Court File and Parties

COURT FILE NO.: 12-36765

DATE: 2018/06/18

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Milena Karafiloski and Stane Karafiloski, Plaintiffs/Moving Parties

AND:

Nzela Jeanine Kalenga and Nkema-Liloo Etale, Defendants

BEFORE: Madam Justice L. Sheard

COUNSEL: Matthew A. Caldwell, Counsel for the Plaintiffs/Moving Parties

Danielle Muise, Counsel for the proposed defendants, Viking Insurance Company of Wisconsin

Jeffrey Goit, counsel for the Defendant, Nzela Jeanine Kalenga, and for the Motor Vehicle Accident Claims Fund

No one appearing for Nkema-Liloo Etale, his having been noted in default

HEARD: May 7, 2018

ENDORSEMENT

[1] The plaintiff, Milena Karafiloski (“Ms. Karafiloski”), was injured as a pedestrian in a motor vehicle accident on May 14, 2012. She and her then husband, Stane Karafiloski (“Mr. Karafiloski”), commenced this action against the driver, Nzela Jeanine Kalenga, and owner, Nkema-Liloo Etale, of the vehicle that struck Ms. Karafiloski. The defendants were noted in default and in March 2013 the matter was set down for an uncontested trial.

[2] At the request of the Motor Vehicle Accident Claims Fund (“MVACF”), the noting in default as against Kalenga was set aside to allow the MVACF to defend the claim on behalf of Kalenga.

[3] In their motion dated July 18, 2017, the plaintiffs sought leave to add three insurers as defendants: The Guarantee Company of North America (“GCNA”), Dairyland Insurance Company (“Dairyland”) and Viking Insurance Company of Wisconsin (“Viking”).

[4] When this motion was heard, the plaintiff determined to seek to add only Viking as party. Viking opposes the motion on the basis that the claim against Viking is “statute-barred, clearly untenable at law and incapable of proof.”

Background

[5] At the time of the accident, Ms. Karafiloski was living in Ontario. She had been living with her husband, Stane Karafiloski, in California, but returned to Ontario to care for her dying son, Dario Cernile. On May 14, 2012, Ms. Karafiloski was not a named insured under any auto policy; she did not own a vehicle; and had not purchased insurance with respect to any vehicle. While Cernile was alive, he allowed Ms. Karafiloski to drive the vehicle he co-owned with his brother. The vehicle was insured by Guarantee Company of North America (“GCNA”). Ms. Karafiloski continued to drive the vehicle after Cernile’s death, with the consent of its surviving co-owner. The accident occurred approximately three months after the death of Cernile.

[6] A chronology of events is found in the plaintiffs’ Motion Record as follows:

a) May 2012: Ms. Karafiloski applies for and receives accident benefits from GCNA;

b) July 2012: GCNA initiates a “Dispute Between Insurers”, asserting that Ms. Karafiloski was not a named insured or a listed driver under Cernile’s policy and that MVACF was primarily liable for payment of Ms. Karafiloski’s accident benefits;

c) August 9, 2012: “claimspro”, the independent adjusters assigned by MVACF, asks the plaintiffs’ lawyer to provide information and authorizations from Ms. Karafiloski;

d) August 10, 2012: Ms. Karafiloski’s lawyer replies that she was not a named insured under any automobile policy and confirms that she was married to Mr. Karafiloski, a licensed driver;

d) August 23, 2012: Sharon R. Hanks of Granite Claim Solutions (“Granite”), the independent adjuster retained by GCNA, writes directly to Ms. Karafiloski, (copying Ms. Karafiloski’s lawyer) and provides her with a copy of the “Notice to Applicant of Dispute Between Insurers” form sent to Dairyland, who was then believed to be Mr. Karafiloski’s motor vehicle insurer. Granite asserts that, based on the Priority Rules for payment of Accident Benefits, Mr. Karafiloski’s insurer was “primary” for payment of Ms. Karafiloski’s claim for Accident Benefits.;

e) October 2012: GCNA determines that the vehicle that struck Ms. Karafiloski was not insured but that its owner, Etale, was a listed driver under policy of insurance with the Personal Insurance Company (“Personal”). GCNA took the position that Personal had a higher priority for payment of Ms. Karafiloski’s accident benefits and added Personal to the Priority Dispute;

f) July 31, 2013: Ms. Karafiloski is examined under oath by counsel for GDNA, Dairyland, and MVACF and gave a number of undertakings. The undertakings included that: Ms. Karafiloski obtain a copy of the Dairyland Insurance policy issued to Mr. Karafiloski; she ask Mr. Karafiloski who insured his Mercedes motor vehicle; she write to the brokerage firm and request whatever policy or declaration pages were associated with the prior insurance policy for the Mercedes;

