Old Republic Insurance Company of Canada v. Aviva Canada Inc., 2014 ONSC 2425

Old Republic Insurance Company of Canada v. Aviva Canada Inc.

[Indexed as: Old Republic Insurance Co. of Canada v. Aviva Canada Inc.]

Ontario Reports

Ontario Superior Court of Justice,

Lederman J.

May 28, 2014

120 O.R. (3d) 313 | 2014 ONSC 2425

Case Summary

Insurance — Limitations — Insurer A denying coverage for losses arising out of motor vehicle accident — Insured successfully suing Insurer A — Insurer A aware that vehicle insured by Insurer B was at fault for accident but not adding Insurer B or its insured as third party and not notifying Insurer B of its claim for indemnification within two years of being served with statement of claim — Section 18 of Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 18 applying to Insurer A's action against Insurer B for indemnification — Action statute-barred — Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 18.

Old Republic denied insurance coverage to S for damage to property in a motor vehicle accident which occurred in May 2009. S successfully sued Old Republic for a declaration that the loss was covered under Old Republic's policy. Old Republic was aware that Aviva was the insurer of the other vehicle involved in the accident and that the Aviva vehicle was 100 per cent at fault for the accident. However, Old Republic did not add Aviva or its insured as third parties to S's action. In 2013, Old Republic commenced an action against Aviva for indemnification. Aviva brought a motion to dismiss the action as statute-barred by operation of the Limitations Act, 2002.

Held, the motion should be granted.

Section 18 of the Limitations Act, 2002 applied to the facts of this case. Because Old Republic refused coverage under its policy, it could be said that Old Republic was an alleged "wrongdoer" in the context of the action brought by S. Moreover, its subsequent claim for contribution and indemnity from Aviva was based on the fault of Aviva's insured, constituting Aviva the other alleged wrongdoer. Old Republic's action was statute-barred.

Bruinsma v. Cresswell (2013), 114 O.R. (3d) 452, [2013] O.J. No. 770, 2013 ONCA 111, 302 O.A.C. 377, 40 M.V.R. (6th) 169, 360 D.L.R. (4th) 484, 19 C.C.L.I. (5th) 1, 223 A.C.W.S. (3d) 1032; 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; Schmitz (Litigation guardian of) v. Lombard General Insurance Co. of Canada, [2014] O.J. No. 531, 2014 ONCA 88, 315 O.A.C. 187, consd

Other cases referred to

Canaccord Capital Corp. v. Roscoe (2013), 115 O.R. (3d) 641, [2013] O.J. No. 2643, 2013 ONCA 378, 306 O.A.C. 382, 9 C.C.E.L. (4th) 26, 363 D.L.R. (4th) 182, 228 A.C.W.S. (3d) 252; Siena-Foods Ltd. v. Old Republic Insurance Co. of Canada (2012), 2012 ONCA 583, 112 O.R. (3d) 180, [2012] O.J. No. 4164, 296 O.A.C. 326, 13 C.C.L.I. (5th) 197, [2012] I.L.R. I-5334; Waterloo Region District School Board v. CRD Construction Ltd. (2010), 103 O.R. (3d) 81, [2010] O.J. No. 5358, 2010 ONCA 838, 271 O.A.C. 142, 97 C.L.R. (3d) 274, 327 D.L.R. (4th) 611, 100 C.P.C. (6th) 1, 196 A.C.W.S. (3d) 257 [page314]

Statutes referred to

Insurance Act, R.S.O. 1990, c. I.8 [as am.], s. 263, (2)

Limitations Act, 2002, S.O. 2002, c. 24, Sch. B [as am.], ss. 4, 5 [as am.], (1)(a)(ii)-(iv), 18, (1)

Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41 [as am.]

Rules and regulations referred to

Automobile Insurance, R.R.O. 1990, Reg. 664, s. 8, (1), (2)

Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 29

MOTION for an order dismissing an action.

John J. Jones, for plaintiff.

Caroline Gronke, for defendant.

1LEDERMAN J.: — The plaintiff, Old Republic Insurance Company ("Old Republic"), brings this action against the defendant, Aviva Canada Inc. ("Aviva"), seeking statutory indemnification under s. 8(1) of Automobile Insurance, R.R.O. 1990, Reg. 664, enacted under the Insurance Act, R.S.O. 1990, c. I.8. Old Republic seeks summary judgment against Aviva for $166,355.94.

