Cervo v. State Farm Mutual Automobile Insurance Co., 2006 ONCA 37119

Cervo v. State Farm Mutual Automobile Insurance Co.; Cervo v. Raimondo [Indexed as: Cervo v. State Farm Mutual Automobile Insurance Co.]

83 O.R. (3d) 205

Court of Appeal for Ontario,

Labrosse, Rosenberg and MacPherson JJ.A.

November 2, 2006

Insurance -- Automobile insurance -- Statutory accident benefits -- Time limits -- Insured giving notice of claim for statutory accident benefits two years after accident involving forklift and van -- Insurer denying claim on basis that notice was not given within 30 days as required by s. 59(1) of Statutory Accident Benefits Schedule -- Insured claiming that he had reasonable excuse under s. 59(4) for failure to give timely notice as he relied on his lawyer, it was unclear at time whether forklift constituted a motor vehicle, and complexity of case required that lawyer obtain a second opinion -- None of those excuses being "reasonable" -- Statutory Accident Benefits Schedule, O. Reg. 776/93, s. 59.

Insurance -- Relief from forfeiture -- Relief provided by s. 59(4) of Statutory Accident Benefits Schedule from requirement to notify insurer of accident within 30 days not rendering inoperable more general relief from forfeiture provisions of s. 129 of Insurance Act -- Motion judge's discretionary decision refusing to grant relief from forfeiture under s. 129 entitled to appellate deference -- Insured required to demonstrate that insurer suffered no prejudice as result of failure to give timely notice -- Motion judge entitled to find that insurer was prejudiced and that prejudice outweighed hardship to insured -- Insured's appeal dismissed -- Insurance Act, R.S.O. 1990, c. I.8, s. 129 -- Statutory Accident Benefits Schedule, O. Reg. 776/93, s. 59.

The plaintiff was injured in 1994 when he was crushed between a forklift and a van. Shortly afterwards, he retained the defendant R as his lawyer. More than a year after the accident, R sought a second legal opinion, receiving it nine months after the request was made. Two days before the second anniversary of the accident, the defendant insurer was informed of the accident for the first time and was advised of the plaintiff's intention to advance a claim for Statutory Accident Benefits. The insurer rejected the claim on the basis that the plaintiff failed to notify it within 30 days after the circumstances arose that gave rise to the entitlement to benefits, as required by s. 59(1) of the Statutory Accident Benefits Schedule ("SABS"), and that the plaintiff did not have a "reasonable excuse" under s. 59(4) for non-compliance with the time limit. On a [page206] motion under Rule 22 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the motion judge ruled that the plaintiff did not have a "reasonable excuse" for non-compliance under s. 59(4) of the SABS and that this was not an appropriate case for relief from forfeiture under s. 129 of the Insurance Act. The plaintiff appealed.

Held, the appeal should be dismissed.

Per Labrosse J.A. (Rosenberg J.A. concurring): The plaintiff argued before the motion judge that he had reasonable excuses for non-compliance with the time limit because: he relied on R; it was not clear whether a forklift was an automobile under the Act; and the complexity between the tort claims and the plaintiff's rights under the SABS required a second opinion. The motion judge properly rejected each of those excuses. First, mere reliance on a solicitor is not a reasonable excuse. Second, during the time the notice should have been given, the existing jurisprudence was such that a claimant in the plaintiff's position would reasonably have believed that he had been in an automobile accident. The question of whether the forklift was an automobile was not a reasonable excuse. In any event, the accident also involved a parked van, and there was case law in 1994 that strongly suggested that a parked van would be considered an automobile and that the accident arose from the use or operation of the vehicle. Third, even accepting that, when a solicitor is in doubt regarding the validity of his client's claim and thus seeks the opinion of another, this would constitute a reasonable excuse for the delay involved, but no opinion was sought in this case until more than a year had passed since the accident. There was no explanation why the second opinion was not and could not have been sought shortly after the accident. The last two excuses lost all merit in light of the evidence that there was no disadvantage to the plaintiff in applying for the benefits immediately after the accident took place.

Section 59(4) of the SABS was not intended to render nugatory the more general relief from forfeiture provided in s. 129 of the Insurance Act. Relief from forfeiture is an equitable remedy and is purely discretionary. An appellate tribunal is not at liberty to substitute its own discretion for the discretion already exercised by the judge of first instance. The motion judge was entitled to refuse to grant relief from forfeiture in the circumstances of this case. She was entitled to conclude that the loss of the ability to receive statutory accident benefits was not a significant hardship to the plaintiff and that there was evidence of prejudice to the insurer as a result of the delay. In the case of relief against forfeiture, the onus is on the insured to show that the insurer suffered no prejudice as a result of the breach. The plaintiff filed no evidence of hardship to himself or lack of prejudice to the insurer.

Per MacPherson J.A. (dissenting): In refusing to grant relief from forfeiture under s. 129 of the Insurance Act, the motion judge erred in her treatment of the hardship to the plaintiff and prejudice to the insurer and erred in her ultimate conclusion. The loss of statutory accident benefits was a very significant hardship, which was not much reduced by the possibility that the plaintiff might be awarded damages in tort actions against the driver of the forklift and his employer or R. The record put forward by the insurer did not support a finding of strong prejudice. If an insurer claims that it is seriously prejudiced by an extension of time, it has an evidentiary obligation to provide some details. The insurer did not do so. Because relief from forfeiture was available under s. 129 of the Act, it was unnecessary to consider whether the trial judge also erred in her interpretation of s. 59(4) of the SABS. [page207]

APPEAL from the judgment of Low J., [2005] O.J. No. 1781, [2005] O.T.C. 338 (S.C.J.), on a motion for the determination of questions of law.

