Kassburg v. Sun Life Assurance Company of Canada

[Indexed as: Kassburg v. Sun Life Assurance Co. of Canada]

Ontario Reports

Ontario Superior Court of Justice,

Ellies J.

March 7, 2014

119 O.R. (3d) 620 | 2014 ONSC 1523

Case Summary

Limitations — Insurance — Insurer failing to validly contract out of two-year limitation period in Limitations Act as limitation provisions in contract and policy document did not state limitation period in clear language — Limitation period not starting to run until insured was advised that her final appeal from denial of long-term disability benefits had failed — Insured's action against insurer commenced within limitation period — Limitations Act, 2002, S.O. 2002, c. 24, Sch. B.

The plaintiff was insured under a group policy of insurance issued by the defendant. In May 2008, she submitted a claim for long-term disability benefits. The defendant informed the plaintiff in December 2008 that her claim had been declined, and advised her that she should submit new medical information if she wished to appeal that decision. The plaintiff subsequently passed through three [page621] levels of appeal, and was finally informed in February 2011 that her claim remained declined. She commenced an action against the defendant a year later. The defendant brought a motion for summary judgment dismissing the action on the basis that it was commenced outside of the applicable limitation period, which the defendant claimed was that set out in the insurance contract.

Held, the motion should be dismissed.

The defendant failed to validly contract out of the two-year limitation period in the Limitations Act, 2002 as the limitation provisions in the contract and policy document did not state a limitation period in clear language. Based on the language in the insurance contract, it was not unreasonable for the plaintiff to believe that the appeal procedure formed part of the application process. The statutory limitation period did not begin to run until the plaintiff was informed in February 2011 that her final appeal had failed. The plaintiff was entitled to a declaration that the claim was issued within the limitation period.

Esau v. Co-operators Life Insurance Co., [2004] B.C.J. No. 2195, 2004 BCSC 1347, 16 C.C.L.I. (4th) 271, [2005] I.L.R. I-4363, 135 A.C.W.S. (3d) 710; Markel Insurance Co. of Canada v. ING Insurance Co. of Canada (2012), 109 O.R. (3d) 652, [2012] O.J. No. 1505, 2012 ONCA 218, 290 O.A.C. 75, [2012] I.L.R. I-5264, 348 D.L.R. (4th) 744, 8 C.C.L.I. (5th) 210, 214 A.C.W.S. (3d) 249, distd

Other cases referred to

Boyce v. Co-operators General Insurance Co. (2013), 116 O.R. (3d) 56, [2013] O.J. No. 2568, 2013 ONCA 298, 22 C.C.L.I. (5th) 1, 307 O.A.C. 28, 228 A.C.W.S. (3d) 834; Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7, 314 O.A.C. 1, 453 N.R. 51, 2014EXP-319, J.E. 2014-162, EYB 2014-231951, 12 C.C.E.L. (4th) 1, 27 C.L.R. (4th) 1, 46 C.P.C. (7th) 217, 37 R.P.R. (5th) 1, 366 D.L.R. (4th) 641

Statutes referred to

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

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.], ss. 4, 5(1), (a)(iv), 22 [as am.], (1), (2), (5), (6)

Rules and regulations referred to

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 20

MOTION for summary judgment dismissing an action.

Geoffrey Larmer, for plaintiff.

Duncan McDuff, for defendant.

[1] ELLIES J.: — In this motion for summary judgment under Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the defendant seeks an order dismissing the plaintiff's claim for disability benefits under a group insurance policy on the basis that her action was commenced outside of the applicable limitation period.

Background

[2] The plaintiff worked as a special constable for the North Bay Police Services. As an employee, she was a member of the [page622] North Bay Police Association and insured under a group policy of insurance issued by the defendant to the association. On or about May 1, 2008, the plaintiff submitted a claim for long-term disability ("LTD") benefits in which she stated that she had been totally disabled since October 22, 2007.

[3] The insurance policy provided for an "elimination period", which was a period of time during which the plaintiff's employer paid her short-term disability benefits. On May 15, 2008, the defendant wrote to the plaintiff, advising that the elimination period would expire on September 11, 2008 and that LTD benefits would be payable under the policy starting on September 12, 2008. Therefore, the letter indicated, the plaintiff's claim was still "pending".

[4] The defendant next wrote to the plaintiff on December 4, 2008, advising that her claim had been "declined". The letter also contained the following paragraph:

Should you wish to appeal our decision, you need to submit new medical information provided by your physician[.]

[5] From that date to February 24, 2011, correspondence was exchanged between the plaintiff or her representatives and the defendant, in which the plaintiff submitted further information as part of a process in which she passed through three "levels" of appeal. Her appeals were not successful. The final appeal ended on February 24, 2011, when the defendant sent the plaintiff a letter advising that her claim remained declined. The letter also advised her that she might wish to seek legal advice as one of two options. The plaintiff followed that advice and retained a lawyer. Her lawyer commenced an action against the defendant on behalf of the plaintiff on February 21, 2012.