g) February 19, 2014: Ms. Karafiloski’s counsel provides opposing counsel with a copy of the California Auto Application for Dairyland Auto with respect to Mr. Karafiloski and his insurance for his 1997 Mercedes motor vehicle (the “California Auto Application”);

h) April 11, 2014: Kerry L. Filomeni, counsel for GCNA, writes to Ms. Karafiloski’s lawyer respecting the ongoing priority dispute and advises that “matters at issue continue to surround Mr. Karafiloski’s policy and which American insurer issued the policy in effect at the time of” Ms. Karafiloski’s accident. Filomeni requested a copy of Mr. Karafiloski’s “pink slip” or similar document which, they assumed, would name the insurer that had issued him the policy. In the event that document was not available or not provided by Mr. Karafiloski, his address and telephone number were also requested;

i) June 17, 2014: counsel for Ms. Karafiloski advises that Mr. Karafiloski authorizes GCNA to contacting the broker who issued the Dairyland policy to Mr. Karafiloski;

j) August 12, 2014: counsel for Ms. Karafiloski provides counsel to MVACF with his client’s Full and Final Release respecting her Accident Benefits. He also confirmed their telephone conversation of that day:

While we were speaking today, you commented that the Fund [MVACF] would likely take the position that it was not responsible to pay any Judgment my client might obtain, if it appears that an insurer may have been responsible to pay my client’s claim. Can you please confirm that this is the Fund’s position?

At this point I am leaning towards bringing a motion to add both insurers involved in the accident benefit priority to dispute to the tort action. However, in reviewing Stane’s California policy, it seems to me that his insurer is more likely to be “Viking Insurance Company of Wisconsin” than “Dairyland Auto”. You suggested that would lead to the conclusion that Stane’s policy would not cover my client for her Ontario accident, as Viking is not a signatory of the PAU. ...

… I look forward to confirming the Fund’s position regarding the appropriate parties to this action.;

k) October 24, 2014: counsel for MVACF responds that his client was not in a position to discuss settlement until the Priority Dispute has been resolved;

l) February 18, 2015: counsel for MVACF advises counsel for the plaintiffs that he believes that counsel for GCNA is intending to seek an order compelling counsel for Dairyland to advise as to the name of the insurer who underwrote the policy for Mr. Karafiloski;

m) August 14, 2015: counsel for MVACF advises Ms. Karafiloski’s counsel:

We have confirmation from Dairyland that Viking is the insurer of Stane Karafiloski for the period in question. What we don’t know is whether the particular Viking insurer was a signatory to the PAU and therefore has priority. The arbitrator will be contacting us to arrange a follow-up hearing to discuss that issue in the coming weeks and we will hopefully resolve this remaining issue. …;

n) October 13, 2015: counsel for MVACF confirms to Ms. Karafiloski’s counsel that Viking insured Mr. Karafiloski but not which Viking insurer and whether that insurer was a signatory to the PAU, and whether Dairyland intends to add them as a party to the priority dispute;

o) March 21, 2016: counsel for MVACF advises Ms. Karafiloski’s counsel that “the priority dispute has been settled as between GCNA, Dairyland and MVACF, on the basis that none of the parties involved in the dispute between the insurer’s arbitration for priority will be formally accepting priority”;

p) June 27, 2016: counsel for MVACF advises Ms. Karafiloski’s counsel that:

Just because no one accepted priority does not mean that there isn’t a valid insurance policy who should be responding to your tort claim. The onus is on the plaintiff to prove that there is no policy of insurance that should be responding to the plaintiff’s claim. As you know, the Fund is the absolute last resort.

I would refer due [sic] to section 22 of the Motor Vehicle Accident Claims Act which states that “no payment shall be made out of the Fund in respect of a claim or judgment for damages or in respect of a judgment against the Superintendent of an amount paid or payable by an insurer by reason of the existence of a policy of insurance within the meaning of the insurance act…”

As it turns out, there may be more than one valid insurance policy out there and therefore I would suggest that you add all of the insurance companies out of an abundance of caution.

The bottom line is that the Fund will not be paying out any money to your client. …

[7] Viking asserts that the plaintiffs knew that Viking had issued a policy of motor vehicle insurance to Mr. Karafiloski, which provided insurance coverage from May 7, 2012 to November 7, 2012. A copy of the policy is attached as an exhibit to the affidavit of Brian Chung, a lawyer at Aird & Berlis LLP, counsel for Viking, sworn March 28, 2018, in response to the plaintiffs’ motion. The Viking policy specifically excludes uninsured motorist bodily injury coverage.