Cases referred to

Chiarelli v. Wiens (2000), 2000 3904 (ON CA), 46 O.R. (3d) 780, [2000] O.J. No. 296, 34 C.P.C. (4th) 227 (C.A.), distd

Other cases referred to

Barry Carruthers and Royal & SunAlliance Insurance Company of Canada, unreported, FSCO A99-00023, May 30, 2002; Boell v. Schinkel (1991), 1991 7210 (ON SC), 3 O.R. (3d) 741, [1991] O.J. No. 1019, 32 M.V.R. (2d) 80 (Gen. Div.); Bottan v. Vroom, [2002] O.J. No. 1383, 113 A.C.W.S. (3d) 335 (C.A.); Canadian Newspapers Co. v. Kansa General Insurance Co. (1996), 1996 2482 (ON CA), 30 O.R. (3d) 257, [1996] O.J. No. 3054, [1996] I.L.R. Â1-3369 (C.A.) [Leave to appeal to S.C.C. refused [1996] S.C.C.A. No. 553]; Falk Brothers Industries Ltd. v. Elance Steel Fabricating Co., 1989 38 (SCC), [1989] 2 S.C.R. 778, [1989] S.C.J. No. 97, 80 Sask. R. 22, 62 D.L.R. (4th) 236, 99 N.R. 228, [1990] 1 W.W.R. 29, [1989] I.L.R. Â1-2506; Friends of the Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, [1992] S.C.J. No. 1, 84 Alta. L.R. (2d) 129, 88 D.L.R. (4th) 1, 132 N.R. 321, [1992] 2 W.W.R. 193; July v. Neal (1986), 1986 149 (ON CA), 57 O.R. (2d) 129, [1986] O.J. No. 1101, 17 O.A.C. 390, 32 D.L.R. (4th) 463, [1986] I.L.R. Â1-2126, 12 C.P.C. (2d) 303, 44 M.V.R. 1 (C.A.); Kingsway General Insurance Co. v. West Wawanosh Insurance Co. (2002), 2002 14202 (ON CA), 58 O.R. (3d) 251, [2002] O.J. No. 528, 155 O.A.C. 238, 35 C.C.L.I. (3d) 267, [2002] I.L.R. Â1-4087, 112 A.C.W.S. (3d) 145 (C.A.); Morrone v. CAA Insurance Co. (Ontario), [1995] O.J. No. 3024, [1996] I.L.R. 1-3295, 17 M.V.R. (3d) 15 (Gen. Div.); Omand v. Disabled & Aged Regional Transit Systems (1993), 1993 8456 (ON SC), 14 O.R. (3d) 52, [1993] O.J. No. 1372, 46 M.V.R. (2d) 12 (Gen. Div.); Regele v. Slusarczyk (1997), 1997 3648 (ON CA), 33 O.R. (3d) 556, [1997] O.J. No. 1849, 147 D.L.R. (4th) 294 (C.A.); Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 100 (SCC), [1994] 2 S.C.R. 490, [1994] S.C.J. No. 59, 20 Alta. L.R. (3d) 296, 115 D.L.R. (4th) 478, 168 N.R. 381; Scherer v. Paletta, 1966 286 (ON CA), [1966] 2 O.R. 524, [1966] O.J. No. 1017, 57 D.L.R. (2d) 532 (C.A.)

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8, s. 129

Saskatchewan Insurance Act, S.S. 1978, c. S-26, s. 109

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 22

Statutory Accident Benefits Schedule -- Accidents after December 31, 1993 and before November 1, 1996, O. Reg. 776/ 93, s. 59(1), (4)

Jadranka Cavrak, for Gerardo Cervo. D'Arcy McGoey, for State Farm Mutual Automobile Insurance Company. Philippa Samworth, for Joseph Raimondo.

MACPHERSON J.A. (dissenting): --

A. Introduction

[1] Regrettably, this appeal relates to a serious accident that took place almost 12 years ago, on December 1, 1994. The insured [page208] person, the appellant Jerry Cervo, applied for no-fault accident benefits. The insurance company, the respondent State Farm Mutual Automobile Insurance Company ("State Farm"), denied his claim on the basis that he had not notified State Farm of his claim within 30 days after the accident, as required by s. 59(1) of the Statutory Accident Benefits Schedule, O. Reg. 776/93 (the "SABS").

[2] Cervo took the position that strict compliance with this limitation period was not required in the circumstances of his case. He relied on s. 59(4) of the SABS which provides that a failure to comply with the time limit in s. 59(1) does not disentitle a person to benefits if the person has "a reasonable excuse" for non-compliance. Cervo also relied on the more general relief provision in s. 129 of the Insurance Act, R.S.O. 1990, c. I.8, which permits a court to grant relief if the court "considers it inequitable that the insurance should be forfeited".

[3] The matter came before Low J. as a Rule 22 motion [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] for the determination of two questions:

(1) Whether the plaintiff Jerry Cervo had a reasonable excuse for his failure to apply in timely fashion for benefits under the Statutory Accident Benefits Schedule under the Insurance Act;

(2) If he did not, is this an appropriate case for relief from forfeiture under s. 129 of the Insurance Act?

[4] The motion judge answered both questions in the negative. The appellant Cervo and the appellant Joseph Raimondo, who was Cervo's lawyer, appeal the motion judge's decision.

B. Facts

(1) The parties and events

[5] The matter proceeded before the motion judge on the basis of an Agreed Statement of Facts: AGREED STATEMENT OF FACTS

1. On December 1, 1994 Jerry Cervo sustained various injuries as a result of an incident that occurred in the driveway of Serpa Auto Services at 185 Toryork Drive.

2. The injuries sustained by Mr. Cervo include a fractured right femur, fracture of the left tibia and fibula as well as injuries to the knee, ankle, hip, back and head. Mr. Cervo has undergone surgery both with respect to the fractures as well as knee reconstruction of the anterior crew shaped ligament. At the time of the accident Mr. Cervo was nineteen years of age with a date of birth of May 20, 1975. [page209]

3. On the day of the accident Mr. Cervo and one Terry Dias attended at Serpa Auto Services in Mr. Dias' van. The van was parked in the driveway of Serpa Auto Services and was not being operated at the time of the incident. Mr. Cervo was standing at the rear of the van.

