Bachour v. Certas Direct Insurance Company, et al., 2012 ONSC 7529

CITATION: Bachour v. Certas Direct Insurance Company, et al., 2012 ONSC 7529

COURT FILE NO.: CV-08-087740-00
DATE: 20120224

CORRIGENDA 20130524

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

MICHAEL BACHOUR

Plaintiff

• and -

CERTAS DIRECT INSURANCE COMPANY, JOHN DOE CORPORATION and JOHN DOE

Defendants

COUNSEL: Gregory Govedaris, for the Plaintiff Thomas Hanrahan, for the Defendant Certas Direct Insurance Company

HEARD: December 14, 2011

REVISED REASONS FOR DECISION

The text of the original endorsement has been corrected with the text of corrigendum (released today’s date)

EDWARDS J.

Overview

[1] The plaintiff seeks to correct the name of John Doe as pleaded in the Statement of Claim by inserting the name Maria Diolanda (“Ms. Diolanda”), who is an employee of the defendant company, Certas Direct Insurance Company (“Certas”).

[2] The plaintiff takes the position that anyone reading the original Statement of Claim with the name of John Doe as pleaded would know that the “litigation finger” was pointed at Ms. Diolanda.

[3] Certas takes the position that the plaintiff’s motion cannot succeed as, in fact, what the plaintiff is seeking to do is add Ms. Diolanda to an existing action after the expiry of the limitation period. Certas argues that it was well within the knowledge of the plaintiff, having received the Statement of Defence, that John Doe and John Doe Corporation as pleaded could not be a broker or agent of Certas as its Statement of Defence made clear that it did not utilize brokers to act as an authorized representative and that Certas is a direct writer of its own insurance policies.

[4] The issue therefore really comes down to a question of whether the plaintiff is seeking to add Ms. Diolanda to an existing action after the expiration of the limitation period or whether the motion is to correct the name of a party defendant after the expiry of the limitation period.

The Facts

[5] The plaintiff’s action is a claim for damages against his insurer arising out of, what is suggested to be an alleged wrongful denial of a property damage claim made by the plaintiff on February 12, 2007 for water damage to his property which is located at 18 Cornwall Drive, Ajax, Ontario (the “plaintiff’s home”). The damage is alleged to have occurred on February 9, 2007. The plaintiff’s claim for property damage was made pursuant to a homeowner’s property insurance policy issued by the defendant to the plaintiff.

[6] The plaintiff’s action was commenced against Certas, John Doe Corporation and John Doe by way of a Notice of Action issued on February 8, 2008 with the Statement of Claim being served on March 18, 2008. I reproduce the relevant portions of the Statement of Claim as they relate to the description of Certas, John Doe Corporation and John Doe below:

(i) Certas – “the Insurer at all material times insured the Plaintiff by way of having brokered (through the agency of its authorized representatives), underwritten and issued to the Plaintiff, for the Property the Insurance Policy.”

(ii) John Doe Corporation – “the Broker, and with authorization from the Insurer, or ostensible authority to represent the Insurer, the Broker acts as the Insurer’s agent for purpose of dealing with both applicants for insurance and the Insurer’s actual insureds, in connection with such matters as;

(a) Brokering policies of the Insurer;

(b) Providing applicants with advertising and promotional literature authoried or produced for the benefit of the insurer;

(c) Advising applicants of the coverages offered by the Insurer;

(d) Advising applicants of the coverages as offered by the Insurer, which coverages the applicants require according to the Broker or which they make inquiries concerning;

(e) Advising applicants and insureds as to the coverages offered by the Insurer which will, in the opinion of the Broker, meet their person or business needs;

(f) Delivering copies of declaration pages and policy wordings of the Insurer’s Insurance policies to its insureds;

(g) Billing the Insurer’s insureds for outstanding premium monies owing;

(h) Taking notice of events or occurrences which trigger the Insurer’s coverage obligations; and

(i) Advising insureds as to whether the events or occurrences of which it has been notified trigger the Insurer’s coverage obligations.

At all material times the Broker did in fact perform, amongst other things, all of the above-listed business practices, on behalf of itself and the Insurer, in connection with all matters concerning the Plaintiffs and arising with respect to the Insurance Policy.”