[6] The defendant contends that a limitation period contained in the contract governs and that the contractual limitation period expired on December 10, 2009. Alternatively, it argues that the two-year statutory limitation period contained in the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B (the "Act") expired on December 4, 2010. In either case, it submits that the plaintiff's action was commenced out of time.

Issues

[7] Although there were additional issues raised by the parties, only three issues need to be addressed in this motion, namely,

(1) which limitation period applies;

(2) when the applicable limitation period commenced; and [page623]

(3) the extent of the relief that should be granted.

[8] I will begin by briefly discussing the last issue.

Analysis

The extent of the relief that should be granted

[9] There is no issue between the parties that this case is an appropriate one for a summary determination of the limitation period issue raised by the defendant. However, the plaintiff submits that, if she is successful, the court should award her a declaration that the action against the defendant is not barred by the limitation period, in addition to dismissing the defendant's motion with costs. I will return to this argument following my analysis of the other issues.

Which limitation period applies

[10] Section 4 of the Act provides for a default limitation period of two years. It reads:

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.

[11] Section 22(1) precludes contracting out of the limitation periods contained in the Act, subject only to certain exceptions. Section 22(2) of the Act contains one of those exceptions and provides that a limitation period under the Act may be varied or excluded by an agreement made before January 1, 2004. The plaintiff argues that the contractual limitation period in this case does not apply for two reasons, namely, (1) because the insurance contract was not made before that date and (2) because the limitation provisions are ambiguous.

Date of the insurance contract

[12] The group insurance policy under which the plaintiff was insured is comprised of two documents, namely, a contract document and a policy booklet incorporated by reference into the contract. Together, they comprise "Contract No. 22494".

[13] The contract states that it is effective March 1, 2003 and that it was issued on March 26, 2003. There is no evidence to the contrary and these dates were not disputed by the plaintiff. However, the contract was subsequently varied. In particular, effective June 1, 2007 the contract was varied by the defendant to provide that dependent benefits payable under any government-sponsored plan would no longer be used to reduce any disability benefit payments. The amendment was effected pursuant to a [page624] term of the contract which permits the defendant to vary it unilaterally. Where such a unilateral variation takes place, the change will be considered as accepted by the contract holder if premiums are paid after the contract holder is given a copy of the proposed change, or where it fails to object to the change within 31 days from the date of receiving notice of it. The plaintiff does not contest the fact that the contract was properly varied in this case. Instead, she argues that the variation had the effect of depriving the defendant of the "grandfathering" provisions of s. 22(2) of the Act.

[14] The plaintiff provided no jurisprudential or statutory authority in support of her submission that the change in question created an entirely new contract after June 1, 2007. If the variation of an important term in a contract results in a new agreement, I would agree. However, I need not decide the issue because, in my view, even if a new contract was entered into after June 1, 2007, it fits within another exception to the prohibition against contracting out of the Act, namely, the "business agreement" exception.

[15] Section 22(5) and Section 22(6) of the Act provide:

22(5) The following exceptions apply only in respect of business agreements:

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.

(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.

[16] The word "consumer" is defined in s. 1 of the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sch. A:

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

[17] An insurance contract may qualify as a business agreement: Boyce v. Co-operators General Insurance Co. (2013), 116 O.R. (3d) 56, [2013] O.J. No. 2568, 2013 ONCA 298, at para. 23. The insurance contract at issue in this case was entered into between the association and the defendant. As a result, it was not entered into by an individual acting for personal, family or household purposes. For that reason, if the contract is not valid because it was entered into before January 1, 2004, it qualifies [page625] as a business agreement under s. 22 of the Act because it was made after October 19, 2006. In either case, the contractual limitation period is not rendered invalid under the Act. However, that does not end the inquiry with respect to the validity of the contractual limitation period.

Ambiguity

[18] In order to validly contract out of a statutory limitation period under s. 22(5) and s. 22(6) of the Act, three requirements must be met. These were set out in Boyce, at para. 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.

[19] The defendant argues that the contractual limitation period in this case is clear. It contends that the period began to run 90 days after the elimination period ended, namely, December 10, 2008, and ended one year later, on December 10, 2009. I would agree, if the only reference to a limitation period was contained in the booklet. However, the contract also refers to the limitation period, but uses different terms than those used in the booklet.

[20] At p. 13 of the booklet, beside the heading, "When and how to make a claim", the following appears:

To make a claim, complete the Notice of Claim for Group Long-Term Disability Benefits that is available from your employer.

We must receive notice of claim on the earlier of the following dates:

-- 60 days after the total disability begins.

within 30 days of the termination of this Long-Term Disability benefit.