4. The Fern Group occupies 176 Toryork Drive. On the date of the incident Ram Lall, an employee of Fern Group was operating a forklift moving skids of boxes from 176 Toryork Drive to a warehouse unit across the street at 185 Toryork Drive. This storage unit is adjacent to Serpa Auto Services.

5. On one of the trips, Mr. Lall, while transporting the skid of boxes on his forklift struck Mr. Cervo crushing him against the rear of the van. The Metropolitan Police Incident Report is attached at Tab 2 to this agreed statement of facts.

6. At the time of this incident State Farm Mutual Automobile Insurance Company provided comprehensive automobile insurance to Jerry Cervo under the following policies:

a. Policy number 244 4588-B11-60B (a 1982 GMC);

b. Policy number 2711125-B25-60B (a 1989 Pontiac);

c. Policy number 222 4221-E20-60C.

The State Farm policy provided coverage for, interalia [sic], uninsured coverage, underinsured coverage and statutory accident benefits.

7. Within 30 days of this incident, Jerry Cervo retained Joseph Raimondo to act on his behalf with respect to all matters flowing from this incident.

8. The applicable insurance regime with respect to automobile accidents at the time of this incident was known as "Bill 164" and the applicable regulation was the Statutory Accident Benefits Schedule -- Accidents Between January 1, 1994 and November 1, 1996.

9. Jerry Cervo relied on Joseph Raimondo to provide him with advice with respect to the available claims he may have flowing from this incident including:

a. Claims against "unprotected" defendants in tort;

b. Claims against "protected" defendants in tort;

c. Claims for statutory accident benefits.

10. In January of 1996 Joseph Raimondo retained Thomson Rogers on behalf of Jerry Cervo to provide an opinion with respect to, interalia [sic], whether this incident constituted an accident as defined under the relevant Statutory Accidents Benefits Schedule and under the provisions of the then Insurance Act. Assistance was also sought as to the best option available to Mr. Cervo in the circumstances of this case. The opinion was provided by Thomson Rogers by letter dated September 17, 1996 with further clarification orally on November 29, 1996. Joseph Raimondo's instructing letter of March 18, 1996 and Thomson Rogers' opinion of September 17, 1996 are attached at Tabs 3 and 4 of this Agreed Statement of Facts. [page210]

11. On November 29, 1996 a letter of the same date was faxed and sent by courier to State Farm Mutual Automobile Insurance Company advising of the insured's intention to advance a claim for Statutory Accident Benefits and enclosing the Application for Accident Benefits. The letter and enclosures are attached at Tab 5 to this Agreed Statement of Facts. State Farm had no knowledge of this accident prior to November 28, 1996.

12. State Farm rejected the claim for accident benefits by letter dated January 15, 1997 citing Section 59 of the Statutory Accident Benefits Schedule. A copy of that letter is attached at Tab 6 to this agreed statement of facts.

13. State Farm claims the insured is not entitled to Statutory Accident Benefits for the following reasons:

a. He failed to notify the insurer within 30 days after the circumstances arose that gave rise to the entitlement to benefits or as soon as practical thereafter;

b. There is no reasonable excuse for failure to do so as provided under Section 59(4).

14. Mr. Cervo takes the position on this motion, only, that Section 59(1) does not apply as he had a reasonable excuse as follows:

a. He relied on the direction and instructions of his counsel, Joseph Raimondo;

b. It was unclear whether the incident of December 1, 1994 constituted an "accident" as defined under the Statutory Accident Benefits Schedule and the Insurance Act R.S.O. 1990 and amendments thereto as the law was not clear at the time whether a forklift constituted an automobile;

c. The complexity of the interrelationship between tort claims (protected and unprotected defendants) and the rights that would ensue versus the rights under the Statutory Accident Benefits Schedule required a second opinion.

(2) The motion judge's decision

[6] In comprehensive reasons released on May 5, 2005, the motion judge answered both of the questions in the negative. Accordingly, she dismissed Cervo's action against State Farm, leaving untouched his action against his former lawyer, Raimondo.

C. Issues

[7] The issues are:

(1) Did the motion judge err by concluding that the appellant Cervo did not have a reasonable excuse for not complying with the 30-day period for notifying his insurer of his potential claim for accident benefits? [page211]

(2) Did the motion judge err by concluding that the appellant Cervo should not be granted relief from forfeiture under s. 129 of the Insurance Act?

D. Analysis

[8] In my view, this appeal can be resolved by determining the second issue, namely the application of s. 129 of the Insurance Act to the circumstances of this case.

(1) Preliminary issue

[9] Section 59(1) and (4) of the SABS provides:

59(1) A person who wants to apply for benefits under this Regulation shall notify the insurer within thirty days after the circumstances arose that gave rise to the entitlement to benefits, or as soon as practicable thereafter. . . . . .

(4) A failure to comply with a time limit set out in subsection (1) . . . does not disentitle a person to benefits if the person has a reasonable excuse.

[10] Section 129 of the Insurance Act provides:

129. Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

[11] The respondent submits that since s. 59 of the SABS contains its own relief from forfeiture, it follows that s. 129 of the Insurance Act is inapplicable in this case. The respondent describes this submission in terms of s. 59(4) "occupying the field" of relief from forfeiture. For three reasons, I reject this submission.

[12] First, it is not at all clear that this issue was raised before the motion judge, who did not consider it in her comprehensive reasons. Indeed, the parties agreed that there were two legal questions that needed to be determined -- whether Cervo could bring himself within s. 59(4) of the SABS and whether this was an appropriate case for relief from forfeiture under s. 129 of the Insurance Act. If, as the respondent asserts, s. 59(4) of the SABS was in effect a code in the domain of relief from forfeiture for SABS benefits, the second stated question would have been irrelevant.

