Boyce et al. v. The Co-Operators General Insurance Company

[Indexed as: Boyce v. Co-Operators General Insurance Co.]

Ontario Reports

Court of Appeal for Ontario,

Doherty, Cronk and Lauwers JJ.A.

May 8, 2013

116 O.R. (3d) 56 | 2013 ONCA 298

Case Summary

Insurance — Limitations — Insurance policy which covered fashion boutique clearly and unambiguously providing for one-year limitation period — Motion judge erring in finding that provision was incapable of overriding otherwise applicable two-year limitation period in Limitations Act as agreement could be effective for purposes of s. 22 of Act only if it contained specific reference to statutory limitation period, clear and unequivocal language that parties were intending to vary statutory protection and provision alerting insured that they were forgoing statutory right to longer limitation period — Insurance contract being "business agreement" as defined in s. 22(6) of Act — Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 22.

The plaintiffs owned and operated a fashion boutique that was insured by the defendant. When the defendant denied coverage for a claim, the plaintiff commenced an action more than one year, but less than two years, after the incident giving rise to the claim. The insurance policy contained a provision stating, "Every action or proceeding against the insurer for recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs." The defendant brought a motion for summary judgment, claiming that the action was barred by the one-year limitation period. The motion judge dismissed the motion, holding that the provision in the policy limiting coverage to claims made within one year of the loss did not override the statutory two-year limitation period set out in s. 4 of the Limitations Act. She held that the term in the policy lacked the specific language necessary to override the statutory limitation period and that, in any event, the contract of insurance was not a "business agreement" as required under s. 22(5) of the Act. The defendant appealed.

Held, the appeal should be allowed. [page57 ]

The policy provided for a one-year limitation period in clear and unambiguous language. The motion judge erred in finding that an agreement could be effective for the purposes of s. 22 of the Limitations Act only if it contained specific reference to the statutory limitation period; clear and unequivocal language that the parties were intending to vary the statutory protection; and a provision clearly alerting the insured that they were foregoing a statutory right to a longer limitation period. Nothing in the language of s. 22 offered any support for imposing those requirements. The motion judge also erred in finding that the insurance contract was not a "business agreement" under s. 22(5) because insurance contracts are not covered by the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A. The scope of the Consumer Protection Act, 2002 was irrelevant. The only relevance of that Act flowed from the incorporation of the definition of "consumer" from that Act into s. 22(5) of the Limitations Act, 2002.

Armak Chemicals Ltd. v. Canadian National Railway Co. (1991), 3 O.R. (3d) 1, [1991] O.J. No. 536, 80 D.L.R. (4th) 675, 46 O.A.C. 292, 26 A.C.W.S. (3d) 1358 (C.A.); Bell Canada v. Plan Group Inc. (2012), 109 O.R. (3d) 128, [2012] O.J. No. 58, 2012 ONSC 42 (S.C.J.); Hunter Engineering Co. Inc. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426, [1989] S.C.J. No. 23, 57 D.L.R. (4th) 321, 92 N.R. 1, [1989] 3 W.W.R. 385, J.E. 89-571, 35 B.C.L.R. (2d) 145, 14 A.C.W.S. (3d) 277; International Movie Conversions Ltd. v. ITT Hartford Canada (2002), 57 O.R. (3d) 652, [2002] O.J. No. 76, 154 O.A.C. 189, 34 C.C.L.I. (3d) 13, [2002] I.L.R. I-4075, 111 A.C.W.S. (3d) 335 (C.A.), consd

Statutes referred to

Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A, s. 1 [as am.]

Insurance Act, R.S.O. 1990, c. I.8, s. 148

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss. 4, 22, [as am.], (5) [as am.], (6)

APPEAL from the order of M. Quigley J., [2012] O.J. No. 5288, 2012 ONSC 6381 (S.C.J.) dismissing a motion for summary judgment.

