Court File and Parties
COURT FILE NO.: C-391-15 DATE: 2016-07-15 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: FADIL USANOVIC, Plaintiff AND: LA CAPITALE LIFE INSURANCE COMPANY also carrying on business as LA CAPITALE FINANCIAL SECURITY INSURANCE COMPANY, Defendant
BEFORE: The Honourable Mr. Justice D.A. Broad
COUNSEL: Daniel Fife and Maple Cameron, for the Plaintiff Vincent Genova, for the Defendant
HEARD: June 22, 2016
Endorsement
Background
(a) Denial of Benefits
[1] The plaintiff was the insured pursuant to a disability policy issued by the defendant (the “policy”). The defendant’s name at the time of issuance of the policy was Penncorp Life Insurance Company. The policy was first issued in 1999 as an “accident-only” policy. Pursuant to an application by the plaintiff sickness benefits were added to the policy in 2004.
[2] The plaintiff made a claim for disability benefits after he suffered a fall on September 27, 2007. The defendant approved the claim and paid benefits to the plaintiff for a number of years.
[3] In late 2011 and early 2012 the defendant made a determination that the plaintiff no longer qualified for benefits under the policy because, in its view, the plaintiff was not disabled from engaging in any occupation for which he had reasonable training and experience, as required by the terms of the policy. It made this determination based on medical evidence it had obtained and on surveillance conducted of the plaintiff.
[4] On January 12, 2012 legal counsel for the defendant wrote to the plaintiff by registered mail informing him that his benefits would be terminated as of November 27, 2011 (the “denial letter’). The denial letter went on to state: “if you disagree with this decision, please submit, within sixty days of receipt of this letter, medical records in support of your claim for total disability from any occupation for which you are reasonably trained and educated.”
[5] The plaintiff telephoned the defendant on February 27, 2012 and left a message expressing his displeasure at its decision to terminate his benefits. On February 28, 2012 a representative of the defendant called the plaintiff back informing him that if he wished to appeal the decision that he would have to submit an appeal in writing and would need to submit new medical evidence.
[6] The defendant says it received nothing further from the plaintiff until February 25, 2015 when it received a notice of appeal from the plaintiff’s counsel, followed by a Notice of Claim and then a Statement of Claim issued on April 29, 2015.
[7] The plaintiff claims, in preparing for cross-examination on this motion, that he found an appeal letter to the defendant on his home computer dated February 3, 2011 (misdated – it should read 2012). This letter was produced by the plaintiff in a supplementary Affidavit of Documents sworn March 24, 2016. The plaintiff claims that he hand-delivered the appeal letter to the defendant’s premises. He acknowledges that it was not accompanied by any new medical evidence. The defendant states that it has no record of having received the plaintiff’s appeal letter.
(b) Statement of Claim
[8] In his Statement of Claim the plaintiff claimed against the defendant damages in the amount of one million dollars, including punitive damages, aggravated damages and damages arising from mental distress, payment of disability benefits under the policy, declarations that the plaintiff is disabled pursuant to the terms of the policy and that the premiums pursuant to the policy are waived, nunc pro tunc from November 27, 2011, an order that the plaintiff is entitled to recover a refund of all premiums paid from November 27, 2011, interest and costs.
(c) Motion for Summary Judgment
[9] The defendant has brought a motion for summary judgment pursuant to Rule 20 of the Rules of Civil Procedure dismissing the plaintiff’s action on the basis, inter alia, that it is barred pursuant to the one year period set forth in the policy for an action to be brought against it arising from a denial of benefits (the “contractual limitation”) or in the alternative by the Limitations Act, 2002, S.O. 2002, c. 24 (the “Limitations Act”).
[10] In argument the defendant relied upon the two-year limitation period provided the Limitations Act on the basis that, since the action was not brought for over three years following a clear denial of benefits, it was not necessary to rely upon the one-year contractual limitation.
