ONTARIO

SUPERIOR COURT OF JUSTICE

PERTH COURT FILE NO.: 124/12
DATE: 20121113

BETWEEN:

THOMAS BOYCE and MARILYN BOYCE
Plaintiffs

– and –

THE CO-OPERATORS GENERAL INSURANCE COMPANY
Defendant

Richard T. Knott, for the Plaintiffs
Mitchell K. Kitagawa, for the Defendant

HEARD: September 28, 2012

Quigley J.

[ 1 ] This is a motion by the defendant for summary judgment dismissing the plaintiffs' action against the defendant under Rule 20.01 (3) of the Rules of Civil Procedure (“Rules”), whereby a defendant may, after delivering a statement of defence, move for summary judgment dismissing all or part of the claim in the statement of claim.

[ 2 ] Alternatively, the defendant moves for summary judgment dismissing the plaintiff Thomas Boyce's action against the defendant under the same Rule.

[ 3 ] Rule 20.04 (2) of the Rules provides that the Court shall grant summary judgment if it is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.

Background

[ 4 ] The plaintiffs carry on a business in the Village of Merrickville in the County of Leeds and Grenville, operating a women's fashion boutique known as 'Portside Boutique'.

[ 5 ] The plaintiff Marilyn Boyce runs the boutique, and her husband Thomas Boyce manages the business affairs of the store.

[ 6 ] Advertising for the business as illustrated at Tab A of the plaintiff Thomas Boyce's Affidavit (“Affidavit”) appears to indicate that both plaintiffs hold themselves out as proprietors of this business.

[ 7 ] Tab B of the Affidavit contains a policy of insurance between the plaintiffs and the defendant insurer. The first page of the policy of insurance begins, “Dear Policy Holder”, and goes on to outline the renewal offer for the plaintiffs' business insurance.

[ 8 ] On Friday, October 29, 2010, Marilyn Boyce and another employee of the boutique, locked and secured the premises at the end of the business day.

[ 9 ] Upon Marilyn Boyce's return to the store for the October 30, 2010 business day, she discovered a foul odour emanating from the store, primarily at the entrance way.

[ 10 ] Police were called; as well, the defendant was notified of this incident. After speaking with police, the plaintiffs concluded that the smell was the result of vandalism on the eve of Hallowe'en.

[ 11 ] The defendant took the position that this was a skunk smell, which was not included in the plaintiffs' insurance coverage.

[ 12 ] As a result of the defendant's denial of coverage, the plaintiffs engaged a pest control company which attended the premises and reported that there was no evidence of pest activity. This report was forwarded to the defendant.

[ 13 ] A letter dated November 11, 2010 was sent from Patrick Robb, property unit specialist for the defendant, to the plaintiff Marilyn Boyce. This letter, found in the defendant's Motion Record at Tab B, advised Marilyn Boyce that the damage was caused by a peril not covered in the policy. In the same letter, Mr. Robb advised that any legal proceeding against the insurer is “absolutely barred” unless commenced within one year after the loss or damage occurs.

[ 14 ] In December, 2010 the plaintiffs met with their lawyer who later that month filed the plaintiffs' proof of loss claim, executed by both plaintiffs.

[ 15 ] At no time did the defendant take the position that the proof of loss claim filed in both plaintiffs' names was inaccurate.

[ 16 ] The only document produced by the defendant on this motion indicating that the plaintiff Thomas Boyce is not a named insured, is a 'print screen' from their own internal accounting system (see Motion Record of the Defendant at Tab A).

[ 17 ] The Statement of Claim was issued on February 17, 2012.

Position of the Defendant

[ 18 ] The defendant argues that the action is barred by virtue of the insurance contract. The defendant states that the general two-year limitation period under the Limitations Act, 2002 does not apply by operation of section 14 of the “Statutory Conditions” listed on the policy which reads as follows:

Every action or proceeding against the insurer for the 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 policy includes an exception where the limitation period is two years in the Province of Manitoba and in the Yukon Territory.

