Irish v. Sun Life Assurance Company of Canada

65 O.R. (3d) 87

[2003] O.J. No. 2064

Docket No. C38955

Court of Appeal for Ontario,

Doherty, Austin and Gillese JJ.A.

May 29, 2003

Limitations -- Insurance -- One-year limitation period in s. 206(1) of Insurance Act beginning to run when insurer receives sufficient evidence to determine whether benefit is properly payable under policy and not when insurer unequivocally rejects claim -- Discoverability principle having no application to limitation period in s. 206(1) -- Insurance Act, R.S.O. 1990, c. I.8, s. 206(1).

The plaintiff was insured under an accidental death and dismemberment policy issued by the defendant to her employer. The policy provided for a lump sum payment upon total loss of the use of a limb as a result of an accident. On July 3, 1998, the defendant received a claim for dismemberment benefits from the plaintiff, who described her accident as a loss of feeling in her right leg following neurosurgery in February 1997. By letter dated July 31, 1998, the defendant rejected the claim on the basis that the injury was not caused by an accident and that the loss of use of the leg was not total as required by the policy. In May 1999, counsel for the plaintiff advised the defendant that the plaintiff objected to the [page88] defendant's position and intended to pursue her benefits claim. A statement of claim seeking a declaration that the plaintiff was entitled to dismemberment benefits was issued on July 27, 1999, slightly more than a year after the defendant received the plaintiff's proof of loss and slightly less than a year after the defendant rejected her claim. The defendant brought a motion for summary judgment dismissing the action as barred by the one-year limitation period in s. 206(1) of the Insurance Act. For the purposes of the motion, it was accepted that the policy was a life insurance policy governed by Part V of the Insurance Act. Section 206(1) of the Act provides that an action against an insurer for the recovery of insurance money shall not be commenced more than one year after the furnishing of the evidence required by s. 203 of the Act, that is, sufficient evidence of the happening of the event upon which insurance money becomes payable; the age of the person whose life is insured; the right of the claimant to receive payment; and the name and age of the beneficiary, if any. The motion judge dismissed the motion, holding that the one-year limitation period commences only upon an unequivocal rejection of the claim by the insurer. The defendant appealed.

Held, the appeal should be allowed.

The one-year limitation period in s. 206(1) of the Act begins to run when the insurer has been furnished with sufficient evidence to determine whether the benefit is properly payable under the policy, not when the insurer unequivocally rejects the claim. Although it is the insurer who must determine the sufficiency of the evidence in order to decide whether to make payment on the policy, that does not mean that it is the insurer's assessment that governs if the sufficiency of the evidence becomes an issue in litigation. In that case, it will be for the court to decide, on an objective basis, whether the information was sufficient. Even where the court determines that the insurer had sufficient evidence to make the necessary assessment by a given date, the conduct of the insurer after that date may estop it from asserting that it had sufficient evidence on the earlier date. In this case, there was no delay in assessing the plaintiff's claim and no suggestion that the defendant misled the plaintiff or that it should be estopped by its conduct from claiming that it had sufficient evidence as of July 26, 1998, a year and a day before the statement of claim was issued.

The one-year limitation period described in s. 206(1) of the Act commences upon the occurrence of an event, the furnishing of sufficient evidence of the facts referred to in s. 203, which is not a constituent element of a claim based on a breach of the contract of insurance. Consequently, the discoverability principle is of no assistance in interpreting the limitation period in s. 206(1). Even if the discoverability principle applied to the s. 206(1) limitation period, it did not assist the plaintiff, as she knew what information she had furnished to the defendant, she was deemed to know the contents of s. 203 and she knew or ought to have known of the terms of her policy. Absent any request for further information by the defendant, it could not be said that the plaintiff did not know or ought not to have known that the defendant had been furnished by her with sufficient evidence to assess the claim. The claim was statute- barred.

Ingram v. Imperial Life Assurance Co. of Canada (1986), 1986 2741 (ON SC), 54 O.R. (2d) 762n (H.C.J.), affg (1985), 1985 2123 (ON SC), 53 O.R. (2d) 442, [1986] I.L.R. Â1-2018, 16 C.C.L.I. 170 (L.J.S.C.); Kissoondial v. Prudential Insurance Co. of America (1987), 1987 4121 (ON CA), 60 O.R. (2d) 797, 22 O.A.C. 158, 42 D.L.R. (4th) 186, [1988] I.L.R. Â1-2271 (C.A.), consd

APPEAL from an order dismissing a motion for summary judgment dismissing a claim.