[13] Second, there is nothing in the language of s. 59 of the SABS to suggest that it was intended to render nugatory the [page212] more general, and well-known, relief from forfeiture provided in s. 129 of the Insurance Act: see Morrone v. CAA Insurance Co. (Ontario), [1995] O.J. No. 3024, 17 M.V.R. (3d) 15 (Gen Div.) at para. 20.

[14] Third, and most importantly, the language of the two provisions is very different. Section 59(4) of the SABS ("reasonable excuse") mandates a focus on the claimant's conduct -- why did he not apply for benefits within the time limit? Section 129 of the Insurance Act ("inequitable that the insurance should be forfeited"), on the other hand, focuses attention on the consequences of the late application for both the claimant (hardship) and the insurance company (prejudice). This fundamental difference in focus tells strongly against the submission that s. 59(4) of the SABS occupies the field, thus rendering s. 129 of the Insurance Act inapplicable to this case.

[15] I note that on this point the respondent relies on Kingsway General Insurance Co. v. West Wawanosh Insurance Co. (2002), 2002 14202 (ON CA), 58 O.R. (3d) 251, [2002] O.J. No. 528 (C.A.) to support its position that the specific relief in s. 59(4) of the SABS trumps the general relief in s. 129 of the Insurance Act. I disagree. Kingsway is a case involving the failure of one insurance company to notify another insurance company about a claim within a statutory time frame. Different considerations apply to claimants whose knowledge of the complexities and requirements of insurance policies and statutes is almost certainly not at the same level as the knowledge of the companies involved in the industry. In any event, Kingsway is written in terms of declining to exercise discretion to grant an extension under a general statute, not the very different "occupies the field" principle advanced here by the respondent.

(2) Relief from forfeiture under s. 129 of the Insurance Act

[16] Section 129 of the Insurance Act does not contain explicit time limit language. It is a general curative provision. However, in Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 38 (SCC), [1989] 2 S.C.R. 778, [1989] S.C.J. No. 97 ("Falk Bros."), a case dealing with a provision of the Saskatchewan Insurance Act (s. 109) identical to s. 129 of the Ontario Insurance Act, the Supreme Court of Canada held that failure by an insured to comply with a time limit for giving notice of a potential claim to an insurer was "imperfect compliance" covered by s. 129. Justice McLachlin, speaking for a unanimous court, stated, at para. 18:

The case law has generally treated failure to give notice of claim in a timely fashion as imperfect compliance whereas failure to institute an action within [page213] the prescribed time period has been viewed as non-compliance, or breach of a condition precedent. Thus, courts have generally been willing to consider granting relief from forfeiture where notice of claim has been delayed.

[17] Justice McLachlin also set out the general purpose of s. 129 and the factors to consider in a s. 129 analysis, at para. 13:

The first consideration is that s. 109 is a remedial section and as such should be given an appropriately broad interpretation . . . The purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer. This purpose is consistent with interpreting s. 109 as permitting the court to grant relief from contractual as well as statutory conditions.

[18] The motion judge cited Falk Bros. and explicitly considered the factors identified by McLachlin J., namely, hardship to the claimant and prejudice to State Farm.

[19] The motion judge identified the hardship to Cervo if he could not claim no-fault benefits from State Farm as "the risks of his action against his solicitor". She described the prejudice to State Farm as "[l]oss of an opportunity to conduct early examinations [and] to provide therapeutic interventions" [at para. 52].

[20] The motion judge concluded [at para. 53]:

Weighing the conduct of the plaintiff in refraining from giving notice of his claim, the absence of substantial hardship to the plaintiff, the existence of prejudice to the defendant and the absence of conduct on the part of the defendant that could be said to be objectionable, I am not of the opinion that it would be inequitable that the loss be permitted to lie where it falls and the insurance benefits be avoided in these circumstances.

[21] With respect, the motion judge erred in her treatment of the hardship to the claimant and prejudice to the insurer factors and, therefore, also erred in her ultimate conclusion.

[22] On the hardship factor, the motion judge did not mention that if relief from forfeiture is not granted, the appellant will not be able to receive no-fault accident benefits under the SABS. This is a very significant hardship. SABS benefits do not require proof of fault. SABS benefits are, potentially, both broad and generous (encompassing income loss, rehabilitation, attendant care, housekeeping and medical expenses). Moreover, under the SABS regime, the claimant has access to a speedy, informal, convenient and inexpensive process to determine both eligibility for, and quantum of, benefits. Finally, the fact that this hardship is one that will be shared by all claimants who miss a time limit for making a claim does not diminish the reality of the hardship.

[23] In addition, I do not think that the hardship to the appellant is much reduced by the possibility that he might be awarded [page214] damages in tort actions against the driver (and employer) of the forklift or his former lawyer. These actions have the potential to be long, slow, expensive and, importantly, uncertain in result.

[24] On the prejudice factor, I do not think that the record put forward by State Farm supports a finding of strong prejudice. State Farm's initial rejection of Cervo's claim, in a letter dated January 15, 1997, relied solely on the time limit of s. 59 of the SABS. There is nothing in the letter about how late submission of the claim might compromise any steps, medical or legal, that State Farm might have contemplated taking. Moreover, for several years State Farm's principal position was that an accident involving a forklift was not an accident that was covered by SABS.

[25] The only evidence about the prejudice that State Farm might suffer if it had to respond to Cervo's claim on the merits emerged from the examination for discovery of David Dim, a claims manager at State Farm. When Mr. Raimondo, Cervo's lawyer at the time, asked Mr. Dim about prejudice, State Farm's counsel replied on behalf of Mr. Dim:

MR. RAIMONDO: Can you provide me with specifics exactly other than this sort of general comment that you just made? Specifically, what prejudice did State Farm encounter as a result?

MR. GOLD: Yes. I can tell you that specifically we didn't have the opportunity to speak to any witnesses at an early date to get medical examinations at an early date which may, in fact, have been able to assist the plaintiff, we don't know because we didn't have the opportunity to set anything up; and there may be some other ways which we've been prejudiced that don't come to mind as we speak. . . . . .