Mitchell K. Kitagawa, for appellant (defendant) The Co-Operators General Insurance Company.

Richard Knott, for respondents (plaintiffs) Thomas and Marilyn Boyce.

BY THE COURT: --

I

[1] The respondents own and operate a woman's fashion boutique known as "Portside Boutique". Their business has been insured by the appellant ("Co-Operators") for a number of years.

[2] On October 30, 2010, Ms. Boyce arrived at the store to discover a foul odour emanating from the entrance area. The business had to be closed for a time, substantial clean-up costs were incurred and a great deal of inventory could not be salvaged. The respondents contacted the Co-Operators immediately. Co-Operators took the position that the smell was caused by a [page58 ]skunk and that any damage was not covered by the policy. The respondents claimed that the business had been vandalized, a peril covered by the policy.

[3] The respondents filed a proof of loss claim in December 2010, and commenced this action by Statement of Claim issued in February 2012, more than one year, but less than two years after the incident.

[4] Co-Operators moved for summary judgment, claiming that the action was time barred by a one-year limitation period. Co-Operators relied on the one-year statutory limitation period in s. 148 of the Insurance Act, R.S.O. 1990, c. I.8.

[5] On the motion, Co-Operators expanded its argument to include the submission that the action was out of time by virtue of the contractual provisions in the policy that incorporated the one-year limitation set out in the Insurance Act. Co-Operators also argued that Mr. Boyce was not a party to the policy of insurance.

[6] The motion judge found that the one-year statutory limitation period in the Insurance Act had no application. Co-Operators does not challenge that finding on appeal. The motion judge also held that Thomas Boyce was a party to the insurance contract. That finding is not challenged on appeal.

[7] The motion judge further held that the provision in the policy limiting coverage to claims made within one year of the loss did not override the statutory two-year limitation period set out in s. 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. In so holding, the motion judge held that the term in the policy lacked the specific language necessary to override the statutory limitation period and that, in any event, the contract of insurance was not a "business agreement" as required under s. 22(5) of the Limitations Act, 2002.

II

[8] Co-Operators does appeal from the motion judge's holding that the contract of insurance does not contain an enforceable one-year limitation period. The appeal raises three questions.

(1) Is there a term in the contract of insurance that provides for a one-year limitation period?

(2) If there is a term in the contract imposing a one-year time limit on claims, is that term capable of overriding the otherwise applicable two-year limitation period set out in the Limitations Act, 2002?

(3) Is the contract of insurance a "business agreement" as defined in s. 22(6) of the Limitations Act, 2002? [page59 ]

III

The Relevant Terms of the Insurance Contract

[9] The contract contains the following provisions:

Conditions

The Statutory Conditions apply to the peril of fire and as modified or supplemented by forms or endorsements attached apply as Policy Conditions to all other perils insured by this policy.

Statutory Conditions

14. Action

Every action or proceeding against the insurer for recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year* next after the loss or damage occurs.

• Two years in province of Manitoba and Yukon Territory

[10] These provisions purport to incorporate the statutory conditions in s. 148 of the Insurance Act into the contract.

The Relevant Provisions of the [Limitations Act, 2002](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)

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.

22(1) A limitation period under this Act applies despite any agreement to vary or exclude it, subject only to the exceptions in subsections (2) to (6).

Exception

(2) A limitation period under this Act may be varied or excluded by an agreement made before January 1, 2004.

Same

(3) A limitation period under this Act, other than one established by section 15, may be suspended or extended by an agreement made on or after October 19, 2006.

Same

(4) A limitation period established by section 15 may be suspended or extended by an agreement made on or after October 19, 2006, but only if the relevant claim has been discovered.

Same

(5) The following exceptions apply only in respect of business agreements: [page60 ]

1. A limitation period under this Act, other than one established by section 15, may be varied or excluded by an agreement made on or after October 19, 2006.