Other cases referred to Campbell v. Crown Life Insurance Co. (1980), 25 B.C.L.R. 12 (S.C.); [page89] Fehr v. Jacob (1993), 1993 4407 (MB CA), 85 Man. R. (2d) 63, 41 W.A.C. 63, [1993] 5 W.W.R. 1, 14 C.C.L.T. (2d) 200, 14 C.P.C. (3d) 364 (C.A.), supp. reasons (1993), 1993 14910 (MB CA), 88 Man. R. (2d) 10, 51 W.A.C. 10, 16 C.P.C. (3d) 382 (C.A.); Grenier v. Canadian General Insurance Co. (1999), 1999 2156 (ON CA), 43 O.R. (3d) 715, 32 C.P.C. (4th) 267 (C.A.), affg (1997), 1997 12100 (ON SC), 32 O.R. (3d) 343, 25 M.V.R. (3d) 262 (Gen. Div.); Kerry v. Blue Cross Life Insurance Co. of Canada (1996), 1996 3700 (PE SCTD), 141 Nfld. & P.E.I.R. 286, 443 A.P.R. 286, [1996] I.L.R. Â1-3365 (P.E.I.S.C.); Peixeiro v. Haberman, 1997 325 (SCC), [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429, 217 N.R. 371, 30 M.V.R. (3d) 41, 12 C.P.C. (4th) 255; Pluzak v. Gerling Global Life Insurance Co. (2001), 2001 24096 (ON CA), 52 O.R. (3d) 520, 195 D.L.R. (4th) 293, [2001] I.L.R. Â1-3951, 3 C.P.C. (5th) 16 (C.A.), revg (1999), 1999 14791 (ON SC), 44 O.R. (3d) 49, [1999] I.L.R. Â1-3686, 29 C.P.C. (4th) 60 (Gen. Div.); Thomas v. Manufacturers Life Insurance Co., 2001 61001 (AB QB), [2001] A.J. No. 1753 (QL), 294 A.R. 391, 40 C.C.L.I. (3d) 128 (Q.B.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, ss. 203-18, 206(1)

Duncan McDuff, for appellant. Michael Chadwick and Todd McCarthy, for respondent.

The judgment of the court was delivered by

DOHERTY J.A.: --

I

[1] In July 1998, Barbara Irish, the respondent, made a claim for a dismemberment insurance benefit under a group life insurance policy issued by the appellant, Sun Life Assurance Co. of Canada ("Sun Life"). Sun Life rejected the claim for various reasons. In July 1999, Ms. Irish commenced this action against Sun Life seeking a declaration that she was entitled to the dismemberment benefits payable under the policy. Sun Life brought a motion for summary judgment contending that the action was barred by the one-year limitation period in s. 206(1) of the Insurance Act, R.S.O. 1990, c. I.8. The motion judge rejected this submission and dismissed Sun Life's motion. Sun Life appeals. I would allow the appeal and dismiss the action.

II

[2] Ms. Irish is covered under an accidental death and dismemberment policy issued by Sun Life to her employer. That policy provides for a lump sum payment upon total loss of the use of a limb as a result of an accident.

[3] On July 3, 1998, Sun Life received a claim for dismemberment benefits from Ms. Irish. The claim was on a pre- printed three-part proof of claim form prepared by Sun Life. The top part [page90] of the form was completed by Ms. Irish and described her accident as a loss of feeling in her right leg following neurosurgery in February 1997. The second part of the form was completed by Ms. Irish's employer and provided employment related information. The third part of the form was completed by Ms. Irish's doctor. He indicated that Ms. Irish's left leg was paralyzed as a result of nerve damage caused during surgery undertaken to eliminate intractable pain caused by shingles.

[4] Ms. Irish's claim was referred to a Sun Life medical consultant on or about July 22, 1998. The consultant was asked to review the "medical documentation" with a view to determining whether the injury suffered by Ms. Irish was an "accident". The medical consultant offered the opinion that Ms. Irish had not lost the total use of her leg and that in any event the injury to her leg was the result of a complication during surgery and not an accident. The consultant's notes attached to his opinion refer to medical information which was not in the proof of claim form and presumably came from the "medical documentation" referred to in the request forwarded to the consultant. The consultant's report was dated July 24, 1998.

[5] By letter dated July 31, 1998, Sun Life advised Ms. Irish that her claim had been rejected. Echoing the comments of the medical consultant, Sun Life advised Ms. Irish that her injury was not caused by an accident, and that the loss of use of her leg was not total as required by the policy. Sun Life also took the position that the proof of claim had not been filed within one year of the alleged accident as required by the policy.