MR. RAIMONDO: Now other than -- again, and I hate to -- I mean, my -- other than what you've told me and again in a general way that you didn't have an opportunity to have -- interview witness and get medical examination, you told me specifically again how these two issues have made a difference or how they prejudiced State Farm?

MR. GOLD: In fairness, Counsel, I think the prejudice will speak for itself. I don't want to sit here and conjecture, but let's by way of example, and that's why -- I give this example only. For all we know, if we knew about the accident quickly and if he was entitled to benefits and if we -- State Farm could have assisted him with some sort of treatment for all we know your client would have been up and about.

I don't know. That's speculation at on my part and --

[26] In my view, this articulation of potential prejudice is far removed from what is required when potential loss of important accident benefits for a seriously injured claimant is at stake. Cervo's injuries are well-known by State Farm. There is [page215] considerable medical documentation concerning those injuries and their treatment over the years. In light of these factors, State Farm has an obligation to provide specific answers to such questions as: Why can't you investigate? What witnesses do you need to speak to? About what? What opportunities have you lost?

[27] In Chiarelli v. Wiens (2000), 2000 3904 (ON CA), 46 O.R. (3d) 780, [2000] O.J. No. 296 (C.A.), at para. 14, Laskin J.A. said:

The only allegation of prejudice in the material filed by the defence on the motion is the following very general statement in the affidavit of State Farm's claims adjuster:

It is my belief that the defence of this action has been seriously prejudiced due to the passage of time and the strong possibility that pre-accident and post-accident records and witnesses may not be available or that their recollections may not be accurate.

Although the onus remains on the plaintiffs to show that the defendant will not be prejudiced by an extension, in the face of such a general allegation, the plaintiffs cannot be expected to speculate on what witnesses or records might be relevant to the defence and then attempt to show that these witnesses and records are still available or that their unavailability will not cause prejudice. It seems to me that if the defence is seriously claiming that it will be prejudiced by an extension it has at least an evidentiary obligation to provide some details. The defence did not do that in this case.

(Emphasis added)

In my view, this passage is a precise fit to the circumstances of this case.

[28] For these reasons, and with respect, I disagree with the motion judge's refusal to grant relief from forfeiture. It follows that it is not necessary to consider whether the trial judge erred in her interpretation of s. 59(4) of the SABS.

E. Disposition

[29] I would allow the appeal and set aside the judgment of the motion judge. The appellants are entitled to their costs of the appeal which I would fix, in accordance with the agreement of counsel, at $5,000 inclusive of disbursements and GST.

LABROSSE J.A. (ROSENBERG J.A. concurring): --

[30] I have read with interest the reasons of my colleague, Justice MacPherson. Unfortunately, I cannot agree with either his reasons or his conclusion.

[31] My colleague has included in his reasons the Agreed Statement of Facts filed by the parties. I will only highlight certain facts relevant to my reasons. [page216]

The Facts

[32] On December 1, 1994, the appellant, Gerardo Cervo ("Cervo" or "the claimant"), while in the process of checking a light at the rear of his companion's van, was injured when he was struck by a forklift and crushed against the rear of the van. On or about December 8, 1994, within one week of the accident, Cervo retained the appellant, Joseph Raimondo, to act as his solicitor with respect to all matters flowing from the accident.

[33] In his factum, the solicitor states that he did not receive particulars of three existing comprehensive policies with State Farm Mutual Automobile Insurance Company issued to Cervo's parents, which provided uninsured and underinsured coverage and statutory accident benefits to Cervo as a named insured, until December 1995, more than a year after the accident. No explanation is given as to why details of the policies were not immediately available after the accident.

[34] In January 1996, some 15 months after the accident, the solicitor retained Thomson Rogers to provide him with an opinion as to the options available to his client. Thomson Rogers provided its opinion on September 17, 1996 with further clarification on November 29, 1996, approximately nine and 11 months, respectively, after the request was made. No explanation is given for the delay in seeking the opinion, nor is there any evidence that the solicitor inquired about the reasons for the delay.

[35] State Farm had no knowledge of the accident until it was notified of it by the solicitor on or about November 28, 1996, two days short of two years after the accident. It is not surprising that State Farm rejected the claim.

[36] At the date of the argument before the motion judge, there were three pending actions arising from the accident: (1) Cervo's action in tort against the operator of the forklift and others, (2) his action against State Farm for accident benefits, and (3) his action against his solicitor for damages for professional negligence for the failure to give notice to State Farm of his claim in timely fashion.

The Issues

[37] The motion proceeded pursuant to Rule 22 of the Rules of Civil Procedure for the determination of the following questions:

(1) Did Jerry Cervo have a reasonable excuse for his failure to apply in timely fashion for benefits under [s. 59 of] the Statutory Accident Benefits Schedule ("SABS") under the Insurance Act? [page217]

(2) If he did not, is this an appropriate case for relief from forfeiture under s. 129 of the Act?

Question (1)

Did Jerry Cervo have a reasonable excuse for his failure to apply in timely fashion for benefits under s. 59 of the Statutory Accident Benefits Schedule ("SABS") under the Insurance Act?

[38] The motion judge found that Cervo did not have a reasonable excuse for his failure to notify State Farm of the accident.

[39] The relevant parts of s. 59 provide as follows:

59(1) A person who wants to apply for benefits under this Regulation shall notify the insurer within thirty days after the circumstances arose that gave rise to the entitlement to benefits, or as soon as practicable thereafter. . . . . .

(4) A failure to comply with a time limit set out in subsection (1) or (3) does not disentitle a person to benefits if the person has a reasonable excuse.

[40] Section 59 requires an applicant to notify State Farm within 30 days of the circumstances giving rise to entitlement to the benefits or as soon as practicable thereafter. A failure to comply with this time limit does not disentitle an applicant to the benefits if the applicant had a reasonable excuse.