[ 19 ] The “Statutory Conditions” listed in the policy are a recitation of the fire insurance statutory conditions contained in s. 148 of the Insurance Act , R.S.O 1990, c.I.8.

[ 20 ] In addition, the policy states as follows:

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.

[ 21 ] The defendant relies upon the fire insurance Statutory Conditions as binding upon the insured.

[ 22 ] The defendant further argues that the aforementioned policy is a commercial policy and not a residential policy, and is therefore an exception to the prohibition on agreements to vary limitation periods contained in s.22 of the Limitations Act, 2002 .

[ 23 ] As the limitation issue requires a legal as opposed to a factual determination, the defendant submits that there is no genuine issue requiring a trial.

[ 24 ] The defendant’s position is also that the plaintiff Thomas Boyce was not a party to the insurance contract and summary judgment should be granted dismissing his action.

The Position of the Plaintiffs

[ 25 ] The plaintiffs' position is that they can rely on s.4 of the Limitations Act, 2002, which sets a basic limitation period of two years from the date of the loss. The claim was brought within the two year period.

[ 26 ] The plaintiffs suggest that the statutory conditions contained in s.148 (14) of the Insurance Act , which the defendant seeks to rely on, should be read in the entire context of the whole of Part IV (Fire Insurance). The Statutory Conditions in the policy are part of Part IV Fire Insurance, only.

[ 27 ] The plaintiffs state that s.148 (14) of the Insurance Act under Part IV Fire Insurance, and s.259.1 and 281.1 under Part VI Motor Vehicle Liability Policies are the only provisions in the Insurance Act that include a one year limitation period. As such, it can be inferred that the legislative intention to bar claims after a one year period from the date of loss was meant only to extend to these types of policies. As s. 148(14) of Part IV - Fire Insurance is relied on by the defendant, it should be not be read as to limit claims brought forward after one year for loss resulting from all other situations, including vandalism which is the basis for the plaintiffs' claim. In addition, the fire insurance provisions of the Insurance Act (including the Statutory Conditions) are not applicable to all-risk policies such as the one in dispute. The plaintiffs rely upon the decision KP Pacific Holdings Ltd. v. Guardian Insurance Company of Canada , 2003 SCC 25 () , 2003, 1 S.C.R. 433.

[ 28 ] In addition, the plaintiffs suggest that this case falls squarely within the ambit of s.22 of the Limitations Act, 2002 , which permits only limited exceptions, within which the subject claim is not included.

[ 29 ] The plaintiffs assert that any provision in the defendant's insurance policy that attempts to shorten the applicable limitation period is contrary to s.22 of the Limitations Act, 2002 .

[ 30 ] The plaintiffs also assert that the Thomas Boyce was an insured under the policy.

The Law

Summary Judgment

[ 31 ] The powers of the court on a motion for summary judgment are set out in Rule 20.04 (2.1) as follows:

20.04 (2.1) In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at trial:

1. Weighing the evidence.
2. Evaluating the credibility of a deponent.
3. Drawing any reasonable inference from the evidence.

[ 32 ] In the set of decisions collectively known as Combined Air Mechanical Services v. Flesch , 2011 ONCA 764 () the Ontario Court of Appeal set out the general rules pertaining to summary judgment motions. The Flesch, supra decision outlined three types of cases which are amenable to summary judgment:

(a) The parties agree that the case is amenable to summary judgment;

(b) Those cases where the claim or the defence is without merit;

(c) Where it is other than the above two, but the court can still dispose of the case on the merits where the trial process is not required in the “interest of justice”.

Applicability of the Fire Insurance Statutory Conditions

[ 33 ] The applicability of Part IV of the Insurance Act , including the statutory conditions, are governed by s. 143(1) of the Insurance Act which includes the following provision:

s. 143(1) This Part applies to insurance against the loss of or damage to property arising from the peril of fire in any contract made in Ontario except,

(c) where the peril of fire is an incidental peril to the coverage provided

[ 34 ] The Supreme Court of Canada definitively dealt with the issue of whether multi-peril policies can be considered “fire insurance” in the British Columbia case of KP Pacific Holdings Ltd. v. Guardian Insurance Company of Canada , 2003 SCC 25 () , 2003, 1 S.C.R. 433.

