COURT FILE NO.: CV-10-412816

DATE: 20140401

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: THE ECONOMICAL INSURANCE GROUP, Plaintiff

AND:

NATIONWIDE MUTUAL INSURANCE COMPANY, Defendant

BEFORE: D.L. Corbett J.

COUNSEL:
George Kanellakos, for the Plaintiff
Bruce R. Mitchell, for the Defendant

HEARD: December 11, 2013

ENDORSEMENT

[1] Two insurance companies dispute which should pay damages from a car accident. Their disagreement concerns how the “discoverability principle” applies to determine the start of the limitations period.

Disposition

[2] For the reasons that follow Economical is granted judgment.[^1] Economical exercised reasonable diligence. Despite that diligence, persons in Economical with sufficient understanding to appreciate that it had a claim against Nationwide did not come to that appreciation until July 2010. That is the “date of discoverability”. This claim was commenced less than two years after, and so is within the two year limit established under the Limitations Act: the claim is in time.

Background Facts

[3] The car accident happened in March 2003. A car driven by Ginger Lee Fink crossed over the centre line into oncoming traffic. The Fink car collided with a car driven by Sandra Williams. Ms Williams and her passenger, Paul Betts, were both injured in the collision.

[4] The plaintiff, Economical, was Ms Williams’ insurer.

[5] Ms Williams brought a claim (the “Williams Action”), which Economical settled for $186,296.04.

[6] Economical then sued Ms Fink (the “Fink Action”) to recover its expense to settle the Williams Action. Economical obtained default judgment against Ms Fink.

[7] Economical tried to locate Ms Fink unsuccessfully and closed its file without recovering on its judgment in the Fink Action.

[8] Ms Williams’ passenger, Mr Betts, sued Ms Williams and Ms Fink (the “Betts Action”). Economical responded to the Betts Action on behalf of Ms Williams.

[9] During the course of the Betts Action, Economical personnel and counsel learned that Ms Fink had insurance. However, they were unaware that Economical had an unsatisfied judgment against Ms Fink in the Fink Action for indemnity in respect to the Williams Action.

[10] At the conclusion of the Betts Action, in July 2010, Economical personnel involved in the Betts Action learned that Economical had a judgment in the Fink Action to which Ms Fink’s insurance should respond.

[11] Economical then sought to collect its judgment in the Fink Action from Ms Fink’s insurer, Nationwide. Nationwide refused to pay. So Economical sued Nationwide in this proceeding, which was commenced in 2010.

The Issue

[12] Economical’s claim is brought under s.258(1) of the Insurance Act for indemnity from Ms Fink for the amounts paid to its own insured.[^2]

[13] The applicable limitations period for this claim is two years.[^3]

[14] The limitations period begins to run on the date that Economical knew, or in the exercise of reasonable diligence ought to have known, of its claim.[^4]

[15] In the context of this claim, it is settled law that a claim is not “discovered” until the plaintiff discovers “that the at fault driver… was in fact insured pursuant to a valid policy of motor vehicle insurance….”[^5]

[16] Nationwide does not dispute these principles. It argues that Economical did, in fact, know that Ms Fink was insured at least as early as 2007. Thus this case turns on the question of when an insurer can be said to “know” a fact for the purpose of the discoverability principle.

[17] Nationwide asserts two lines of argument, that:

(a) Economical did not exercise proper diligence to try to locate Ms Fink and to determine whether Ms Fink had insurance; and

(b) during its defence of the Betts claim, Economical learned in 2007 that Ms Fink had insurance, and thus the date of actual discovery was in 2007, not 2010 as asserted by Economical.