[6] Ms. Irish had retained counsel by May 1999. By letter dated May 11, 1999, counsel told Sun Life that Ms. Irish objected to the position taken by Sun Life as to her entitlement to the dismemberment benefit and would be "pursuing your company" for those benefits. A statement of claim seeking among other things, a declaration of Ms. Irish's entitlement to dismemberment benefits, was issued on July 27, 1999, slightly more than a year after Sun Life received her proof of claim and slightly less than a year after Sun Life rejected the claim.

III

[7] For the purpose of the motion, it was accepted that the policy was a life insurance policy governed by Part V of the Insurance Act which includes ss. 203 to 218. Section 203 provides:

203(1) Where an insurer receives sufficient evidence of,

(a) the happening of the event upon which insurance money becomes payable; [page91]

(b) the age of the person whose life is insured;

(c) the right of the claimant to receive payment; and

(d) the name and age of the beneficiary, if there is a beneficiary,

it shall, within thirty days after receiving the evidence, pay the insurance money to the person entitled thereto.

[8] Section 203 directs that the insurer pay the insurance money to the person entitled to receive it within 30 days of the insurer receiving sufficient evidence of the four facts identified in subsections (a) to (d). Where there is a dispute as to the sufficiency of the evidence provided, ss. 208, 210 and 213 provide mechanisms for a judicial determination of that dispute. In addition, s. 218 authorizes an application for an order requiring payment of the insurance moneys where the insurer does not make the payment within 30 days of receiving the evidence referred to in s. 203.

[9] Section 206(1) contains the operative limitation period:

206(1) Subject to subsection (2), an action or proceeding against an insurer for the recovery of insurance money shall not be commenced more than one year after the furnishing of the evidence required by section 203 or more than six years after the happening of the event upon which the insurance money becomes payable, whichever period first expires.

(Emphasis added)

[10] Sun Life and Ms. Irish agree that the one-year limitation period referred to in s. 206(1) governs this proceeding [See Note 1 at end of document]. They disagree, however, as to the date on which the one-year period began to run. Sun Life argues that time began to run when it received the proof of claim on July 3, 1998. Ms. Irish contends that the limitation period could not start until she received notice of the rejection shortly after July 31, 1998.

IV

[11] The motion judge referred to Ingram v. Imperial Life Assurance Co. of Canada (1985), 1985 2123 (ON SC), 53 O.R. (2d) 442, [1986] I.L.R. Â1-2018 (L.J.S.C.), affd (1986), 1986 2741 (ON SC), 54 O.R. (2d) 762n (H.C.J.) and Kissoondial v. Prudential Insurance Co. of America (1987), 1987 4121 (ON CA), 60 O.R. (2d) 797, 42 D.L.R. (4th) 186 (C.A.) as authority for the proposition that the one-year limitation period commences only upon an unequivocal rejection of the claim by the insurer. [page92]

[12] I cannot agree with the motion judge's reading of these cases. In Ingram, supra, the insurer communicated regularly with the claimant after the claimant had filed the proof of claim. In those communications, the insurer requested additional information. It subsequently rejected the claim. In these circumstances, it was held that it could not be said that the insurer had sufficient evidence of the facts referred to in s. 203 until the insurer rejected the case. In the present case, the insurer did not request further information or in any way suggest that the information provided by Ms. Irish was insufficient. To the contrary, it communicated its rejection of the claim within 30 days of receipt of the proof of claim.

[13] In Kissoondial, supra, the appellant could only succeed if the six-year limitation period referred to in s. 206(1) applied. If the one-year limitation period was applicable, the claim was well out of time regardless of whether the one-year period began with the filing of the proof of claim or the rejection of the claim by the insurer. The court was not required to and did not choose between those two potential dates. Grange J.A., for the court, did recognize (and he cited Ingram in this context) that the conduct or inaction of the insurer could delay the running of the one-year limitation period. That caveat has no application in this case. This claim was rejected in a timely and unequivocal fashion.

[14] Neither Ingram, supra, nor Kissoondial, supra, supports the conclusion that the limitation period described in s. 206(1) does not begin to run until the claimant has notice that the claim has been rejected. If the legislature had intended the limitation clock to run from the occurrence of that event, it would have said so.