(iii) John Doe – “the Agent is an individual who was at all material times an insurance agent or broker employed by the Broker, and who in the course and scope of his duties as an employee of the Broker, performed all of the business practices of the Broker as listed and described in paragraph 3 of this claim, in connection with all matters concerning the Plaintiff and arising with respect to the Insurance Policy. The Broker is, therefore, vicariously liable for all actions, errors and omissions of the Agent. Accordingly, the Broker and the Agent will hereinafter in this Claim be referred to collectively as the (“Insurance Broker”).

[7] The proposed amendment to the Statement of Claim as it relates to the issue of the broker and Ms. Diolanda, I reproduce below in its entirety:

3. The Broker, Maria Diolanda (which is done in-house) and with authorization from the Insurer, or ostensible authority to represent the Insurer, the Broker acts as the Insurer’s agent for purpose of dealing with both applicants for insurance and the Insurer’s agent for purpose of dealing with both application for insurance and the Insurer’s actual insureds, in connection with such matters as;

(a) Brokering policies of the Insurer;

(b) Providing applicants with advertising and promotional literature authored or produced for the benefit of the insurer;

(c) Advising applicants of the coverages as offered by the Insurer;

(d) Advising applicants of the coverages as offered by the Insurer, which coverages the applicants require according to the Broker or which they make inquiries concerning;

(e) Advising applicants and insureds as to the coverages offered by the Insurer which will, in the opinion of the Broker, meet their personal or business needs;

(f) Delivering copies of declaration pages and policy wordings of the Insurer’s Insurance policies to its insureds;

(g) Billing the Insurer’s insureds for outstanding premium monies owing;

(h) Taking notice of events or occurrences which trigger the Insurer’s coverage obligations; and

(i) Advising insureds as to whether the events or occurrences of which it has been notified trigger the Insurer’s coverage obligations.

At all material times the Broker did in fact perform, amongst other things, all of the above-listed business practices, on behalf of itself and the Insurer, in connection with all matters concerning the Plaintiffs and arising with respect to the Insurance Policy.

4. The Agent, Maria Diolanda, is an individual who was at all material times an insurance agent or broker employed by the Insurer Broker, and who in the course and scope of her his duties as an employee of the Insurer Broker, performed all of the business practices of the Broker as listed and described in paragraph 3 of this claim, in connection with all matters concerning the Plaintiff and arising with respect to the Insurance Policy. The Insurer Broker is, therefore, vicariously liable for all actions, errors and omissions of the Agent. Accordingly, the Broker and the Agent will hereinafter in this Claim be referred to collectively as the (“Insurance Broker”).

[8] There is no dispute now, the parties having completed discoveries, to state that Maria Diolanda is a licensed insurance agent in the province of Ontario, who is an employee of Certas. Ms. Diolanda works as an insurance sales agent within Certas’ underwriting department and works at the Mississauga call centre. She is one of 131 insurance sales agents, all of whom are employees of Certas.

[9] The Statement of Defence was served on plaintiff’s counsel by Certas on April 30, 2008. As of that date, it should have been apparent to the plaintiff that Certas did not utilize brokers to act as its authorized representative and that it is a direct underwriter of its own insurance policies. If this was not apparent from the reading of the Statement of Defence, it certainly should have been apparent as a result of the discovery of Certas’ representative Kim Tucker, who testified on June 30, 2010 that Certas directly underwrites its own policies and does not use brokers to sell their insurance.

[10] Ms. Tucker testified on her discovery that Ms. Diolanda was the underwriting sales agent who spoke to the plaintiff on the telephone when the initial contact was made with Certas on August 25, 2006. The plaintiff did not move to amend the Statement of Claim until the motion before this court was served on October 5, 2011.

[11] In addition to the motion to amend the Statement of Claim, there were many other areas of relief sought in the Notice of Motion that I was advised at the commencement of argument had been resolved and would be the subject matter of a consent order. The most contentious issue raised by the motion, however, appears to be what relates to the amendment referenced above.