Part of the application process will include filling out claim forms that give us as many details about the claim as possible. You, the attending doctor and your employer will all have to complete claim forms.

In order to receive benefits, we must receive these forms no later than 90 days after the end of the elimination period.

We will assess the claim and send you or your employer a letter outlining our decision.

(Emphasis added)

[21] The policy booklet sets out the limitation period, at p. 3: [page626]

No legal action may be brought by you more than one year after the date we must receive your claim forms or more than one year after we stop paying disability benefits.

(Emphasis added)

[22] The wording in the booklet is to be contrasted to that of the contract. The contract refers to two distinct things, namely, "written notice" and "proof of claim" under the heading "Claiming Benefits", at p. 4-1 of the document, which reads:

Notice and proof of claim

Sun Life must receive written notice and proof of claim within the time limits shown under each benefit.

From time to time Sun Life may request additional information to support a proof of claim. If the information is not provided within 90 days of the request, the employee will not be entitled to benefits.

[23] The contract goes on to deal with the limitation period under the same general heading. It provides, at p. 4-2:

Legal Actions

No legal action may be brought against Sun Life more than one year after the end of the time period in which proof of the claim is required or more than one year after the date Sun Life stops paying disability benefits. If either of these time limits are less than required by the law of the jurisdiction in which the employee resides at the time of becoming covered under this contract, then the time limit will be extended to the minimum required by law.

(Emphasis added)

[24] Thus, whereas the booklet ties the limitation period to the receipt of claim forms, the contract ties the limitation period to proof of the claim, without specifying that these are the same things, if in fact they are. "Proof of the claim" is not defined or explained in the contract. However, it is referred to in the booklet. At p. 5 of the booklet under the heading, "Long-Term Disability", beside a margin note entitled, "General description of the coverage", the following appears:

Long-Term Disability coverage provides a benefit to you if you are totally disabled. You qualify for this benefit if you provide proof of claim acceptable to Sun Life that:

-- you became totally disabled while covered, and

you have been following appropriate treatment for the disability since its onset.

(Emphasis added)

[25] The booklet also refers to the claim forms as being only "part of the application process" in the section I have set out in para. 20, above. [page627]

[26] Reading the provisions of the contract document and the booklet together, as I must, "proof of claim", or "proof of the claim", appears to refer to the process of providing information to the defendant that it deems sufficient to make a decision as to whether to pay benefits. It would not be unreasonable to interpret the limitation period in the contract as providing that the limitation period of one year begins to run once Sun Life receives sufficient proof of the claim, and not simply the claim forms.

[27] It would also not be unreasonable to believe, as the plaintiff did, that the appeal procedure formed part of application process. The plaintiff deposed that she interpreted the reference to limitation periods contained in most of the correspondence the defendant sent, in which it indicated that it did not intend to waive its right to rely on "any available contractual or statutory limitation period", as referring to the "application process".

[28] The ambiguity of the relevant clauses is demonstrated by the fact that the plaintiff's representative, Susan Cousineau, was confused by them. Ms. Cousineau was the North Bay Police Association civilian executive who represented the plaintiff in connection with her application to the defendant for disability benefits. On January 20, 2009, she wrote to the defendant and asked two questions in response to the defendant's letter of December 4, 2008, in which it referred to the appeal process. She wrote:

1. Should Miss Kassburg submit further medical information, will it be included in this file or will the application process start over again?

2. The Group Policy 022494 of the North Bay Police Association does not include any particulars on the appeal process. Could you advise what the procedure is for the appeal process?

[29] Ms. Cousineau never received a reply to these questions despite requesting answers again on February 26, 2009 (via e-mail) and February 27, 2009 (via ordinary mail).

[30] In my view, the limitation provisions in the contract and the policy document do not state the limitation period in clear language. As a result, the defendant failed to validly contract out of the statutory limitation period contained in the Act.

When the applicable limitation period commenced

[31] Section 5(1) of the Act sets out the time at which a claim is discovered for the purpose of s. 4. If provides: [page628]

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).

[32] The defendant argues that if the statutory limitation period applies, then the two-year period set out in s. 4 of the Act began to run on December 4, 2008 and expired on December 4, 2010. It submits that the plaintiff knew all she needed to know after she received the defendant's letter of December 4, 2008 in which she was advised that her claim had been declined. It relies on the decision of our Court of Appeal in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada (2012), 109 O.R. (3d) 652, [2012] O.J. No. 1505 2012 ONCA 218, in which it was held that a party with a claim for indemnity suffers a loss each day it is out-of-pocket after the claim became payable.