V

[15] The one-year limitation period in s. 206(1) runs from the "furnishing of the evidence required by s. 203". The evidence required by s. 203 is "sufficient evidence" to establish the facts referred to in subsection (a), (b), (c) and (d). Those are:

-- the happening of the event giving rise to the obligation to pay the claim (s. 203(a));

-- the age of the claimant (s. 203(b));

-- the right of the claimant to receive payment (s. 203(c)); and

-- the name and age of the beneficiary, if any (s. 203(d)). [page93]

[16] Subsection (a) refers to the event which gives rise to the obligation to pay the benefit. In the context of this case, the subsection required Ms. Irish to provide sufficient evidence of her "accident" and of her total loss of the use of her leg to trigger Sun Life's obligation to pay under the policy. Subsection (b) is self-explanatory and required Ms. Irish to inform the insurer of her age. At first glance, subsection (c) would appear to refer to the merits of the claim advanced; however, this court has interpreted subsection (c) as referring only to the identity of the claimant as a person entitled under the policy to make the claim: Kissoondial, supra, at p. 800 O.R. The facts referred to in subsection (d) have no application to a claim for a dismemberment benefit.

[17] The question of when an insurer has been furnished with sufficient evidence of the facts referred to in s. 203 is a question of fact: Kerry v. Blue Cross Life Insurance Co. of Canada, 1996 3700 (PE SCTD), [1996] I.L.R. Â1-3365, 443 A.P.R. 286 (P.E.I.S.C.) at pp. 4180-81 I.L.R.; Campbell v. Crown Life Insurance Co. (1980), 25 B.C.L.R. 12 (S.C.). The phrase "sufficient evidence" in s. 203 must be interpreted with an eye to the overall purpose of that section. Section 203 is intended to secure timely payment of benefits once the insurer has received the information needed to determine whether the benefit is properly payable under the policy. The evidence referred to in s. 203 is directed to establishing entitlement to payment under the policy. It is "sufficient evidence" when the insurer is able to make that assessment. I agree with Ferrier J. in Pluzak v. Gerling Global Life Insurance Co. (1999), 1999 14791 (ON SC), 44 O.R. (3d) 49, [1999] I.L.R. 1-3686 (Gen. Div.) at p. 55 O.R. [See Note 2 at end of document] where he said:

When the insurance company receives enough evidence to make the unequivocal determination of liability, it has received "sufficient evidence".

[18] Although it is the insurer who must determine the sufficiency of the evidence in order to decide whether to make payment on the policy, that does not mean that it is the insurer's assessment that governs if the sufficiency of the evidence furnished to the insurer becomes an issue in litigation. If it becomes an issue, it will be for the court to decide, on an objective basis, after an examination of the information provided to the insurer when the insurer was furnished with sufficient evidence of the facts referred to in s. 203: see Insurance Act, ss. 208, 210. [page94]

[19] Even where the court determines that the insurer had "sufficient evidence" to make the necessary assessment by a given date, the conduct of the insurer after that date may estop it from asserting that it had sufficient evidence on the earlier date. I think Ingram, supra, is best understood as a case where the insurer, by its conduct, was estopped from claiming that it had sufficient evidence of the relevant facts at a point in time when it was still requesting additional information concerning those facts from the insured: see also Thomas v. Manufacturers Life Insurance Co., 2001 61001 (AB QB), [2001] A.J. No. 1753 (QL), 294 A.P.R. 391 (Q.B.).

[20] There is no suggestion that Sun Life misled Ms. Irish or that it should be estopped by its conduct from claiming that it had sufficient evidence as of July 26, 1998, a year and a day before the statement of claim was issued.

[21] As indicated above, Sun Life argues that it had "sufficient evidence" when it received the proof of claim on July 3, 1998. This contention is arguably inconsistent with Sun Life's obtaining of additional medical evidence some time before it referred the file to its consultant on July 22, 1998. I need not decide whether Sun Life had sufficient evidence as of July 3. On the evidence adduced on the motion, there is no doubt that it had all of the material needed to assess the claim by July 22, 1998 at the latest. Section 206(1) speaks of the "furnishing of the evidence" required by s. 203 and not the insurer's decision to accept or reject the claim based on that evidence. While an inordinate delay in assessing a claim after the furnishing of the requisite evidence may estop an insurer from relying on s. 206(1), especially if the claimant has relied on that delay, there is no delay here. It is also noteworthy that in paras. 6 and 10 of her amended statement of claim, Ms. Irish pleads that she established her entitlement to the benefits under the policy in the proof of claim submitted by her in late June 1998. The affidavit filed on Ms. Irish's behalf on the summary judgment motion does not suggest otherwise, but instead asserts that the claim was brought within the limitation period because it was issued "within one year of the denial of the claim". As indicated above, that is not the event which triggers the running of the one-year limitation in s. 206(1).