The Position of the Plaintiff

[12] The plaintiff relies on rule 5.04 and rule 26 of the Rules of Civil Procedure in support of its motion to amend. These rules are similar but an important distinction must be made between rule 26.01 which is mandatory in nature while the analysis required under rule 5.04(ii) is discretionary. The real issue as previously noted is whether or not anyone reading the original Statement of Claim in its original format would appreciate the litigation finger was being pointed at an employee of Certas as the person who had the dealings with the plaintiff when the policy was being sold and therefore had the various duties and responsibilities to inform the plaintiff about any potential gaps in coverage. The plaintiff cannot be faulted for inserting the name of John Doe when the Statement of Claim was issued as it would have been highly unlikely that the plaintiff would have known of the name of the person with whom he was dealing when he had telephone contact on August 25, 2006. Can the plaintiff be faulted for not moving to amend his Statement of Claim once Certas’ Statement of Defence had been served and a full appreciation then made as to the basis upon which Certas sold its insurance policies to the public at large. The determination of this issue is a “close call”. However, for the reasons that follow, I am satisfied that the litigation finger was, in fact, pointing at the person who sold the policy of insurance to the plaintiff and that Certas would have known of this when the Statement of Claim was served.

The Position of the Defendant

[13] The defendant Certas takes the position that the proposed amendments as set forth above are in breach of the statutory limitations and as such, result in irremediable prejudice to the defendant. Certas also takes the position that the proposed amendments are not tenable in law and do not otherwise comply with the rules of pleading and is therefore an abuse of process.

[14] Where, as in this case, the plaintiff as characterized by Certas, seeks to add Ms. Diolanda after the expiry of the limitation period, the plaintiff must show that there has been due diligence exercised to discover the identity of the proposed party at issue. As such, this court is then called upon to determine whether such due diligence existed as a matter of fact. It is suggested by Certas that the plaintiff must give a reasonable explanation as to why the information about the existence of Ms. Diolanda was not obtainable with due diligence. Certas argues that no such evidence is before this court. Certas suggests that there is no evidence that the plaintiff exercised due diligence to determine who the person was that sold the policy of insurance to the plaintiff particularly given that Certas’ Statement of Defence made clear that it did not sell insurance through a broker.

[15] With respect to the tenability of the proposed amendments, counsel for Certas acknowledges that the test for a legally tenable pleading is that the court must assume that the facts pleaded in the proposed amendment are true and the only question is whether they disclose a cause of action. It is also acknowledged that amendments are to be granted unless the claim is clearly impossible of success and that for the purpose of the proposed amendments they are to be read generously, with allowance for deficiencies in drafting: see Plante v. Industrial Alliance, 2003 CanLII 64295 (ON SC), [2003] O.J. No. 3034.

[16] Counsel for Certas also argues that this court retains a residual discretion to refuse an amendment to add a party if the proposed amendment fails to meet a basic threshold of legal soundness. In other words, it is suggested the proposed amendment must be tenable at law: See Royal Laser Corp. v. Rivas, [2011] O.J. No. 685.

[17] While the thrust of the arguments presented on behalf of Certas focused on why from a legal perspective the amendments sought should not be granted, I was left with the distinct impression that, as alluded to in Certas’ Factum, the real reason why the plaintiff’s motion was being resisted was because Certas saw the plaintiff’s underlying reason for the amendment as one not aimed so much at having Ms. Diolanda added as a party, but rather to allow the plaintiff to conduct a discovery of Ms. Diolanda. As such, Certas suggests that this court retains a discretion to refuse to add a party if to do so would amount to an abuse of process, such as a duplicative discovery of the corporate defendant: See Plante v. Industrial Alliance, supra, and National Trustco v. Furbacher, [1994] O.J. No. 2385 (Gen. Div.).

The Law

[18] The plaintiff relied heavily in argument on those cases which have allowed amendments, despite the passage of a limitation period, to correct a misdescription or misnomer where there is a coincidence between a plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant: see Lloyd v. Clark, 2008 ONCA 343; Spirito Estate v. Trillium Health Centre, 2008 ONCA 762; and Ormerod v. Fermer, 2009 ONCA 697.

[19] In Lloyd, supra, the Court of Appeal agreed with the appellants that the motion judge had erred by refusing the appellant’s request that the title of the proceedings be corrected to name the Regional Municipality of Durham (“Durham”) as a defendant in place of the Town of Ajax and the Corporation of the Town of Whitby, pursuant to section 21(2) of the Limitations Act. Section 21(2) of the Limitations Act provides that a party may not be added to a proceeding, except where the correction is for misnaming or misdescription of a party. In coming to the conclusion that a fair reading of the Statement of Claim made clear that the plaintiff intended to name the municipality having jurisdiction over and responsibility for the maintenance of the road where the accident occurred, the Court of Appeal made clear that case law “amply supports the proposition that where there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant”, an amendment may be made despite the passage of the limitation period to correct the misdescription or misnomer.

