutory remedies, have been exhausted: U-Pak Disposals (1989) Ltd. v. Durham (Regional Municipality), 2014 ONSC 1103, at paras. 22-25; Kadiri v. Southlake Regional Health Centre, 2015 ONSC 621, at paras. 52-57, aff'd, 2015 ONCA 847.

5. Analysis: The Running of Limitations Periods for STD and LTD Insurance Claims

[71] As of November 1, 2007, Mr. Pepper had a breach of contract cause of action against Standard Life. Thus, to make his February 17, 2010 Statement of Claim timely, the onus is on Mr. Pepper to show that he discovered his claim later than November 1, 2007.

[72] In other words, had Mr. Pepper sought legal advice on November 1, 2007, his lawyer would have told him that he already had a perfected cause of action against Standard Life. The presumption in s. 5(2) of the Limitation Act, 2002 is that Mr. Pepper discovered his claim against Standard Life on November 1, 2007, unless the contrary is proved.

[73] In my opinion, based on the evidentiary record, Mr. Pepper proved that, subjectively, he did not discover his claim against Standard Life until on or after he had retained Mr. Levin. In January 2008, Mr. Pepper instructed Mr. Levin about the history of his disability claims and the current status that he had lost his appeal against the termination of his LTD benefits but that he had provided further medical reports to Standard Life from Drs. Wiley and Axler in December 2007 and a decision was pending. Up until this point of time, Mr. Pepper had not subjectively discovered his claim against Standard Life because he was operating under the belief that there had not been any absolute definitive refusal of his claim for LTD benefits. Subjectively, in the fact-specific circumstances of the case at bar, until Mr. Pepper retained Mr. Levin, his belief that there had been no definitive breach of the insurance contract was genuine and reasonable and, subjectively speaking, commencing an action against Standard Life would not have been appropriate for Mr. Pepper having regard to the nature of his claim under the insurance policy and the history of his relationship with Standard Life.

[74] The legal and factual situation, however, changed upon Mr. Pepper retaining Mr. Levin. Much like a personal injury lawyer would ask when the car accident occurred, in taking instructions, Mr. Levin knew or ought to have known that as of November 1, 2007, Mr. Pepper had a perfected breach of contract cause of action against Standard Life.

[75] While it could have occurred earlier if Mr. Pepper had retained a lawyer earlier than January 2008, at that juncture, Mr. Levin could have had a Statement of Claim against Standard Life drafted and issued, and Mr. Pepper’s breach of contract claim would not have been premature. Objectively speaking, as of January 2008, having regard to the nature of the alleged breach of the insurance contract, a proceeding against Standard Life was fully ripened.

[76] The issue then narrows to the fact-specific inquiry about whether an action against Standard Life would be - to use the language of s.5(1)(a)(iv) - an appropriate means to seek a remedy, having regard to the nature of the injury, loss or damage.

[77] Given that Standard Life was still considering the medical information that Mr. Pepper had forwarded in December 2007 and given the past history of the relationship between Mr. Pepper and Standard Life, it is unlikely that Mr. Levin would have recommended the aggressive approach of immediately suing Standard Life to obtain a remedy, but that circumstance of waiting for a decision about the most recent appeal just begs the question of whether Mr. Pepper could and ought to have been told that, objectively, the limitation period for a claim against Standard Life had begun to run on November 1, 2007. In the interim, the parties could attempt to resolve the matter.

[78] Put somewhat differently, the question is what should Mr. Levin have noted on his file in January 2008 as the “tickler date” for commencing an action against Standard Life? This is a fact-based inquiry, and as noted above, the appropriateness factor introduces some delay and uncertainty in the commencement of the limitation period.

[79] In my opinion, on the facts of the immediate case, given the extensive history of providing benefits, denying benefits, considering appeals of the denials, making more denials, inviting further appeals, and progressively and retroactively restoring benefits, there was some objective reason to think that the commencement of the limitation period had been delayed. I, therefore, conclude that Mr. Pepper’s claim is not statute-barred.

[80] Given the arguments of the parties, it is necessary to make clear that my decision is based on the fact-specific circumstances of the immediate case that focus on the particular history of Mr. Pepper’s and Standard Life’s relationship. In this regard, I reject Mr. Pepper’s argument that Standard Life was under an obligation to advise him about its view that the limitation period had commenced to run as of November 1, 2007 when it also invited him to submit further medical information. See Usanovic v. La Capitale Life Insurance Company, 2016 ONSC 4624, where Justice Broad held that there is no obligation on an insurer to advise its insured about the operation of limitation period statutes.

[81] In coming to my decision about the appropriateness factor, I also reject Mr. Pepper’s submission that in actions against disability insurers, the limitation period does not begin to run until there is a clear and unequivocal denial of the benefits promised under the contract. There is no such rule.

[82] The correct articulation of the law is that a clear and unequivocal denial of the benefits under the contract could constitute a breach of the insurance contract that would commence the running of a limitation period; however, a clear and unequivocal denial is not a prerequisite to a cause of action. What is required is a breach of the contract. An unequivocal denial would constitute a repudiation of the contract, but a breach of contract could also be proven simply by a failure to perform the contract promises.