(d) Position of the Defendant
[11] The defendant submits that the denial letter of January 12, 2012 represented clear notice to the plaintiff that his benefits under the policy were no longer payable or that he no longer qualified for benefits under the policy. It says that the law is settled that a clear denial of benefits constitutes “discovery” of the existence of a claim under the Limitations Act which commences the running of the 2-year limitation period and that neither an invitation to appeal nor the bringing of an appeal stops or delays the running of the limitation period. Moreover, as disclosed on his cross-examination, the plaintiff understood that his benefits were being terminated upon receipt of the denial letter and he considered retaining a lawyer to fight the denial in 2012 but did not do so because he doubted that he had a chance of winning and could not afford one, thereby satisfying the discoverability requirement in s. 5 of the Limitations Act.
[12] The defendant states that since the action was not brought within two years of the claim being discovered it is statute-barred and ought to be dismissed.
(e) Position of the Plaintiff
[13] The plaintiff submits that the denial letter did not provide a clear and unequivocal denial of his benefits under the policy because it stated that further information could be provided if he did not agree with the defendant’s decision. He says that the limitation period did not begin to run until he “discovered” the existence of the claim on March 18, 2015 when counsel for the defendant provided his letter in response to his appeal submitted February 25, 2015.
[14] The plaintiff also submits that the defendant owed a duty of good faith to him which carried with it an obligation not to put its interests ahead of his welfare. The duty of good faith cast upon the defendant included an obligation to provide him with notice with respect to the limitation period and to otherwise assist him with his claim.
[15] Finally, the plaintiff argues that there is insufficient evidence before the court to establish any prejudice suffered by the defendant by reason of the plaintiff’s delay in pursuing the action.
Principles Applying to Summary Judgment Motions
[16] The Court of Appeal in the case of Combined Air Mechanical Services et al v. Flesch et al, 2011 ONCA 764, at paras. 40-44 observed that generally there are three types of cases that are amenable to summary judgment pursuant to Rule 20 of the Rules of Civil Procedure, namely:
a) a case where the parties agree that it is appropriate to determine an action by way of a motion for summary judgment;
b) a case where a claim or a defence is shown to be without merit; and
c) a case where the trial process is not required in the interest of justice.
[17] The Supreme Court of Canada in Hryniak v. Mauldin, [2014] 1 S.C.R. 87 stated at para. 49 that there will be no genuine issue requiring a trial when a judge hearing a summary judgment motion is able to reach a fair and just determination on the merits, and that this will be the case where the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result.
[18] The Supreme Court of Canada went on to provide a roadmap or approach to be followed by judges hearing motions for summary judgment at paras. 66-68. The judge should first determine if there is a genuine issue requiring trial based only on the evidence before her or him, without using the new fact-finding powers in sub rules 20.04(2.1) and (2.2). There will be no genuine issue requiring a trial if the summary judgment process provides the motions judge with the evidence required to fairly and justly adjudicate the dispute and is a timely, affordable and proportionate procedure. If there appears to be a genuine issue requiring a trial, she or he should then determine if the need for a trial can be avoided by using the new powers under sub rules 20.04(2.1) and (2.2). While summary judgment must be granted if there is no genuine issue requiring a trial, the decision to use either the expanded fact-finding powers or to call oral evidence is discretionary.
The Limitations Act, 2002, S.O. 2002, c. 24
[19] The relevant provisions of the Limitations Act for the purposes of this motion are as follows:
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.
(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).
(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.
Analysis
(a) Was Denial of Benefits Clear and Unequivocal?
[20] The plaintiff relies upon the cases of Kassburg v. SunLife Assurance Company of Canada, 2004 ONCA 922 (C.A.) and Smith v. Co-operators General Insurance Company, 2002 SCC 30, [2002] 2 S.C.R. 129 in support of his position that the 2012 denial letter did not provide a clear and unequivocal denial of his claim for benefits.