[ 35 ] The key issue addressed in KP Pacific Holdings was whether fire is an “incidental peril” when contained in a multi-peril policy. In paragraph 18 of the Court's decision written by Chief Justice McLachlin, she states as follows:

If we still lived in a world where people took out different policies for each of these risks. s.119 would still function reasonably well. The problem is that our world is quite different. Section 119 is being asked to apply to an animal it was never designed to tame – the modern multi-peril policy. Section 119 is built on the premise of discrete policies for discrete subject matters, with limited overlap. It deals with overlap and intersection by enumerated exclusions, and by the logic of what is primary and what is incidental. It may still make good sense for certain multiple subject-matter policies, where these are fairly limited in scope, and where the subject matters can be readily identified and ranked. But when applied to broader multi-risk policies, it fails.

[ 36 ] At paragraph 19 of her decision, McLachlin CJ. states,

I conclude that s.119 can be applied to comprehensive policies only at the costs of contrived reinterpretation and anomalous consequences. Whatever interpretation one seeks to put on Part 5's terms, however one struggles to apply it to this policy, one ends by acknowledging inconsistency. I cannot conclude either from the language of s.119 or its history that the Legislature intended a multi-risk policy such as this one to fall within Part 5 with all the attendant consequences, including a shortened limitation period. It follows that this policy, like any other policy that does not fit into a specific category, is governed by Part 2, the section of general application.

[ 37 ] I find that the facts and the law with respect to this case fall squarely within the ambit of KP Pacific Holdings. As the legislation in Ontario uses substantially the same wording as the legislation in British Columbia referred to in KP Pacific Holdings , it appears clear that a multi-peril policy, such as the one issued to the Plaintiffs, cannot be considered fire insurance. The peril of fire is an “incidental peril” to the coverage provided and therefore excluded from the application of Part IV (Fire Insurance) of the Insurance Act by virtue of s. 143(1) (c) of the Insurance Act .

[ 38 ] It is also important to note that the B.C. legislation expressly contemplated that the fire insurance provisions could include insurance against “other risks” whereas the Ontario legislation has no such provision. Even with the B.C. legislation contemplating the inclusion of “other risks”, the Supreme Court in KP Pacific Holdings determined that the modern multi-peril policy still cannot be considered fire insurance.

[ 39 ] As such, it appears that the policy issued to the Plaintiffs cannot be construed as “fire insurance” to trigger the one year limitation period contained in s. 148(14) of the Insurance Act .

[ 40 ] As s. 148(14) of the Insurance Act is inapplicable to the within action, it appears clear that the applicable limitation period is two years unless the limitation period has been varied by agreement pursuant to s. 22 of the Limitations Act, 2002 .

Applicability of the Statutory Condition contained in the policy

[ 41 ] Any attempt by the insurer to shorten a limitation period is ineffective, except in the circumstances outlined in s.22 (2)-(6) of the Limitations Act, 2002 . Unless the defendant can demonstrate that one of the exceptions apply, the limitation period remains two years.

[ 42 ] Section 22(5) of the Limitations Act, 2002 , appears to permit a limitation period to be varied or excluded by agreement made on or after October 19, 2006 if the agreement is a “business agreement”.

[ 43 ] With respect to whether the presence of the “statutory conditions” attached to the policy constitutes an agreement to vary the applicable limitation period, I refer to the decision of Justice Allen of the Ontario Superior Court of Justice, in the decision of Bell Canada v. Plan Group Inc. 2012 ONSC 42 . My reading of that decision suggests that an “Agreement” under s. 22 must include the following:

1. specific reference to the statutory limitation period;
2. clear and unequivocal language that the parties are intending to vary the application of the statutory protection contained in the applicable limitation period; and
3. provisions which clearly alert the prospective claimant that they are foregoing a statutory right to a longer limitation period within which to make a claim.

[ 44 ] The language contained in the “statutory conditions” attached to the policy of the Plaintiffs contains no such language. To the contrary, the language misleadingly suggests that the limitation period contained in the “statutory conditions” were mandated by legislation, not by contract.