[20] In Spirito, et al. v. Trillium Health Centre, the motion judge was found by the Court of Appeal to have correctly viewed the case as one of misnomer, and as such, the limitation period had not expired. The essence of the plaintiff’s argument was that they were simply seeking to correctly name the appellants as opposed to adding them as parties and as such, there would be no issue with respect to the expiry of the limitation period. The court characterized, as I have, in this matter, the issue as being one as to whether it was a case of misnomer or one of adding a party.

[21] The Court of Appeal in Spirito, supra, referenced an earlier decision of Saunders J. in Dukoff, et al. v. Toronto General Hospital, et al. (1986) 1986 CanLII 2648 (ON SC), 54 O.R. (2d) 58 where Saunders J. noted a practice that had been adopted then, and a practice which continues to be adopted, of using fictitious names where the identity of the parties are unknown. Saunders J. noted that if the case was one of misnomer then the Statement of Claim could be corrected by replacing the fictitious name (John Doe) with the correct name, even though the correction that was being sought occurred after the expiry of the limitation period. Adopting that test, Saunders J. referenced an earlier decision of the English Court of Appeal in Davies v. Elsby Brothers Ltd., [1960] All E.R. 672 (C.A.) at page 676 as follows:

... how would a reasonable person receiving the document take it? If, in all the circumstances of the case, and looking at the document as a whole, he would say to himself: “Of course it must mean me, but they have got my name wrong”, then there is a case of mere misnomer. If, on the other hand, he would say: “I cannot tell from the document itself whether they mean me or not and I shall have to make inquiries”, then it seems to me that one is getting beyond the realm of misnomer.

[22] Applying the aforementioned principles adopted by Saunders J. from the English Court of Appeal, one may then frame the issue as to whether or not Certas looking at the Statement of Claim as a whole in its original form could say: “Of course it must mean our sales employee, but the plaintiff has got the description of our sales force incorrect.” Certas surely must have asked itself the question as to whether or not the litigation finger was pointing at the person that sold the policy of insurance to the plaintiff. Whether that person sold the policy through a brokerage agency or as an employee, ultimately what the plaintiff is now seeking to do is to correct a misnomer and not to assert a new cause of action.

The Result

[23] I am satisfied then that the plaintiff should be entitled to correct the name of John Doe to plead the name of Certas’ sales agent, Maria Diolanda. The proposed Statement of Claim in its amendment as set forth above in my view, however, does not properly assert that cause of action and leave should be granted to the plaintiff to properly assert the cause of action as against Maria Diolanda alone and not as against any fictitious John Doe Corporation company described as a broker.

[24] In the event I am wrong in my conclusion that the plaintiff should be entitled to correct the misnomer in his Statement of Claim, I am satisfied that under the circumstances, it would not be inappropriate to allow the plaintiff to have a discovery of Maria Diolanda as she and she alone likely is the only person who would have direct knowledge of the discussions that she would have had with the plaintiff when the policy of insurance was sold to the plaintiff nearly four and a half years ago.

Costs

[25] As to the issue of costs, the parties provided me with their draft Bills of Costs, the totals of which were remarkably similar on a partial indemnity basis. The plaintiff sought an order that was discretionary in nature and that in all likelihood could have been avoided if the motion had been brought once the defendant’s Statement of Claim had been served. At that point in time Certas would have been in no position to have resisted the amendment sought.

[26] As I ultimately framed the issue, this matter came down to whether or not, apart from the legality of the amendment sought, whether Certas would be compelled to produce Diolanda as a further representative to answer questions on behalf of Certas. In my view, this motion could have been avoided simply by a consent order producing Ms. Diolanda for discovery with the focus of the discovery limited to Ms. Diolanda’s role in the sale of the policy to the plaintiff in August 2006. Under the circumstances, it strikes me that success in this matter has been mixed and the parties should consider whether there should be any costs awarded to either party. Since this issue was not addressed during the course of argument, however, I am prepared to receive written submissions from the parties as to the question of who bears the costs and the quantum of those costs. The submissions are to be received if counsel are so inclined through the trial coordinators’ office, limited to five pages in length and received within 15 days from the date of these reasons.

Justice M.L. Edwards

DATE: May 24, 2013

CORRIGENDA

1. The citation on the first page is changed from 2012 ONSC 1175 to 2012 ONSC 7529.