2Aviva submits that the action is statute-barred by operation of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B and should be dismissed. Alternatively, Aviva submits that Old Republic has failed to provide evidence to allow this court to adequately determine what, if any, are the proper damages payable to it, and that this is not an appropriate case for summary judgment.

Background Facts

3Old Republic denied coverage to Siena-Foods Limited ("Siena") for compensation for a food processing machine that was damaged in a motor vehicle accident on May 28, 2009. The machine was being transported in a truck rented by Siena from Ryder Truck Rental Limited, which truck was insured by Old Republic.

4As a result of the denial of coverage, Siena, by its trustee in bankruptcy, brought a claim against Old Republic for a declaration that the loss of the machine was covered under the Old Republic policy as well as for damages, interest and costs. The action was commenced on May 28, 2010, and the statement of claim was served on Old Republic on or about July 26, 2010 (the "Siena action"). Old Republic denied coverage under its policy.

5Old Republic was aware that Aviva was the insurer of the other vehicle (the "Aviva vehicle") involved in the motor vehicle accident and that the Aviva vehicle was 100 per cent at fault for [page315] the accident. However, at no time did Old Republic add Aviva or its insureds as third parties to the Siena action.

6A motion was brought to the Superior Court of Justice in the Siena action to determine a question of law as to the applicability of s. 263(2) of the Insurance Act. The court held in Old Republic's favour. However, Siena appealed and the Court of Appeal reversed the decision of the Superior Court of Justice by way of decision dated September 10, 2012 [112 O.R. (3d) 180, [2012] O.J. No. 4164, 2012 ONCA 583], and found that Siena had coverage under the Old Republic policy.

7Following the Court of Appeal's decision, Siena and Old Republic negotiated a settlement of all claims arising from the Siena action. The settlement of $197,000 was reached between Old Republic and Siena on November 26, 2012. At no time prior to finalizing settlement did Old Republic advise Aviva that it would be seeking indemnification for any amounts it paid to Siena.

8The first notice that Aviva had of Old Republic's intent to claim indemnification from it was on January 8, 2013, when Old Republic demanded the full amount of the settlement paid to Siena, less a $20,000 deductible. It did so on the basis of s. 263 of the Insurance Act and s. 8 of R.R.O. 1990, Reg. 664, which provide that the insurer of automobile contents is entitled to indemnification from the insurer of the other vehicle involved in the accident according to the fault of the drivers.

9On June 3, 2013, Old Republic served Aviva's counsel with a statement of claim.

Is Old Republic's Claim Statute-Barred by Operation of the Limitations Act, 2002?

10Sections 4 and 5 of the Limitations Act set out the limitation period for actions brought in Ontario. Section 18 indicates how these sections are to be interpreted in the case of claims for contribution and indemnity. The relevant parts of these sections provide 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, [page316]

(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).

Contribution and indemnity

18(1) For the purposes of subsection 5(2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer's claim is based took place.

Application

(2) Subsection (1) applies whether the right to contribution and indemnity arises in respect of a tort or otherwise.

11In Canaccord Capital Corp. v. Roscoe (2013), 115 O.R. (3d) 641, [2013] O.J. No. 2643, 2013 ONCA 378, Sharpe J.A. reviewed the legislative history of s. 18 and stated, at para. 24, as follows:

In my view, the departure from the 1948 model to embrace "wrongdoers", not just tortfeasors, and to cover claims that arise "in respect of a tort or otherwise" represented a conscious decision to expand the scope of the provision beyond the tort context to include claims like the one at issue in this case. This is consistent with the often-repeated goal of creating a clear, cohesive scheme for addressing limitation issues. As mentioned, the purpose of the Act is to balance the plaintiff's right to sue with the defendant's need for certainty and finality. Carving out exceptions to the general rule in s. 18 for certain types of claims in contribution and indemnity would undercut that purpose. It would expose defendants from whom contribution and indemnity is sought to unpredictable limitation periods, undermining the defendant's ability to defend the claim. Consequently, it is my view that the legislative history supports the conclusion that s. 18 of the Act governs the claim at issue.