[21] In Kassburg the insurer wrote to the insured stating that her claim for long-term disability benefits was declined and advised “should you wish to appeal our decision, you need to submit new medical information” and cautioned that “by considering an appeal, we are not nor do we intend to waive any of our rights under the policy, including our right to apply any available contractual or statutory limitation periods.” Correspondence between the insured and the insurer ensued over the next two years and additional medical information was provided by the insured. The insurer’s letters invited the insured to continue to appeal by submitting further medical information, which she did. Ultimately the insurer wrote to the insured advising her that her claim for benefits was declined at the “third and final appeal level” and stated that she could either initiate a complaint with the insured’s ombudsman’s office or she could “seek independent legal advice.” The insured retained counsel and issued a statement of claim and the insurer brought a motion for summary judgment seeking a dismissal of the action based on expiry of the limitation period.
[22] The motion judge made a determination, based on the evidence, as to when the insured discovered her claim and concluded that the claim was discovered on the date of the letter in which the insurer advised her that her final appeal had failed. The motion judge dismissed the motion and granted a declaration that the insured’s action was commenced within the applicable limitation period. The Court of Appeal, in dismissing the appeal, found that the motion judge’s conclusion that the insurer’s initial denial was not clear was open to him on the evidence, which included the contract wording and the communications between the parties.
[23] In the present case the defendant’s denial letter explained the steps required for the plaintiff to challenge or appeal its decision to terminate his benefits requiring submission, within 60 days of receipt of the denial letter, medical records in support of his claim for total disability from any occupation for which he is reasonably trained and educated. In contrast to the facts in Kassburg, the plaintiff in the present case took no steps to challenge or appeal the denial of benefits in accordance with the procedure required by the defendant.
[24] S.K. Campbell, J. distinguished Kassburg in the case of Landriault v. Sun Life Assurance Company of Canada, 2015 ONSC 3196 (S.C.J.) on the basis that, in contrast to Kassburg, the plaintiff in Landriault took no steps and made no inquiries, concluding that the plaintiff’s claim was discoverable more than two years prior to the issuance of the Statement of Claim.
[25] Smith v. Co-operators concerned a claim by the plaintiff for statutory accident benefits following a motor vehicle accident. The insured claimed and received statutory benefits from the insurer who subsequently ceased paying those benefits and send a notice to the insured stating, in part, “If you disagree with our assessment, please contact us immediately. If we cannot settle the application to your satisfaction, you have the right to ask for mediation…”
[26] The Court of Appeal upheld the decision of the motion judge dismissing the action based upon the applicable limitation period. In allowing the appeal and dismissing the insurer’s motion for summary judgment the Supreme Court of Canada found that the insurer had failed to comply with s. 71 of the Insurance Act, R.S.O. 1990, c. I.8 which required an insurer who refuses to pay a benefit “to inform the person in writing of the procedure for resolving disputes relating to benefits…”
[27] In obiter Gonthier, J., at para. 20, expressed doubt as to whether the notice given by the insurer to the insured would even be considered a refusal, on the basis that there was an equivocal sense of indeterminacy in the decision of the insurer, giving the reader the impression that it may very well change its stance if it is contacted for a discussion of the matter. Gonthier, J. did note, however, that the separate letter sent by the insurer to the insured’s solicitor did remove any doubt by clearly stating “Ms. Smith is no longer entitled to Income Replacement Benefits.”
[28] In my view the denial letter in the present case did not convey an equivocal sense of indeterminacy in the defendant’s decision. The letter clearly stated “Penncorp’s notice that your benefits would be terminated as of November 27, 2011 remains in effect.” The specific direction on the steps the plaintiff must take should he disagree with the decision did not, in my view, detract from the clarity by which its determination to terminate benefits was communicated.