2. A limitation period established by section 15 may be varied by an agreement made on or after October 19, 2006, except that it may be suspended or extended only in accordance with subsection (4).

Definitions

(6) In this section,

"business agreement" means an agreement made by parties none of whom is a consumer as defined in the Consumer Protection Act, 2002;

"vary" includes extend, shorten and suspend.

IV

(1) Is There a Term in the Contract of Insurance Providing for a One-Year Limitation?

[11] The language in the policy set out above tracks very closely the language in the insurance contract considered in International Movie Conversions Ltd. v. ITT Hartford Canada (2002), 57 O.R. (3d) 652, [2002] O.J. No. 76 (C.A.). In that case, the judge on the summary judgment motion described the language in the policy as "clear" and not requiring any reference to a statute for clarification. Cronk J.A., after outlining the language and the analysis of the motion judge, indicated, at para. 28:

I agree with these conclusions by the motion judge. Clause 14 is clear and unambiguous. Indeed, in my view, it is difficult to conceive how it could have been made more explicit. Use of the heading "statutory conditions" does not render it ambiguous or confusing.

(Emphasis added)

[12] The motion judge in this case described the provision as "misleading" in that it suggested that the one-year limitation was mandated by legislation and not by contract. In coming to his conclusion, the motion judge made no reference to International Movie Conversions Ltd. That case had direct application to this case. This policy, like the policy in International Movie Conversion Ltd., provides for a one-year limitation on claims in clear and unambiguous language.

(2) Is the Term in the Contract Providing for a One-Year Limitation Capable of Overriding the Otherwise Applicable Two-Year Limitation Period in the [Limitations Act, 2002](https://www.canlii.org/en/on/laws/stat/so-2002-c-24-sch-b/latest/so-2002-c-24-sch-b.html)?

[13] The motion judge recognized that a term in a contract purporting to vary an otherwise applicable limitation period [page61 ]under the Limitations Act, 2002 had to comply with s. 22 of the Limitations Act, 2002. Co-Operators relied on s. 22(5). As set out above, that section allows parties to vary or exclude, by agreement, the otherwise applicable statutory limitation period. Section 22(5), however, applies only to "business agreements" as defined in s. 22(6).

[14] Before considering whether the insurance policy qualified as a "business contract", the motion judge, relying principally on Bell Canada v. Plan Group Inc. (2012), 109 O.R. (3d) 128, [2012] O.J. No. 58, 2012 ONSC 42 (S.C.J.), determined that an agreement could be effective for the purposes of s. 22 of the Limitations Act, 2002, only if it contained the following:

• specific reference to the statutory limitation period;
• clear and unequivocal language that the parties were intending to vary the statutory protection; and
• a provision clearly alerting the insured that they were foregoing a statutory right to a longer limitation period.

[15] The motion judge added a fourth requirement, at para. 46:

For the purposes of s. 22 of the Limitations Act, 2002, I would further add that any agreement to forego the statutory protection contained in the Limitations Act, 2002 ought, at a minimum, to be signed by the person(s) foregoing such a right in order to make clear that he/she understands the forfeiture of that statutory right.

[16] We cannot accept that an agreement purporting to vary the statutory limitation period is enforceable under s. 22 of the Limitations Act, 2002 only if it contains the specific requirements set out by the motion judge. Nothing in the language of s. 22 offers any support for imposing these requirements. The only limitation in s. 22(5) is found in the definition of "business agreement". No other limitation appears, expressly or by implication, and certainly no content related requirements appear in s. 22(5).

[17] The case law relied on in Bell Canada also does not support the judicial imposition of the various specific requirements set out in Bell Canada and adopted by the motion judge. Bell Canada refers to two authorities. One, Armak Chemicals Ltd. v. Canadian National Railway Co. (1991), 3 O.R. (3d) 1, [1991] O.J. No. 536 (C.A.), at p. 16 O.R., involved a contractual term that shifted statutorily imposed liability for fires from the railway to the other contracting party. The second case, Hunter Engineering Co. Inc. v. Syncrude Canada Ltd., [1989] 1 S.C.R. 426, [1989] S.C.J. No. 23, at pp. 449-50 S.C.R., involved a [page62 ]contractual provision that one party claimed replaced a broad statutory warranty with a narrower contractual warranty.