12At para. 28, Sharpe J.A. stated as follows:

Section 18(2) makes clear that this special rule for claims for contribution and indemnity "applies whether the right to contribution and indemnity arises in respect of a tort or otherwise" (emphasis added). The legal theory grounding the contribution and indemnity claim is not relevant for deciding whether s. 18 is triggered; the provision applies when there is a claim for contribution and indemnity, no matter what legal theory underlies the claim. [page317]

13The basis for Old Republic's claim for indemnification is contribution, i.e., the extent to which the Aviva insured was at fault. Section 8(2) of R.R.O. 1990, Reg. 664 provides "the amount of the indemnity is limited to that proportion of the loss over $20,000 that is attributable to the fault, as determined under the fault determination rules, of the driver of the other automobile".

14The goal or objective of s. 18 is to provide a consistent limitation period in the case of claims for contribution and indemnity.

15The Ontario Court of Appeal in Waterloo Region District School Board v. CRD Construction Ltd. (2010), 103 O.R. (3d) 81, [2010] O.J. No. 5358, 2010 ONCA 838 explained how claims for contribution and indemnity fit in with the limitation regime. The court stated the following, at para. 28:

Section 18 also signals that a defendant who wishes to claim contribution and indemnity should bring the claim not after judgment in the main action, but as part of it. Although in theory a defendant could commence a new action for contribution and indemnity within two years of being served with a statement of claim, the more likely procedure is to bring a cross-claim or third-party proceeding in the main action. Even if a new action were commenced, one could envision that, for reasons of economy and efficiency, the actions would likely be joined and tried together.

16Aviva submits that Old Republic should have brought a third party claim against it in the Siena action under Rule 29 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Under Rule 29, the first party insurer, whose insured has brought a claim under a policy for a loss, may bring a potentially "at fault" party into the action as a third party.

17As Old Republic failed to do so or make any claim within two years after being served with the Siena statement of claim, Aviva submits that Old Republic's claim for indemnification is now time-barred.

18Old Republic argues that s. 18 of the Limitations Act is inapplicable to the circumstances of this case. It points out that s. 18 only applies where there is a claim by one alleged wrongdoer against another for contribution and indemnity. It submits that there is no "wrongdoer" in the circumstances of this case in that neither Old Republic nor Aviva are "wrongdoers". It submits, rather, that this is an instance of two insurance companies dealing with claims for indemnity under a statute.

19Old Republic submits that the instant case is analogous to the Court of Appeal's decisions in Schmitz (Litigation guardian of) v. Lombard General Insurance Co. of Canada, [2014] O.J. No. 531, 2014 ONCA 88 ("Schmitz") and 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 ("Markel"). [page318] Schmitz dealt with the issue of when the s. 5 limitation period begins to run in respect of an indemnity claim for underinsured motorist coverage arising out of an optional endorsement to a standard policy. Markel addressed the commencement of the limitation period applicable to a loss transfer claim between insurers regarding statutory accident benefits.

20Old Republic argues that s. 18 of the Limitations Act was not referred to in either Markel or Schmitz. Both cases involved the issue of whether the requirements in s. 5(1)(a)(ii)-(iv) of the Limitations Act have been met in the context of a claim for indemnity. In Markel, the issue was when does the first party insurer know that there is a loss caused by an omission of the second party insurer? The court held that the second party insurer cannot be said to have omitted to indemnify if there was no request for indemnification. It follows that the first party insurer suffers a loss from the moment that the second party insurer can be said to have failed to satisfy its legal obligation to satisfy the claim. Similarly, in Schmitz, the court held that an insured suffers a loss within the meaning of s. 5 the day after it demands indemnity from its insurer.

21Based on the Markel and Schmitz cases, Old Republic submits that the limitation period starts to run when the omission to indemnify occurs, i.e., when the request for indemnification is made, which in this case was January 8, 2013. Accordingly, Old Republic submits that its claim for indemnification is within the prescribed two-year period.

22It appears that s. 18 did not come into play in the Schmitz or the Markel cases because in neither case was there any alleged wrongdoer claiming against another wrongdoer for contribution and indemnity. As noted, in Schmitz, the plaintiff was seeking payment from his own insurer. In Markel, the issue was when the limitation period begins to run for a loss transfer claim made by one insurer against another for indemnification for statutory accident benefits paid to an insured. In neither case was there a claim for contribution or indemnity arising from an action or claim brought by a plaintiff.

23In this regard, a decision of the Court of Appeal, Bruinsma v. Cresswell (2013), 114 O.R. (3d) 452, [2013] O.J. No. 770, 2013 ONCA 111 ("Bruinsma"), is noteworthy. In that case, the court held that a cross-claim by the minister administering the Motor Vehicle Accident Claims Fund against another insurer was time-barred because of s. 18(1) of the Limitations Act.

