COURT FILE NO.: CV-12-466894

DATE: 2013/12/23

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

THE CANADIAN REAL ESTATE ASSOCIATION

Plaintiff

– and –

AMERICAN HOME ASSURANCE COMPANY, CHARTIS INSURANCE COMPANY OF CANADA, CHUBB INSURANCE COMPANY OF CANADA, CONTINENTAL CASUALTY COMPANY, ENCON GROUP INC., TEMPLE INSURANCE COMPANY, XL REINSURANCE AMERICA INC. LLOYD’S UNDERWRITERS, CERTAIN UNDERWRITERS AT LLOYD’S, THOMAS J. HANRAHAN and ZAREK TAYLOR GROSSMAN HANRAHAN LLP

Defendants

Christine Powell, for the Plaintiff

David C. Rosenbaum and Jesse Parker, for the Defendants

HEARD: November 28, 2013 (Ottawa)

REASONS FOR DECISION

beaudoin j.

Nature of the Motion

[1] In this action, the Canadian Real Estate Association (“CREA”) seeks indemnification, defence costs, and damages resulting from the denial of coverage by its insurers in relation to an action in which CREA is the Defendant. CREA also seeks damages from the lawyers that it retained to provide advice on these coverage issues. The Statement of Claim was issued on November 1, 2012.

[2] CREA now seeks an order adding its insurance broker, Marsh, Canada Limited (“Marsh”), nunc pro tunc, as a defendant to this proceeding, as well as an order for leave to amend the Statement of Claim. On consent, the Statement of Claim was amended save and except for the allegations involving Marsh. Marsh opposes its addition as a defendant on the basis that limitation period for the claims against it has expired.

Background

[3] As alleged in the Statement of Claim, between 2002 and 2012, CREA obtained insurance policies from various insurers:

• for the policy period made May 15, 2002 to May 15, 2003 from the American Home Insurance Company, the successor is Chartis Insurance Company of Canada (“Chartis”);

• for the policy periods May 15, 2003 to January 1, 2004 and January 1, 2004 to January 1, 2005, from Encon Group Inc. as managing general agent for a number of the named insurers (“Encon”); and

• for the policy period between January 1, 2006 to January 1, 2007 and renewed each year thereafter, from Chubb Insurance Company of Canada (“Chubb”).

[4] On or about March 19, 2009, an action was commenced against the Plaintiff by Lawrence Mark Dale, Realtysellers Inc. and others (the “2009 Action”). According to the Statement of Claim, CREA sought coverage for the 2009 Action but the Defendant Insurers all denied coverage and refused to pay the Plaintiff’s defence costs under the respective policies.

[5] In its claims against the insurers, CREA alleges that the policies all included the duty to defend and indemnify it for certain claims. The Plaintiff seeks a declaration regarding the duty to defend and damages in the amount of $5,000,000. As against the Defendant lawyers, the Plaintiff seeks damages in the amount of $5,000,000 for negligence and breach of contract. The claim against the lawyers arises in the event that the Defendant Insurers can successfully defend on the basis of the limitation period in respect of the 2009 Action has expired. The action has since been discontinued against Encon.

[6] In support of this motion, CREA has submitted the affidavit of Paul Feuer sworn June 7, 2013. In that affidavit he states that the Defendant Insurers all denied coverage for the 2009 Action between 2009 and 2010. The materials filed on this motion disclose:

• Encon denied coverage by letter dated October 16, 2009. CREA received this letter on or before October 21, 2009, when it forwarded the letter to Marsh;

• Chubb denied coverage by letter dated December 1, 2009, as stated in paragraph 25 of the draft amended Statement of Claim;

• Chartis denied coverage by letter dated November 3, 2010, as stated in paragraph 27 of the draft amended Statement of Claim.

[7] CREA did not name Marsh as a defendant at the time it issued its Statement of Claim. This notice of motion is dated June 28, 2013, more than two years after being informed that all of the Defendant Insurers denied coverage.

[8] Marsh states that the materials filed by the Plaintiff show that it had knowledge of the material facts of a cause of action against Marsh more than two years prior to the proposed amendments, and that March cannot be added as a defendant. CREA argues that it cannot be concluded with any certainty when Marsh’s alleged acts of negligence occurred and that I should allow the amendments with leave to Marsh to plead the limitation period issue in its defence. For the reasons that follow, I accept the arguments put forward by Marsh and refuse CREA’s request to add it as a defendant.

The Law

[9] Rules 5.04(2) and 26.01 of the Rules of Civil Procedure generally permit the court to “add, delete or substitute a party or correct the name of a party incorrectly named, on such terms that are just, unless prejudice would result that could not be compensated for by costs or an adjournment.”

5.04 (2) At any stage of a proceeding the court may by order add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. R.R.O. 1990, Reg. 194, r. 5.04 (2).

26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. R.R.O. 1990, Reg. 194, r. 26.01.

[10] This general discretion is restricted by section 21(1) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, which states:

If a limitation period in respect of a claim against a person has expired, the claim shall not be pursued by adding the person as a party to any existing proceeding.

[11] In its factum, CREA relies on Mazzuca v. Silvercreek Pharmacy Ltd., 56 OR (3d) 768, 2001 8620 (ON CA) for the proposition that “the fact that the limitation period for commencing an action against Marsh may have expired is not a bar to adding Marsh as the defendant”.