[83] In the immediate case, to borrow the language of Justice Sharpe in Markel Insurance Co. of Canada, supra, the claim against Standard Life was fully ripened in November 2007 and requiring the court to assess the tone and tenor of communications in search of a clear denial would inject an unacceptable element of uncertainty into the law of limitation of actions. In the immediate case, I did not weigh the tone and tenor of the communications to come to the conclusion that the commencement of the limitation had been delayed. Rather, I had regard to the totality of the relationship between the parties, including taking into account the particular interests and circumstances of Mr. Pepper.

[84] In any event, in the immediate case, there was a clear and unequivocal denial as early as the correspondence in August 2007 and again in November 2007, but more to the point, the insurance contract was possibly breached as of November 1, 2007 by Standard Life’s non-performance of the contract promise to provide LTD benefits, which it failed to do. The commencement of the limitation period, however, was delayed in the particular circumstances of this case.

[85] In the case at bar, to avoid the running of the limitation period, Mr. Pepper relied upon Kassburg v. Sun Life Assurance Company, 2014 ONSC 1523, affd. 2014 ONCA 922. This case is helpful to Mr. Pepper but not as helpful as he would have it.

[86] In Kassburg, Ms. Kassburg appealed a decision by Sun Life that had denied her disability insurance claim and Justice Ellies held that her claim against Sun Life was not statue-barred. He concluded that the limitation period for a claim against Sun Life began to run on the date when her appeal was denied. In a judgment upheld by the Court of Appeal, he rejected Sun Life’s argument that a letter in which it had denied her claim had commenced the running of the limitation period. However, the letter also indicated that Ms. Kassburg could provide additional medical information and appeal Sun Life’s decision, and Justice Ellies held that the letter was not a clear and unequivocal denial of Ms. Kassburg’s claim sufficient to commence the running of the limitation period. On appeal, the Court of Appeal held that the question of when a claim is "discovered" is essentially a question of fact and that it was open to the motion judge to consider what, in fact, had been communicated to Ms. Kassburg by the insurer’s letter and whether the claim had been clearly and unequivocally denied.

[87] I do not disagree with the authority or the correctness of the decisions in Kassburg v. Sun Life, but I do not read the case as establishing a principle that a clear and unequivocal denial is a requirement before a limitation period begins to run for a claim against an insurer. Rather, the case simply illustrates that the discovery of a claim is a fact-based analysis and a breach of contract claim does not come into existence until there is a breach of contract, which as a factual matter did not occur in Kassburg v. Sun Life until the rejection of Ms. Kassburg’s appeal. There is no discussion in the decision of Justice Ellies or in decision of the Court of Appeal of any principle that a clear and unequivocal denial is a prerequisite to a claim under a disability insurance policy.

[88] In Richards v. Sun Life Assurance Company of Canada, 2016 ONSC 5492, Justice Bale interpreted Kassburg v. Sun Life in much the same manner as I do in the case at bar. In Richards, Sun Life was successful in asserting a limitation period defence based on its denial of Mr. Richards’ claim for disability benefits in a letter indicating that his file had been closed. Justice Bale accepted that there might be cases in which the outcome might depend on whether there was a clear and unequivocal denial; however, it did not follow that a clear and unequivocal denial was always required to commence the running of a limitation period.

[89] In Usanovic v. La Capitale Life Insurance Company, supra, Kassburg v. Sun Life was distinguished on the basis that the insurer’s denial of disability benefits was clear and unequivocal. See also Landriault v. Sun Life, 2015 ONSC 3196.

[90] I recognize that the appropriateness factor introduces some uncertainty in the operation of the Limitations Act, but it also introduces some flexibility and fairness in the application of the discovery principle, which presumptively operates against the claimant as soon as a cause of action becomes objectively apparent. This flexibility and fairness has been augmented by the appropriateness of litigation factor of s. 5(1)(a)(iv) of the Act.

[91] In the immediate case, it would have been most prudent for Mr. Levin to treat November 1, 2007 as the commencement date for the running of the limitation period, but prudence is not the measure of when a limitation period begins to run; the measure is discoverability, and discoverability can be delayed depending on the fact-specific circumstances of each case.

[92] In the immediate case, Standard Life’s denial of benefits was clear and unequivocal and it was not necessary for it to alert Mr. Pepper about its view about the commencement of the running of the limitation period, although having regard to the extensive history between the parties, if it intended to rely on a limitation period defence it might have been prudent for it to make it very-very clear that if Mr. Pepper did appeal its decision there would be no pause in the running of the limitation period. As it turned out, on the fact-specific circumstances of the immediate case, Mr. Pepper’s claim is not statute-barred.

E. Conclusion

[93] For the above reasons, I dismiss Standard Life’s motion and I grant Mr. Pepper’s cross-motion. If the parties cannot agree about the matter of costs, they may make submissions in writing beginning with Mr. Pepper’s submissions within 20 days of the release of these Reasons for Decision, followed by Standard Life’s submissions within a further 20 days.

Perell, J.

Released: March 6, 2017

COURT FILE NO.: CV-09-390257 DATE: 20170306

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

KEVIN PEPPER Plaintiff – and – SANMINA-SCI SYSTEMS (CANADA) INC. and THE STANDARD LIFE ASSURANCE COMPANY OF CANADA Defendants

REASONS FOR DECISION

PERELL J.

Released: March 6, 2017