[22] Counsel for Ms. Irish next submitted that even if Sun Life had been furnished with sufficient evidence of the facts referred to in s. 203 as of July 22, the discoverability principle served to delay the operation of the limitation period in s. 206(1) until Sun Life had notified Ms. Irish of its assessment of the merits of her claim. Counsel contends that Ms. Irish could not sue on the policy [page95] until she had furnished sufficient evidence of the facts referred to in s. 203 so as to permit the insurer to determine whether it was liable to pay under the policy. Counsel argues that the cause of action did not arise until Ms. Irish knew or ought reasonably to have known that sufficient evidence had been furnished to the insurer. He contends that she could only be fixed with this knowledge when she was notified by Sun Life that her claim had been assessed and rejected.

[23] The discovery principle is an aid in the interpretation of statutory language creating a limitation period. The discovery principle aims at avoiding the injustice caused by foreclosing a cause of action before the putative plaintiff could reasonably know of the facts essential to the advancement of the claim: Peixeiro v. Haberman, 1997 325 (SCC), [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429 at paras. 36-38. Not every limitation period is, however, tied to the existence of facts which are essential to the cause of action. Some statutory limitation periods run from the occurrence of a specific event which is not germane to the existence of a cause of action. The discovery principle does not assist in interpreting those statutory provisions: Fehr v. Jacob (1993), 1993 4407 (MB CA), 14 C.C.L.T. (2d) 200, 14 C.P.C. (3d) 364 (Man. C.A.); Grenier v. Canadian General Insurance Co. (1999), 1999 2156 (ON CA), 43 O.R. (3d) 715, 32 C.P.C. (4th) 267 (C.A.).

[24] I cannot agree with the submission that a claimant who alleges a breach of contract by the failure to pay a benefit under a policy must prove that he or she had furnished sufficient evidence of the facts referred to in s. 203 to succeed on that claim on the policy. Section 203 obliges the insurer to pay the benefit within 30 days of receipt of sufficient evidence of the facts described in s. 203. It does not make compliance with s. 203 a condition precedent to a claim for breach of the insurance contract if the benefit is not paid. Section 206(1) recognizes that the claimant may bring an action where there has not been compliance with s. 203 by providing for an alternative limitation period of six years from the happening of the event giving rise to the obligation to pay the benefit. As Grange J.A. observed in Kissoondial, supra, at p. 799 O.R.:

Under s. 183 [now s. 206], a claimant who had not submitted a claim (perhaps because he was not aware of having a claim) is given six years to commence action. . . .

[25] The one-year limitation period described in s. 206(1) commences upon the occurrence of an event, that is the furnishing of sufficient evidence of the facts referred to in s. 203, which is not a constituent element of a claim based on a breach [page96] of the contract of insurance. Consequently, the discoverability principle is of no assistance in interpreting the limitation period set out in s. 206(1).

[26] I would reject this submission even if the discovery principle applied to the one-year limitation period in s. 206(1). Ms. Irish knew what information she had furnished to Sun Life. She is deemed to know the contents of s. 203 and she knew or ought to have known of the terms of her policy. Absent any request for further information by Sun Life, I do not think it can be said that Ms. Irish did not know or ought not to have known that Sun Life had been furnished by her with sufficient evidence to assess the claim. The rejection of the claim confirmed that she had provided sufficient evidence to Sun Life to assess the claim. Indeed, as noted earlier in these reasons, it has always been Ms. Irish's contention that she supplied sufficient evidence to Sun Life in her proof of claim to establish her entitlement to the dismemberment benefit and that Sun Life breached the policy by not paying the benefit.

VI

[27] I would allow the appeal, set aside the order dismissing the motion for summary judgment and grant judgment dismissing the claim on the basis that it is beyond the applicable one- year limitation period in s. 206(1).

[28] Sun Life is entitled to its costs on the motion and on the appeal. The motion judge fixed costs in the amount of $1,500 in favour of Ms. Irish on the motion. Sun Life should have costs of the motion in the same amount ($1,500). I would fix Sun Life's costs of appeal at $8,000.

Appeal allowed.

Notes

Note 1: This position is consistent with the interpretation of the predecessor to s. 206 by this court in Kissoondial v. Prudential Insurance Co. of America (1987), 1987 4121 (ON CA), 60 O.R. (2d) 797, 42 D.L.R. (4th) (C.A.), where the court rejected the argument that the six-year limitation period applies if no payment is made to the claim.

Note 2: Reversed on other grounds (2001), 2001 24096 (ON CA), 52 O.R. (3d) 520, 195 D.L.R. (4th) 293 (C.A.).