[41] In his reasons, my colleague did not find it necessary to deal with the first question as he was of the view that the appeal could be resolved by determining the second question, namely, the granting of relief from forfeiture under s. 129 of the Act. Since, in my view, the motion judge was correct in her resolution of the second issue, I will deal with the question of reasonable excuse.

[42] It was argued before the motion judge that Cervo had reasonable excuses for his failure to apply in a timely fashion for benefits because (1) he relied on his solicitor, (2) it was not clear whether a forklift was an automobile under the Act, and (3) the complexity between the tort claims and the rights under the SABS required a second opinion.

[43] In detailed reasons, the motion judge rejected each excuse advanced by Cervo.

Cervo's reliance on his solicitor

[44] First, the motion judge found that the solicitor was the agent of the client and that as far as third parties were concerned, [page218] the actions of a solicitor are the actions of the principal where the actions are taken in the course of dealing with the client's case. The motion judge relied on arbitral jurisprudence that mere reliance on counsel cannot serve as an excuse: see Barry Carruthers and Royal & SunAlliance Insurance Company of Canada, unreported, FSCO A99-000923, May 30, 2002.

[45] An attempt was made to distinguish the status of the client from the status of the solicitor. It was argued that because Cervo was 19 years of age, lived at home with his parents, had a Grade 11 education and worked as a labourer, these characteristics would somehow constitute a valid excuse for the failure to give notice. However, the solicitor was not hampered by any of these alleged limitations.

[46] In Scherer v. Paletta, 1966 286 (ON CA), [1966] 2 O.R. 524, [1966] O.J. No. 1017 (C.A.), at pp. 526-27 O.R., this court confirmed the relationship of solicitor and client when it stated:

In general, the solicitor is the client's authorized agent in all matters that may reasonably be expected to arise for decision in the particular proceedings for which he has been retained. Where a principal gives an agent general authority to conduct any business on his behalf, he is bound as regards third persons by every act done by the agent which is incidental to the ordinary course of such business or which falls within the apparent scope of the agent's authority.

[47] In the present case there was no evidence of any limitation between the client and the solicitor or on the solicitor's authority to act for his client. I agree with the motion judge that mere reliance on the solicitor was not a reasonable excuse.

Forklift as an automobile

[48] Second, the motion judge found, correctly in my view, that during the time the notice should have been given, the existing jurisprudence was such that a claimant in Cervo's position would reasonably have believed he had been in an automobile accident which would give rise to accident benefits. The motion judge noted that it was long after the period during which the claimant could have given notice of his claim for accident benefits that this court decided in Regele v. Slusarczyk (1997), 1997 3648 (ON CA), 33 O.R. (3d) 556, [1997] O.J. No. 1849 (C.A.) that a tractor (by analogy a forklift) was not an automobile. Accordingly, the motion judge concluded that the question of whether the forklift was an automobile was not a reasonable excuse.

[49] In any event, although this point was not mentioned by the motion judge, but argued by counsel for State Farm, there could not be any doubt that the van involved in the accident was an automobile as defined under the Act, thus giving rise to a claim for [page219] accident benefits. There was no logical reason to fixate on the meaning of the forklift when the van was involved in the accident and was clearly an automobile. Though the van was stationary at the time of the accident, there was case law in 1994 that strongly suggested a parked van would be considered an automobile and that the accident arose from the use or operation of the vehicle: Omand v. Disabled & Aged Regional Transit Systems (1993), 1993 8456 (ON SC), 14 O.R. (3d) 52, [1993] O.J. No. 1372 (Gen. Div.); Boell v. Schinkel (1991), 1991 7210 (ON SC), 3 O.R. (3d) 741, [1991] O.J. No. 1019 (Gen. Div.).

Complexity

[50] Third, the motion judge rejected the argument that the complexity of the matter requiring a second opinion (whether Cervo's tort rights would be affected by applying for accident benefits) was a reasonable excuse for the delay in giving notice until the end of November of 1996. I have difficulty accepting that, when a solicitor is in doubt regarding the validity of his client's claim and thus seeks the opinion of another, this should constitute a reasonable excuse for the delay involved. More importantly in this case, no opinion was sought until January of 1996, long after an opinion could have been sought and obtained had Cervo and/or his solicitor acted with reasonable dilligence. There is no explanation why the second opinion was not and could not have been sought shortly after the accident.

[51] These last two excuses lose all merit in light of the evidence that there was no disadvantage to Cervo in applying for the benefits immediately after the accident took place. The appellants claim they were concerned at the time that the forklift would not be considered an automobile and that Cervo's tort rights might be affected by applying for accident benefits, but offered no valid reason for not providing any notice at all for almost two years; for example, the appellants provided no evidence of anything of a medical nature, physical or emotional, or a practical impediment, inadvertence or ignorance of the obligation to give notice that might have explained the failure to provide timely notice of the accident. As far as the motion judge was concerned, the appellants knew of the obligation to provide notice of the accident and chose not to.

[52] Lastly on this question, was it reasonable, in the absence of any explanation:

-- that the particulars of insurance under which Cervo was insured were not ascertained until more than a year after [page220] the accident though a solicitor was retained within a week of the accident?

-- That a second opinion was not sought until some 15 months after the accident?

-- That the second opinion was not provided until at least nine months after the request was made?

-- That the solicitor did not inquire of the reason for the delay in providing the second opinion?

-- That State Farm was never advised of the accident (even if no application for benefits was being advanced) until two days before the second anniversary of the accident?

[53] This questionable behaviour was carried out in the face of a clear statutory requirement to notify the insurer within 30 days of the accident and each piece of conduct -- or lack thereof -- is inexcusable.

[54] The motion judge canvassed every excuse advanced for the delay. On any reasonable interpretation of "reasonable excuse", interpreted in a broad and liberal manner, in my opinion, the motion judge was correct in her conclusion that no reasonable excuse had been advanced for the failure to apply in a timely fashion for the benefits. To hold otherwise would render the section meaningless.