[29] This conclusion is supported by the plaintiff’s own evidence on cross-examination. At questions 267-268 of his transcript he stated that he gave up pursuit of disability benefits in January, 2012 after receiving the denial letter. At paragraphs 289-292 the plaintiff acknowledged that he and his wife looked at the insurance policy many times after receipt of the denial letter and chose not to pursue his legal options.
[30] I therefore find that the two-year limitation period under the Limitations Act commenced upon receipt by the plaintiff of the defendant’s denial letter dated January 12, 2012.
(b) Was the Defendant Obliged to Advise the Plaintiff of the Limitation Period?
[31] The plaintiff points to the following passage from the case of Bullock v. Trafalgar Insurance Co. of Canada at para. 100 as being descriptive of the duty of good faith and fair dealing owed by an insurer to its insured:
The duty is not a fiduciary duty but includes certain elements akin thereto. A fiduciary who owes a duty of individual loyalty to his/her principal and in exercising powers of discretion arising from the fiduciary relationship must treat the principal's interest as paramount. In contrast, an insurer in fulfilling its contractual obligations may give consideration to its own interests. However, the insurer must give as much consideration to the welfare of the insured as it gives to its own interests. The insurer cannot do anything to injure the rights of the insured to receive the benefits under the policy.
[32] The plaintiff points out that none of the three British Columbia cases relied upon by the defendant in support of the proposition that the defendant had no obligation to advise the plaintiff of the limitation period were framed on the basis of the insurer’s duty of good faith. Those cases are as follows:
Petarek v. Manufacturers Life Insurance Co., 2006 BCCA 250 (B.C.C.A.); Esau v. Co-Operators Life Insurance Co., 2006 BCCA 249 (B.C.C.A.); and Falk v. Manufacturer’s Life Insurance Co., 2008 BCSC 173 (B.C.S.C.)
[33] The plaintiff makes reference to a passage from Insurance Bad Faith (3rd), Hilliker, LexisNexis Canada Inc. 2015, p.58. at para. 2.75 as follows:
An insurer who fails to properly advise the insured of the available policy benefits or unreasonably neglects or refuses to provide adequate assistance in the preparation of claims documentation may be in breach of the duty of good faith and fair dealing. The extent of the insurer’s duty in this regard, however, remains unclear.
[34] Mr. Fife, counsel for the plaintiff, candidly acknowledged in submissions that no previous reported case has gone so far as to impose upon an insurer a positive obligation at common law, in denying or discontinuing benefits, to advise its insured of the existence or details of the applicable limitation period or periods for the commencement of an action against it. He argued that, given the observation by Gonthier, J. in Smith that “one of the main objectives of insurance law is consumer protection” (see para. 11), such an obligation should flow necessarily from the general obligation of good faith and fair dealing on insurers.
[35] In Esau Levine J.A. made reference, at para. 56, to the confusion that results from the “labyrinthine” British Columbia statutory scheme and the lack of information about limitation periods and, at para. 58, issued a judicial plea for the legislature to act “to relieve consumers, insurers, and the courts from this untenable situation in which disabled persons are experiencing the stress of technical legal battles rather than the peace of mind of their disability insurance is intended to provide.”
[36] In Falk, Humphries J., at para. 61, noted that the British Columbia Court of Appeal in Esau and Petarek (which were argued together) specifically adopted the position that there was no obligation on an insurer to tell the insured that the limitation period is running. At para. 62 Justice Humphries stated “I do not share the Court of Appeal’s apparent appreciation of the problems facing insurance companies should they be required to tell the insured that they are relying on a certain event as the triggering date for a limitation period.” Nevertheless Justice Humphries felt compelled to accept the law as set out in Esau and Petarek and find that the plaintiff’s claim in that case was statute barred.
[37] Mr. Fife submits that this court should not be constrained by the British Columbia jurisprudence from extending the law to impose on the defendant an obligation to inform the plaintiff of the existence and details of the limitation period because none of those cases were framed on the basis of the insurer’s duty of good faith. Indeed, in Esau and Petarek the British Columbia Court of Appeal made it clear that such arguments were not raised at trial and accordingly they were not prepared to entertain the argument on appeal (see Esau at para. 25 and Petarek at para. 30).