[ 45 ] In my opinion, the “statutory conditions” attached to the Plaintiff’s policy do not qualify as language which would be required to usurp the statutory protection afforded by the Limitations Act, 2002.

[ 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.

[ 47 ] Not only is the required language missing from the “Statutory Conditions,” I have serious reservations as to whether the “Statutory Conditions” should form a part of the policy at all. The issue of whether attaching “Statutory Conditions” to a multi-peril policy is sufficient to find that the provisions have been contractually adopted has been called into question. See Co-operators v, Burry 2007 NLCA 52 () , [2007] N.J. No. 277 (NLCA). The practice of inserting provisions into a policy of insurance and labelling them “statutory conditions” when the statutory conditions contained in s.148 of the Insurance Act do not apply to multi-peril policies at all should be further evaluated. It is difficult to see how a policy holder can be said to have truly “agreed” to these provisions when they are directed to believe, at least partially, that they are mandated by statute. To the contrary, the statute provides for a longer limitation period. This is particularly of concern in light of the insurer’s overriding duty of good faith to its insureds.

[ 48 ] Furthermore, it is questionable whether an insurance contract can be considered a “business agreement” under the Limitations Act, 2002 . In my view, insurance contracts are not “business agreements” as contemplated by the Limitations Act, 2002 . Insurance contracts are “peace of mind” contracts which are sold by the insurance industry to members of the public. They are branded with the hallmark mutual good faith obligations which are not included in “business agreements”. In my view the legislature did not intend to include such agreements as “business agreements”.

[ 49 ] While the term “business agreement” is defined in s.22(6) of the Limitations Act, 2002, as “an agreement made by parties none of whom is a consumer defined in the Consumer Protection Act , 2002”, The Consumer Protection Act, 2002 , does not deal with contracts of insurance and specifically defers to the Insurance Act for these types of contracts [see s.2(2)(c) of the Consumer Protection Act, 2002 ].

[ 50 ] It was also also argued by the defendant that a letter from the adjuster Patrick Robb to the plaintiff Marilyn Boyce after the loss somehow can be construed as an agreement to vary. I find the after-the-fact attempt by the defendant insurer to unilaterally impose a limitation period on the plaintiffs to be inconsequential and not binding on the plaintiffs.

Removal of Thomas Boyce as a party

[ 51 ] I find further that the defendant has produced no evidence to support its contention that the plaintiff Thomas Boyce was not a party to this insurance contract. This defence is not supported in the evidence. There appears to be no dispute between the parties that all negotiations leading up to the insurance coverage were conducted by the plaintiff Thomas.

Conclusion

[ 52 ] In my opinion, the limitation issue is a matter of law which does not require a trial. I find that the limitation period of two years contained in the Limitations Act, 2002 , is the effective limitation period. Accordingly, the Statement of Claim was issued within the relevant limitation period.

[ 53 ] With respect to the inclusion of Thomas Boyce as a party, the evidence before me suggests that he was a party to the insurance contract. The defendant's summary judgment motion to remove him as a party to the action is dismissed.

Costs

[ 54 ] With respect to the issue of costs, each counsel submitted a draft Bill of Costs to me at the conclusion of the motion hearing.

[ 55 ] The plaintiffs' counsel submitted a draft Bill of Costs totalling $12,942.10 inclusive of HST and disbursements, on a partial indemnity scale.

[ 56 ] The defendant's counsel submitted a draft Bill of Costs of $8,026.88 inclusive of HST on a substantial indemnity scale, and $6,020.15 on a partial indemnity scale.

[ 57 ] Costs will be fixed at $10,750, inclusive of HST and disbursements, payable to the plaintiffs by the defendant forthwith.

Mr. Justice Michael Quigley

Released: November 13, 2012

ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: BETWEEN: THOMAS BOYCE and MARILYN BOYCE Plaintiffs – and – THE CO-OPERATORS GENERAL INSURANCE COMPANY Defendant RULING ON MOTION QUIGLEY J.

Released: November 13, 2012