Question (2)

If Cervo did not have a reasonable excuse, is this an appropriate case for relief from forfeiture under s. 129 of the Act?

[55] The motion judge declined, in the circumstances of this case, to relieve Cervo from forfeiture under s. 129 of the Act, which provides [at para. 3]:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

Relief from forfeiture is a discretionary remedy

[56] It is trite law that the power to grant relief from forfeiture is an equitable remedy and is purely discretionary: [page221] Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 100 (SCC), [1994] 2 S.C.R. 490, [1994] S.C.J. No. 59. Whether relief from forfeiture should be granted requires an examination of all relevant facts: July v. Neal (1986), 1986 149 (ON CA), 57 O.R. (2d) 129, [1986] O.J. No. 1101 (C.A.).

[57] An appellate tribunal is not at liberty to substitute its own discretion for the discretion already exercised by the judge of first instance. In other words, appellate authorities ought not to reverse a decision merely because they would themselves have exercised the original discretion, had it attached to them, in a different way: Friends of the Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, [1992] S.C.J. No. 1.

[58] Also, as recognized by the motion judge, relief from forfeiture arising from imperfect compliance with statutory conditions is to be considered as a remedial section; as such, it should be given an appropriately broad interpretation. She cited Falk Bros., at para. 13, for this principle:

The purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to beneficiaries where there had been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer.

Relationship between s. 59 of SABS and [s. 129](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html) of the [Insurance Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-i8/latest/rso-1990-c-i8.html)

[59] As my colleague did, I would reject the submission of State Farm in terms of s. 59(4) "occupying the field" of relief from forfeiture. I agree with my colleague that there is nothing in the language of s. 59 to suggest that it was intended to render nugatory the more general relief from forfeiture provided in s. 129. Had that been the intention of the legislature, it could easily have done so. Moreover, as noted by my colleague, the fundamental difference in focus of the two sections leads to the conclusion that this was not the legislature's intention.

Hardship to Cervo and prejudice to State Farm

[60] In his reasons, my colleague notes that the motion judge cited Falk Bros., supra, and that she had explicitly examined the factors to be weighed when considering relief against forfeiture -- hardship to the claimant and prejudice to State Farm -- identified by McLachlin J. in that case.

[61] The motion judge concluded her reasons at paras. 50, 51, 52 and 53 as follows: [page222]

Part of the transcript of the examination for discovery of a representative of State Farm was made part of the motion record. The answers given by the State Farm representative disclose the existence of prejudice to the insurer arising from the delay in notice. The prejudice is said to lie in not being able to investigate the claim properly, not being able to speak to witnesses at an early date, not being able to get medical examinations at an early date and not being in a position to have assisted plaintiff with treatment.

Plaintiff has adduced no evidence as to hardship. It is nevertheless obvious that if relief from forfeiture is not granted, the plaintiff will have to look to the defendants in the other actions he has commenced. It is said on behalf of the plaintiff that while he has recourse against the tortfeasor and against his own lawyer for professional negligence, there is no assurance that he will be fully compensated. I agree that there are no absolute assurances in any litigation, but hardship to the plaintiff exists on a continuum from no prejudice at one end to overwhelming and irremediable hardship at the other. In my view, hardship to this plaintiff consists of the risks in his action against his solicitor. The pleadings in that action were before me. The solicitor's statement of defence does not reveal a reasonable explanation for the failure to give timely notice. Nor does it reveal a reasonable explanation for the long delay in seeking a second opinion if one was necessary. While there are risks to the plaintiff, they do not, in my view amount to substantial hardship in the circumstances.

On the other hand, there is evidence of prejudice to the defendant State Farm. The passage of time in itself will cause prejudice because injury and recovery are dynamic. The condition of the injured person changes from week to week and month to month. Loss of an opportunity to conduct early examinations may not be remediable. Loss of the opportunity to provide therapeutic interventions may negatively impact on recovery. Here, no evidence has been adduced to suggest that there is a remedy for loss of those opportunities.

Weighing the conduct of the plaintiff in refraining from giving notice of his claim, the absence of substantial hardship to the plaintiff, the existence of prejudice to the defendant and the absence of conduct on the part of the defendant that could be said to be objectionable, I am not of the opinion that it would be inequitable that the loss be permitted to lie where it falls and the insurance benefits be avoided in these circumstances.

a. Hardship to Cervo

[62] My colleague states that the motion judge did not mention that if relief from forfeiture is not granted, the appellant will not be able to receive no-fault accident benefits under the SABS. However, at para. 51 of her reasons, the motion judge stated: "It is nevertheless obvious that if relief from forfeiture is not granted, the plaintiff will have to look to the defendants in the other actions he has commenced." It is thus apparent from her reasons that she knew the result of her decision not to relieve from forfeiture: Cervo would not receive benefits and would have to look to the defendants in the other actions. [page223]

[63] My colleague considers the inability to receive SABS benefits a significant hardship. The motion judge concluded differently.

[64] The motion judge recognized the uncertainty involved in litigation. She addressed in particular the action against the solicitor, noting that on the basis of the pleadings from that action that were before her, the statement of defence did not reveal a reasonable explanation for the long delay in seeking a second opinion, if one was necessary. In my opinion, the motion judge was of the view that the claimant would likely succeed in his action against his former solicitor.

[65] While recognizing that there were risks to the claimant in litigation, the motion judge concluded [at para. 51]"they do not in my view amount to substantial hardship in the circumstances" [emphasis added]. The claimant clearly has an alternative to this action that was properly taken into account when considering the issue of prejudice.