Exercise of Reasonable Diligence

[18] I am satisfied that Economical took reasonable steps to try to find Ms Fink and to determine whether she had insurance. Ms Fink’s vehicle was licensed by the State of South Carolina. Ms Fink told the investigating police officer that she did not have insurance, and she was charged with operating a motor vehicle without insurance.[^6] I accept Economical’s argument that an insured driver involved in a serious accident almost invariably discloses her insurance status because (a) she wants her insurer to respond to any claims; and (b) she does not wish to be charged with an offence. This argument corresponds with both common sense and experience.[^7]

[19] Nationwide argues that Economical’s failure to conduct further searches of Ms Fink’s driver’s and car licenses shows a want of reasonable diligence. I do not agree. Economical had no reason to believe that Ms Fink was insured, and thus saw no reason to take further steps and incur further expense to confirm that fact. And I agree that Economical spent more efforts trying to find Ms Fink than it did confirming her insurance status. That is because Economical believed that there was no insurance. Had it thought otherwise, it would have spent more effort trying to identify an insurer. The efforts it spent trying to locate Ms Fink were based on its assessment that finding Ms Fink was the only likely route for it to obtain indemnity for what it had paid to settle the Williams Action. Hindsight will often disclose that some sort of further inquiry would have borne fruit – but that is not a fair way to assess what was reasonable at the time. Economical relied reasonably on Ms Fink’s statement to police that she was uninsured.

Actual Knowledge

[20] The more difficult point in this case is whether Economical is fixed with knowledge of Ms Fink’s insurance status once it learned of it during its defence of Ms Williams in the Betts Action. In the context of adjusting and defending personal injury claims in insurance cases, insurers keep cases separate, to protect privacy interests and to defend or advance claims diligently. Implying or requiring communication among persons and counsel on different but related claims files could compromise these principles.[^8] In this case, the personnel involved in settling the Williams Action and in pursuing the Fink Action for Economical were different than those involved in defending the Betts Action. The “left hand” truly did not know what the “right hand” was doing, and for good reason, rather than lack of diligence.

[21] The Williams Action was commenced on May 2, 2003. It was settled on December 22, 2004. The Fink Action was commenced on February 25, 2005 and default judgment was obtained on January 18, 2006. Much of the delay between commencement of the claim and default judgment arose because of efforts to locate Ms Fink to serve her with the claim, and obtaining an order for substituted service when Ms Fink was not found.

[22] The Betts Action was commenced on February 7, 2005. While defending the Betts Action, sometime in late 2007, Economical learned that Ms Fink had insurance. However, the employees and counsel involved in defending the Betts Action did not know that there was an unsatisfied judgment in Economical’s favour against Ms Fink to which the insurance could respond. At this point the files in the Williams Action and in the Fink Action had been closed and the default judgment in the Fink Action was being treated as unrecoverable.

[23] The Betts action resolved in 2010. As part of the process of closing the file, it was reviewed by a “team leader” at Economical. This “team leader” turned out to be the person who had been the adjustor in the Williams Action and the Fink Action, who recognized the names and had the earlier files reviewed. It was at this point, in July 2010, that Economical “discovered” that Ms Fink was insured for the purposes of the Williams Action and the Fink Action.

[24] There shall be judgment for Economical. If the parties cannot agree on costs then they shall be addressed in writing, with all submissions to be delivered to my attention no later than May 31, 2014.

D.L. Corbett J.

Date: April 1, 2014

[^1]: The parties have agreed that this action be determined by way of a motion for summary judgment: R.20.04(1)(b).

[^2]: R.S.O. 1990, c.I.8, s.258(1).

[^3]: Limitations Act, 2002, S.O. 2002, c.24, s.4 and s.5.

[^4]: Grenier v. Canadian General Insurance Co., 1999 ONCA 2156; Peixeiro v. Haberman, 1997 SCC 325.

[^5]: Grenier, ibid., para. 18.

[^6]: See Compulsory Automobile Insurance Act, R.S.O. 1990, c.25.

[^7]: See Grenier v. Canada General Insurance Company, 1999 ONCA 2156.

[^8]: See, for example, Rivait v. Gaudry et al., 1993 ON SC 5438.