[33] The present case is distinguishable from Markel because of the language of the insurance contract. Markel involved a loss transfer scheme between first party insurers with respect to statutory accident in benefits. It is clear from the decision that the court viewed the "Request for Indemnification" form provided for by the Financial Services Commission of Ontario as the equivalent to the claim forms the defendant relies on to commence the contractual limitation period in this case. Markel did not involve an insurance contract containing terms like the one presently under review. Because of the language to which I have referred involving "proof of the claim acceptable to Sun Life", the plaintiff in this case could only know that she was "out-of-pocket" when the insurer denied the claim after receiving proof acceptable to it.

[34] The court in Markel also held, at para. 34, that the word "appropriate" in s. 5(1)(a)(iv) of the Act means "legally appropriate". The defendant argues that the plaintiff in this case knew or ought to have known that an action was appropriate on the date she received the defendant's letter of December 4, 2008. The [page629] defendant points to the decision in Esau v. Co-operators Life Insurance Co., [2004] B.C.J. No. 2195, 2004 BCSC 1347, 16 C.C.L.I (4th) 271, where it was held that an insurer's willingness to reconsider its position does not preclude the insurer from relying on a limitation period. In my view, Esau is distinguishable for two reasons.

[35] First, the summary judgment motion judge in Esau was dealing with a contractual limitation period that was clearer than the one in this case. The policy in Esau required the plaintiff to commence her action "within one year from the expiration of the time within which Proof of Claim is first required by the policy". Although it was not set out in the decision, the use of capital first letters in the words "Proof of Loss" suggests that they were given a meaning elsewhere in the policy such that they became a proper noun. As I have pointed out, the insurance contract in this case did not define the meaning of the words "proof of claim" or "proof of the claim". Further, by incorporating the words "first required", the contract in Esau left little room for interpreting the term to mean that the limitation period commenced at the end of a process, as it did here.

[36] Second, the language employed by the insurer in denying the plaintiff's claim in Esau was clearer than the language used by the defendant in this case. In Esau, the motion judge held that there had been "a clear denial" of the claim: para. 14. That is not so in this case. In this case, the defendant's letters contained language like:

"We . . . are not able to approve it based on the medical information we have received" (December 4, 2008);

"The medical information is insufficient to demonstrate . . ." (December 4, 2008);

"The medical documentation on file does not justify . . ." (April 28, 2009);

". . . the medical documentation on file is not sufficient to justify . . ." (September 6, 2009);

". . . the medical information provided to date does not support . . ." (August 3, 2010).

(Emphasis added)

[37] In the result, I find that the statutory limitation period did not begin to run until February 24, 2011, the date of the letter in which the plaintiff was advised that her final appeal [page630] had failed. Therefore, the claim was issued within the limitation period.

The extent of the relief that should be granted

[38] The defendant submits that a declaration in favour of the plaintiff would be unfair, inasmuch as it put its best foot forward with respect to the relief it sought, but was not obliged to do so with respect to the relief sought by the plaintiff because the plaintiff did not file her own motion under Rule 20. As an example, the defendant refers to the fact that no cross-examination was undertaken by it of the plaintiff on the affidavit she filed in response to the motion.

[39] I have difficulty with the defendant's argument. Even if the plaintiff had served a notice of motion under Rule 20, seeking the declaration she now requests in response to the defendant's motion, the issues between the parties would be identical. The defendant's obligation would also be identical with respect to the plaintiff's motion as it is with respect to its own motion, i.e., to put its best foot forward with respect to the limitation issue.

[40] Moreover, to require the plaintiff now to bring her own motion would be contrary to the clear call to promote proportional, timely and affordable access to justice sounded recently by the Supreme Court of Canada in Hryniak v. Mauldin, [2014] S.C.J. No. 7, 2014 SCC 7. It would also ignore the doctrine of res judicata, which precludes the relitigation of issues that have already been judicially determined between the same parties.

[41] For these reasons, the plaintiff should be entitled to the declaration she seeks.

Conclusion

[42] In its written and oral submissions, the defendant highlighted the importance of limitation periods to society in general, and to the parties in particular. I agree that limitation periods are very important. For that reason, it is difficult to understand why the defendant failed or refused to reply to Ms. Cousineau and never once throughout its correspondence with the plaintiff and her representatives set out its position with respect to the date the limitation period commenced and the date it would end. Certainly, the defendant could not have been afraid to make a mistake and inadvertently prejudice either the plaintiff or itself with respect to the limitation date, given its position that that date was crystal clear from the terms of the insurance contract.

[43] The defendant's motion is dismissed. An order will issue declaring that the plaintiff's action was commenced within the applicable limitation period. [page631]

[44] If the parties are unable to agree with respect to the matter of costs, they may make written submissions, as follows:

(a) the plaintiff may make written submissions, limited to five pages in length, exclusive of attachments and authorities, within 21 days of the release of these reasons;

(b) the defendant may make written submissions in reply, similarly limited in length, within 14 days of the date of receipt of the plaintiff's written submissions.

Motion dismissed.

End of Document