[66] In my view, on the evidence before her, the motion judge was entitled to reach the conclusions she did with respect to both the benefits and the litigation.

b. Prejudice to State Farm

[67] In referring to the prejudice to State Farm, the motion judge found that the evidence of a State Farm representative, given on the cross-examination of his affidavit, disclosed prejudice arising from the delay in giving notice. In particular, prejudice arose from not being able to speak to witnesses and evaluate the claim at an early stage. Furthermore, as the condition of an injured claimant can change from week to week and month to month, there was a loss of opportunity to assist the claimant with treatment.

[68] I reject the argument of the appellants that this evidence was nothing but bald statements. In my view, they are common sense observations properly considered by the motion judge in declining to relieve from forfeiture.

[69] The motion judge also added -- I presume having in mind that the onus was on the person seeking the relief from forfeiture -- that no evidence had been adduced that there was a remedy for the loss of those opportunities.

[70] In reviewing the potential prejudice to State Farm, as testified to by its representative and reviewed above in the reasons of the trial judge, my colleague concludes that the record put forward by State Farm does not support a finding of strong prejudice. He relies upon the decision of this court in Chiarelli v. Wiens, supra, as authority for the view that the insurer is required to provide concrete evidence of how it had [page224] been prejudiced from taking any medical or legal steps that it may have wanted to take. However, there are important differences between this case and Chiarelli.

[71] First, Chiarelli concerned extending the time for service of a statement of claim and the possible prejudice that might be suffered by an insurance company (State Farm) if the time for service was extended. In contrast, the case before this court concerns a 30-day limitation period for notification to an insurer after an accident. More specifically, it concerns whether Cervo had a "reasonable excuse" for his failure to apply in timely fashion for benefits under the SABS and, if he did not, whether this is an appropriate case for relief from forfeiture under s. 129 of the Act. While both cases consider the issue of prejudice to the insurer, the contexts are different: extension of the time for service (being two years) in Chiarelli and a statutory limitation period (being 30 days) for notification of the accident in this case.

[72] Second, in Chiarelli, the plaintiffs notified their insurer immediately of the claim and kept the insurer up-to- date. The plaintiffs retained a lawyer soon after the October accident and by the end of November had put State Farm on notice of a claim. When one of the plaintiffs' medical condition deteriorated, the plaintiffs' lawyer forwarded medical information to State Farm as the information became available. In contrast, in this case, though Cervo retained a lawyer very quickly, State Farm was not notified of a claim until almost two years after the accident occurred, well beyond the 30-day limitation period.

[73] Third, in Chiarelli, the court concluded that State Farm was not prejudiced by the long delay in serving the statement of claim. State Farm failed to act when it knew that the injury to the plaintiff was serious; this was not caused by delay in serving the statement of claim. The insurer had the opportunity to do something about the injury to the plaintiff, but did not. The court held that the insurer could not create prejudice by its failure to do something that it reasonably could have done or ought to have done. In contrast, in this case, the insurer was given no opportunity to examine or help Cervo because it had not been notified of his claim. Unlike the insurer in Chiarelli, it was not given the information to make the choice of whether to examine and assist Cervo's recovery or not.

[74] Fourth, the limitation periods at issue in Chiarelli and this case are very different. The two-year period at issue in Chiarelli concerns the period within which a statement of claim must be served. The limitation period at issue in this case is the 30 days [page225] that are given for an accident victim to notify his or her insurer of the accident.

[75] In Chiarelli, Laskin J.A. spoke in relation to the facts before him. Those facts are so different from the present case that the legal analysis is of limited application. However, I would adopt the part of the passage quoted by MacPherson J.A. in which Laskin J.A. states that the onus remains on the plaintiff to show that the defendant will not be prejudiced by an extension of time. Indeed, it is important to emphasize that in the case of relief against forfeiture, the onus is on the insured to show that the insurer suffered no prejudice as a result of the breach: Canadian Newspapers Co. v. Kansa General Insurance Co. (1996), 1996 2482 (ON CA), 30 O.R. (3d) 257, [1996] O.J. No. 3054 (C.A.), at para. 76. Cervo has not filed any evidence -- much less clear evidence -- of hardship to himself or lack of prejudice to State Farm.

[76] More importantly, my colleague has failed to give appropriate weight to the discretionary nature of the order of the motion judge.

[77] At para. 20 of his reasons, my colleague quotes the conclusion of the motion judge as contained in para. 53 of her reasons, which I find convenient to repeat:

Weighing the conduct of the plaintiff in refraining from giving notice of his claim, the absence of substantial hardship to the plaintiff, the existence of prejudice to the defendant and the absence of conduct on the part of the defendant that could be said to be objectionable, I am not of the opinion that it would be inequitable that the loss be permitted to lie where it falls and the insurance benefits be avoided in these circumstances.

At para. 21, my colleague states:

With respect, the motion judge erred in her treatment of the hardship to the claimant and prejudice to the insurer factors and, therefore, also erred in her ultimate conclusion.

[78] Contrary to the motion judge, my colleague would have exercised his discretion differently and would have put more weight on the hardship to Cervo than on the prejudice to State Farm. In my respectful opinion, it is an error for this court to substitute its preference of the evidence when the motion judge made no mistake in the exercise of her discretion.

[79] The motion judge weighed both sides and did exactly what she was supposed to do: she properly addressed the relevant considerations and exercised her discretion not to relieve from forfeiture; she did not fail to take into consideration a major element of the case; she did not disregard, misapprehend or fail to appreciate relevant evidence, or make a finding not [page226] reasonably supported by the evidence, or draw an unreasonable inference from the evidence.

Conclusion

[80] Where a motion judge exercises discretion, an appellate court should intervene only where the discretion has been exercised on a wrong principle of law or a clear error has been made. It is not the role of an appellate court to replace the exercise of discretion by the motion judge. An appellate court should defer to the findings of fact by a motion judge unless the motion judge disregarded or failed to appreciate relevant evidence: Bottan v. Vroom, [2002] O.J. No. 1383, 113 A.C.W.S. (3d) 335 (C.A.) at para. 13.

[81] I would dismiss the appeal with costs as agreed between the parties.

Appeal dismissed.