State Farm Mutual Automobile Insurance Co. v. Dominion of Canada General Insurance Co. [Indexed as: State Farm Mutual Automobile Insurance Co. v. Dominion of Canada general Insurance Co.]
79 O.R. (3d) 78
[2005] O.J. No. 5502
Docket: C43653
Court of Appeal for Ontario,
McMurtry C.J.O., Goudge and Cronk JJ.A.
December 22, 2005
Insurance -- Arbitration -- Limitations -- Arbitrator erring in ruling that limitation period for arbitrating dispute between insurers over indemnification under s. 275 of Insurance Act commences with first benefit paid for which indemnification can be claimed -- New limitation period arising with each subsequent payment -- Insurance Act, R.S.O. 1990, c. I.8, s. 275.
An arbitrator ruled that the limitation period for arbitrating a dispute between insurers over indemnification under s. 275 of the Insurance Act commences with the first benefit paid for which indemnification can be claimed, and that the indemnification claim before him was time-barred. That conclusion was affirmed by the Superior Court of Justice. The appellant appealed.
Held, the appeal should be allowed. [page79]
A cause of action under s. 275 arises with every payment for which indemnification can be claimed. A new limitation period arises with each payment. The claim for indemnification in this case was not out of time.
APPEAL from a judgment of Backhouse J. of the Superior Court of Justice, dated December 7, 2004, affirming a decision of an arbitrator.
Cases referred to York Fire & Casualty Insurance Co. v. Co-operators, 1999 36836 (ON SC), [1999] O.J. No. 4172, 17 C.C.L.I. (3d) 16, 92 A.C.W.S. (3d) 688 (S.C.J.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 275 Limitations Act, R.S.O. 1990, c. L.15
Philippa G. Samworth, for appellant. Brian C. Atherton, for respondent.
[1] BY THE COURT:-- The issue in this appeal is whether the limitation period for arbitrating a dispute between insurers over indemnification under s. 275 of the Insurance Act, R.S.O. 1990, c. I.8 (the "Act") commences with the first benefit paid for which indemnification can be claimed, or whether a new limitation period arises with each subsequent payment.
[2] Backhouse J. found in favour of the former and upheld the award of Arbitrator Jones to the same effect. In our view, this is in error and the latter conclusion is the proper answer. We would therefore allow the appeal from the arbitrator and reverse his finding that the indemnification claim before him was time-barred.
[3] The motor vehicle collision in this case occurred on March 10, 1992. The first accident benefit payment was made to the occupant of the car by the appellant on May 4, 1992. Section 275 of the Act entitled the appellant to indemnification from the respondent, the insurer of the other motor vehicle. However, the appellant did not commence the arbitration process necessary to settle the dispute with the respondent over indemnification within six years after May 4, 1992, although the appellant made a number of benefits payments after that date.
[4] In this case, it is common ground that the arbitration must be commenced within six years after the cause of action arose as required by the Limitations Act, R.S.O. 1990, c. L.15.
[5] The cause of action here is the entitlement to indemnification given by s. 275(1) of the Act. It reads:
275(1) The insurer responsible under subsection 268(2) for the payment of statutory accident benefits to such classes of persons as may be named in the regulations is entitled, subject to such terms, conditions, provisions, exclusions and limits as may be prescribed, to indemnification in relation to such benefits paid by it from the insurers of such class or classes of automobiles as [page80] may be named in the regulations involved in the incident from which the responsibility to pay the statutory accident benefits arose.
(Emphasis added)
[6] This section creates a statutory cause of action. There is therefore no reason to apply the principles of limitation that have been developed in the common law of torts.
[7] The section also leaves the clear implication that a cause of action arises with every payment for which indemnification can be claimed. It is an entitlement that arises in relation to each benefit paid, not just the first one. Hence, the conclusion we have reached is supported by the clear language of the statute.
[8] Moreover, there is a persuasive policy reason favouring that conclusion. If the limitation period runs only from the first payment, then any dispute between insurers about the quantum of any payment for which indemnification is provided that is made more than six years later, could not be resolved by arbitration. This is contrary to the intent of s. 275(4), which contemplates that any indemnification dispute under s. 275 between the involved insurers shall be resolved through arbitration.
[9] Nor is there any policy reason pointing the other way. There is no concern that if there is a sequence of limitation periods there could be a sequence of arbitrations, theoretically yielding conflicting decisions on fault. The first such adjudication would surely be binding on both insurers for all subsequent indemnification disputes where fault was in issue. And any concern that it would be open to an insurer to dispute fault for the first time many years after the first payment, after that insurer had lived with an apportionment of fault for all that time, is surely answered by the doctrine of estoppel.
[10] Finally, the conclusion we have reached conforms to that of the Honourable R.E. Holland in York Fire and Casualty Insurance Company and the Co-operators, an arbitration under the Act decided on July 20, 1999, unreported. The arbitrator, someone with vast experience in automobile insurance law, said this at p. 5:
The right to indemnification arises when the benefits are paid. In my opinion, this starts the operation of the limitation period for any such benefit paid.
[11] This decision was upheld by Somers J. in York Fire & Casualty Insurance Co. v. Co-operators, 1999 36836 (ON SC), [1999] O.J. No. 4172, 17 C.C.L.I. (3d) 16 (S.C.J.).
[12] We therefore conclude that the claim for indemnification is not out of time but, rather, is alive for all payments made within six years of the commencement of arbitration.
[13] The appeal is allowed. Costs of the appeal to the appellant in the amount of $2,500, inclusive of disbursements and GST.
Appeal allowed. [page81]