[18] In Armak, this court indicated that "very clear language" was required before a contractual provision could successfully shift a statutory obligation from one party to another. In Hunter Engineering Co. Inc., the majority of the Supreme Court of Canada required "clear and direct language" before interpreting a term in a contract as relieving against a statutorily imposed warranty.

[19] Neither judgment purported to detail the contents of the language needed to meet the standards described in the two cases. Certainly, neither case suggested the kind of detailed requirements described by the motion judge. In fact, a close reading of Hunter Engineering Co. Inc., at p. 439 S.C.R., indicates the contrary. In Hunter, one of the parties (Allis-Chalmers) had a term in its contract that provided that the warranty in the contract was "the only warranty . . . and no other warranty or conditions statutory or otherwise, shall be implied". The majority in the Supreme Court of Canada had no difficulty in finding that this express term excluded the statutory warranty despite the absence of any reference to the terms of the statutory warranty and the absence of any specific acknowledgement that the other contracting party was giving up a statutory right. Clearly, the provision in the Allis-Chalmers contract would not have satisfied the prerequisites set down by the motion judge.

[20] A court faced with a contractual term that purports to shorten a statutory limitation period must consider whether that provision in "clear language" describes a limitation period, identifies the scope of the application of that limitation period, and excludes the operation of other limitation periods. A term in a contract which meets those requirements will be sufficient for s. 22 purposes, assuming, of course, it meets any of the other requirements specifically identified in s. 22.

(3) Is the Insurance Contract a "Business Agreement"?

[21] As outlined above, "business agreement" is defined in s. 22(6) as an agreement made by parties, none of whom is a consumer as defined in the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A. That Act defines "consumer" as:

"[C]onsumer" means an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.

[22] By using the definition of "consumer" as found in the Consumer Protection Act, 2002, the legislature drew a bright line for the purposes of s. 22(5) between agreements entered into for [page63 ]"personal, family or household purposes" and other agreements. Subject to the potential application of the other parts of s. 22, persons entering into agreements for personal, family or household purposes cannot contract out of the limitation periods in the Limitations Act, 2002. Persons contracting for other purposes can do so.

[23] The motion judge concluded that the insurance contract was not a "business agreement" under s. 22(5) for two reasons. First, he described the contract as a "peace of mind" contract. That characterization may be appropriate. It does not, however, have any effect on whether the insurance contract falls within the meaning of "business agreement" for the purposes of s. 22(5) of the Limitations Act, 2002. That determination is made solely by reference to the definition of "consumer" in the Consumer Protection Act, 2002.

[24] Second, the trial judge concluded that because insurance contracts were not covered by the Consumer Protection Act, 2002, they could not be business agreements under s. 22(5). The scope of the Consumer Protection Act, 2002 is irrelevant. The only relevance of the Consumer Protection Act, 2002 flows from the incorporation of the definition of "consumer" from that Act into s. 22(5) of the Limitations Act, 2002.

[25] The respondents contracted with Co-Operators for insurance covering various risks related to the operation of their business. The contract was not "for personal, family or household purposes". The contract fell within the definition of "business agreement" in s. 22(6) of the Limitations Act, 2002.

V

Conclusion

[26] The appeal must be allowed, the order below set aside, and an order made dismissing the action insofar as it is based on a claim made under the insurance policy.

[27] Co-Operators is entitled to its costs on the motion and in this court. We fix those costs at $6,000 on the motion and $5,000 on the appeal, both amounts inclusive of disbursements and relevant taxes.

Appeal allowed.

End of Document