[38] The Ontario Court of Appeal, in a different context, recently observed in the case of Fernandes v. Araujo, 2015 ONCA 571 (C.A.) that “the common law has long prided itself in its capacity to evolve and improve with the times.” However, in my view, the extension of the law proposed by the plaintiff would represent a substantial shift in the boundaries of the obligation of good faith and fair dealing on insurers as they are presently understood. At para. 2.78 of Hiliker (p.60) the author states: “in Canada, the issue of whether the duty of good faith requires the insurer to inform the insured of the existence of available policy rights and benefits has been addressed in a small number of cases, from which no clear and consistent principles have emerged.”
[39] Reference was made in Hiliker to the Smith case, however it was observed that the issue of good faith and fair dealing did not arise for discussion. At para. 2.79, the case of Clarfield v. Crown Life Insurance Co., [2000] O.J. 4074 (S.C.J.) was referenced. In that case the insured was unaware of his entitlement to residual disability benefits and the insurer’s denial letter made no mention of the residual disability provisions of the policy. The author stated “on a broad interpretation, the decision in Clarfield may be read as supporting the view that the insurer is required to disclose to the insured the nature of the benefits available under the policy. The decision may also be explained, however, on the more narrow basis that the insurer’s bad faith consisted of failing to advise the insured of the reason for the denial.”
[40] It would appear that, at its highest, the obligation of good faith and fair dealing arguably carries with it a positive obligation on an insurer to inform its insured of the nature of the benefits available under the policy. There is a marked difference, however, between imposing on an insurer a positive obligation to advise with respect to rights and benefits internal to the policy and the imposition of an obligation to advise with respect to the application of law external to the policy, such as pursuant to the Limitations Act.
[41] In my view the court should be circumspect in extending the common law to impose positive obligations of general application on parties, particularly where the implications of so doing are unknown. The law of insurance is broadly occupied by legislation and in my view it should be left to the legislature to regulate, if it deems it necessary and appropriate, the nature and extent of information which must be given by insurers to their insureds upon denial of benefits, including the existence and details of applicable limitation periods.
[42] I find that there was no obligation in law on the defendant to advise the plaintiff of the applicable limitation period in the Limitations Act.
Prejudice
[43] The argument of the plaintiff in its Factum relating to the lack of evidence of prejudice to the defendant was not pursued in submissions. There is no authority supporting the proposition that the application of a limitation period under the Limitations Act depends upon a finding of prejudice to the defendant caused by the plaintiff’s delay. The Limitations Act operates quite apart from any issue of prejudice to the defendant.
Disposition
[44] I find that I am able to reach a fair and just determination on the merits of the action based upon the motion material. The summary judgment process has allowed me to make the necessary findings of fact and to apply the law to the facts. It is unlikely that the evidence at trial will be more fulsome or different than that available on the motion.
[45] I find further that summary judgment is a proportionate, more expeditious and less expensive means to achieve a just result in this case. I am able to make a determination that there are no genuine issues requiring trial based only on the evidence before me, without using the fact-finding powers in sub rules 20.04(2.1) and (2.2).
[46] The motion of the defendant for summary judgment is therefore granted and the action is dismissed on the basis that it is statute-barred.
[47] The parties are encouraged to agree on the costs of the action and the motion. If they are unable to agree the defendant may make written submissions as to costs within 21 days of the release of this endorsement. The plaintiff has 14 days after receipt of the defendant’s submissions to respond. The submissions shall be brief, not exceeding five double spaced pages, excluding Bills of Costs. The defendant may deliver brief reply submission (not exceeding three double-spaced pages) within 7 days after receipt of the plaintiff’s submissions. All such written submissions are to be forwarded to me at my chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
D.A. Broad J.
Date: July 15, 2016