24Bruinsma was involved in a motor vehicle accident with Cresswell. Bruinsma was driving his girlfriend's vehicle, which [page319] was insured by the CAA Insurance Company of Ontario ("CAA"). Cresswell was uninsured. Ordinarily, because Cresswell was uninsured, Bruinsma would be covered by CAA. Bruinsma issued a statement of claim against Cresswell and CAA and served it on Creswell on January 27, 2009. The claim against CAA was for uninsured automobile coverage. CAA defended the claim on the basis that Bruinsma was driving while his licence was under suspension, and therefore he was disentitled to coverage.

25A notice of default against Cresswell was sent to the Motor Vehicle Accident Claims Fund, the insurer of last resort, on November 5, 2009. Because Cresswell was represented by counsel, however, the minister responsible for administering the fund could not file a defence. On May 26, 2011, the minister issued a cross-claim against CAA in Cresswell's name pursuant to the Motor Vehicle Accident Claims Act ("MVACA"). The cross-claim sought a declaration that Bruinsma was covered by CAA and judgment requiring CAA to pay any amount awarded to Bruinsma up to the policy's limits.

26CAA argued that Bruinsma was disentitled to insurance because his licence has been suspended at the time of the accident (which was a breach of the policy), and also that the cross-claim was time-barred by operation of ss. 4, 5 and 18 of the Limitations Act. The motion judge held that provisions of the MVACA precluded the applicability of the Limitations Act to the minister's cross-claim.

27The Court of Appeal held that the MVACA was not listed in a schedule to the Limitations Act, and therefore did not preclude the Limitations Act's application. The court made the following comments, at para. 67:

The motion judge found, and it is conceded, that if the Limitations Act applies to cross-claims by the Minister under s. 8(2) of the MVACA, the cross-claim is time-barred: s. 4 of the Limitations Act establishes a two-year limitation period, and the effect of s. 18(1) of the Limitations Act is that the limitation period began to run when Cresswell was served with the Statement of Claim on January 27, 2009. It had therefore expired by March 27, 2011 when the Statement of Defence and Cross-claim was served.

28The Court of Appeal held that s. 18(1) of the Limitations Act applied, therefore implicitly finding that both the minister (stepping into the shoes of Cresswell) and CAA were alleged wrongdoers within the meaning of s. 18(1).

29In supplementary submissions, Old Republic argued that the court's comments on s. 18 of the Limitations Act were in obiter because it ultimately decided that CAA's policy provided uninsured motorist coverage to Bruinsma. Whether the comments [page320] were in obiter or not, the court made a clear determination that s. 18 applied to the circumstances of the case. The court stated the following, at para. 6:

The second issue is whether the minister's cross-claim is time-barred by virtue of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. I conclude that the Limitations Act applies and therefore the minister's cross-claim is out of time. However, for the reasons below, I would not give effect to the limitation period argument at this time.

30The court stayed CAA's motion for summary judgment for reasons of judicial economy and expeditious determination of issues because, ultimately, the MVACA allowed the minister to assert a defence that CAA's policy covered Bruinsma.

31Bruinsma confirms the Court of Appeal's approach to a broad and universal application of s. 18 of the Limitations Act for cross-claims and third and subsequent party claims of all manner, in furtherance of the goals of clarity and certainty as enunciated by the court in Canaccord Capital, supra, and Waterloo Region District School Board, supra.

32In the instant case, because Old Republic refused coverage under its policy on the basis that the contents of the vehicle were not covered, it could be said that Old Republic, like CAA in Bruinsma, is an alleged "wrongdoer" in the context of the action brought by Siena. Moreover, its subsequent claim for contribution and indemnity from Aviva is based on the fault of Aviva's insured, constituting Aviva the other alleged wrongdoer.

33Accordingly, s. 18 does apply to the facts of this case, as it did in Bruinsma, and since the claim was asserted in excess of two years beyond the time that the Siena statement of claim was served on Old Republic, the claim against Aviva is statute-barred.

34Given that conclusion, there is no necessity to deal with the adequacy of the damages evidence.

Conclusion

35The action is therefore dismissed. Aviva seeks costs for the summary judgment motion and the action in the total amount of $18,829.50, all inclusive. Old Republic does not take issue with the quantum, and accordingly, costs will be fixed in that amount payable by Old Republic to Aviva.