[12] Mazzuca relied on the common law doctrine of “special circumstances” to permit the addition of a party despite the expiry of the limitation. In Joseph v. Canada’s Paramount Wonderland, 2008 ONCA 469, 90 O.R. (3d) 401, the Ontario Court of Appeal held that the two‑year limitation period introduced by the Limitations Act, 2002 is mandatory, and that Rules 5.04 and 26.01 must be interpreted in a way that does not conflict with the legislation. Accordingly, while the rules permit the addition of a party at any stage of a proceeding, they do not apply to extend the mandatory two‑year limitation period. Joseph overruled the “special circumstances” doctrine referred to in Mazzuca. I was referred to subsequent cases that consistently declined to follow Mazzuca in the light of the Court of Appeal’s rejection of the “special circumstances” doctrine in Joseph.[^1] The prejudice argument advanced by CREA is no longer relevant if a limitation period has expired.

The Limitation Period Has Expired

[13] The relevant sections of the Limitations Act, 2002 are as follows:

Basic limitation period

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.

Discovery

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[14] Paragraph 34 of the draft amended Statement of Claim sets out CREA’s allegations against Marsh. It alleges that if CREA is unsuccessful in its claim for indemnity and defence costs against the Defendant Insurers, then Marsh has breached its duties towards it.

[15] Sub‑paragraphs (a) through (f) particularize the allegations of Marsh’s breach of its duties including failing to:

• assess CREA’s insurance needs;

• assess the policies available in the marketplace;

• properly train its brokers;

• advise the Defendant Insurers that the policies did not accord with their understanding of the coverage;

• advise CREA that the policies did not meet its insurance requirement; and

• advise CREA of the applicable notice provisions under the policies.

[16] CREA also pleads that Marsh failed to advise it of the applicable limitation period. This is the same allegation that it made against the Defendant lawyers at paragraph 23 in the original Statement of Claim.

[17] The material before me discloses that CREA knew of the denial of coverage by Encon, Chubb and Chartis as of October 21, 2009, December 1, 2009 and November 3, 2010 respectively. The Plaintiff is presumed by section 5(2) of the Limitations Act, 2002 to have known about the matters that gave rise to the claim on the date the act or omission took place. Marsh’s alleged breaches would have been known to CREA at the date the insurance was denied by the respective Defendant Insurers.

[18] In Wong v. Adler, [2004] O.J. No. 45‑46 (S.C.J.), aff’d [2005] No. 1400 (Div. Ct.), Master Dash held that where the evidence before the court clearly indicates that the essential facts that make up the cause of action were known to the plaintiff more than two years before the motion to amend, the motion should be refused. Master Dash noted that a plaintiff may lead evidence that it did not know of, and could not with due diligence have discovered, its claim against the defendant within two years of the motion to amend.

[19] In this case, CREA has not led any evidence on the discoverability issue. It failed to provide any explanation why it did not name Marsh as a defendant at the time it issued its Statement of Claim on November 12, 2012, where it made similar allegations against its former lawyers. I note that the Statement of Claim was issued within two years of the date of the last denial of coverage by Chartis.

[20] The affidavit of Paul Feuer filed on behalf of CREA is silent regarding the Plaintiff’s failure to name Marsh. The only mention of Marsh appears in paragraphs 8 through 11 of his affidavit. There is no suggestion in that affidavit that the Plaintiff was unaware of the role that Marsh played in these events. To the contrary, the draft amended Statement of Claim shows that the Plaintiff was aware of Marsh’s role prior to and at the time the Plaintiff received the denial of coverage letters.

[21] The Feuer affidavit states at paragraph 8: “Certain of the Defendant Insurers denied CREA coverage based on the fact that notice of the 2009 Action was not provided in accordance with the terms set out in the insurance policies”. CREA knew that they were denying coverage as of the date it received the denial of coverage letters, and any cause of action that CREA may have had against Marsh was known to CREA as of those dates.

[22] There is an onus on the moving party to “prove the contrary” to rebut the presumption set out in section 5(2) of the Limitations Act, 2002. It is not enough to remain silent and then argue that the date on which the claim could have been discovered is uncertain and therefore the claim should be amended.

[23] If the parties are unable to agree, I invite them to submit brief written costs submissions (not exceeding three pages) within 20 days of the release of this decision.

Mr. Justice Robert N. Beaudoin

Released: December 23, 2013

COURT FILE NO.: CV-12-466894

DATE: 2013/12/23

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

THE CANADIAN REAL ESTATE ASSOCIATION

Plaintiff

– and –

AMERICAN HOME ASSURANCE COMPANY, CHARTIS INSURANCE COMPANY OF CANADA, CHUBB INSURANCE COMPANY OF CANADA, CONTINENTAL CASUALTY COMPANY, ENCON GROUP INC., TEMPLE INSURANCE COMPANY, XL REINSURANCE AMERICA INC. LLOYD’S UNDERWRITERS, CERTAIN UNDERWRITERS AT LLOYD’S, THOMAS J. HANRAHAN and ZAREK TAYLOR GROSSMAN HANRAHAN LLP

Defendants

REASONS FOR DECISION

Beaudoin J.

Released: December 23, 2013

[^1]: Streamline Foods Ltd. Jantz Canada Corp., [2012] O.J. No. 1213 (C.A.); Veerella v. Khan, [2009] O.J. No.6347; Marcovitch v. Kertes, [2010] O.J. No. 5020 (Div. Ct.).