[8] Viking further asserts that counsel for the plaintiffs was apprised of the communications and documentation exchanged in the Priority Dispute between GCNA and Dairyland, which included a copy of an affidavit sworn by Lisa Etter on February 9, 2015 that confirmed that none of the Dairyland companies insured Mr. Karafiloski.

[9] In his affidavit, Chung states that he is advised by Dennis O’Leary, Viking’s counsel of record at Aird & Berlis, that at all relevant times the website of the Canadian Council of Insurance Regulators (“CCIR”) identified Viking as an insurer which executed a Power of Attorney and Undertaking (“PAU”). Therefore, there should have been no confusion at any time as to whether Viking was a PAU signatory.

[10] Whether Viking was a PAU signatory is significant: if not, by the terms of its policy, Viking has no liability to the plaintiffs. As a PAU signatory, Viking is bound to provide the minimum coverage for such claims as is required of every Ontario policy of auto insurance namely, $200,000.00 and may, therefore, be potentially liable to the plaintiffs.

[11] It must be noted that the CCIR website has two listings for Viking Insurance Company of Wisconsin, one of which was a signatory as of 1991 and the second of which was not a signatory until 2013, after the accident.

[12] In addition to its position that any claim against it is statute-barred, Viking also opposes the motion on the basis that GCNA is the proper insurer. Viking notes that GCNA admitted that: it issued a policy to Cernile; the policy was in effect on the date of the accident; Ms. Karafiloski had been living with Cernile, and drove the vehicle with his permission while Cernile was alive; Ms. Karafiloski retained possession of the vehicle after Cernile’s death; and continued to drive it with the authorization of the vehicle’s co-owner. Viking therefore asserts that the provisions of section 239 (4) of the Insurance Act deem Ms. Karafiloski to be insured under the GCNA policy as at May 14, 2012.

[13] The Chung affidavit asserts, therefore, that there should have been “no confusion or misunderstanding about the insurer against whom any potential claim should have been made pursuant to the uninsured motorist provisions of the policy.”

[14] The plaintiffs chose not to proceed with their motion to add GCNA as a party and GCNA did not appear in the return of this motion. Therefore, this Court cannot, and does not, make any findings concerning GCNA’s liability.

Issue: Does section 21(1) of the Limitations Act, 2002 bar the addition of Viking as a party?

[15] Rule 5.04 of the Rules of Civil Procedure[^1] permits the court to add parties to an action at any time “on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.”

[16] Further, r. 26.01 provides that the court on motion “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.”[Emphasis added]

[17] The Court’s discretion to add parties is limited by s. 21(1) of the Limitations Act, 2002[^2] which provides:

21(1) 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 proceedings.

[18] The clear expiration of a limitation period is an absolute bar to the addition of a party to an existing action.[^3][Emphasis added]

[19] The plaintiffs acknowledge that their motion, dated July 18, 2017, and originally returnable on August 17, 2017, was brought more than five years after the accident but assert that the plaintiffs’ claims were not “discovered” until they knew or ought to have known that Viking was a signatory to the PAU. The plaintiffs assert that they did not know that Viking was a signatory to the PAU until they received Viking’s Responding Motion record on this motion.

Does s. 5 of the Limitations Act require that a plaintiff know with certainty that its claim will succeed against a defendant?

[20] The evidence put forward by the plaintiff and by Viking supports a finding that Mr. Karafiloski, at least, knew on May 7, 2012, that his Mercedes was insured by Viking:

i. Mr. Karafiloski’s signature appears on page two of the California Auto Application, and the date “5.7.12”, which the parties agree refers to May 7, 2012;

ii. Directly above where Mr. Karafiloski signed are the following pre-printed words:

I acknowledge that I have been offered all of the programs offered by Viking Insurance Company of Wisconsin for which I am eligible and have selected the program listed on page one of this application; and

iii. The face of the copy of the Viking Policy issued to Mr. Karafiloski[^4] includes Mr. Karafiloski’s address and reads in bold print: THIS IS NOT A BILL. Keep for your records.

[21] Ms. Karafiloski and her lawyer would have seen the California Auto Application by at least February 19, 2014, the date counsel for Ms. Karafiloski sent it to Filomeni. Therefore, even if the plaintiffs did not know if Viking was a signatory to the PAU, they would have known that Viking was a potential insurer to whom the plaintiffs might look for recovery on their tort claim.

[22] The evidence respecting when the plaintiffs could have known that Viking might have been a signatory to the PAU is found in the Chung affidavit, which attached a “screen shot” of the CCIR website, which shows the two Viking Insurance signatories to the PAU. The date of the screenshot is 18/01/2018 but in his affidavit, Chung’s evidence is that, at all material times, the CCIR website identified Viking as an insurer that executed a PAU.

[23] Counsel for the plaintiffs and, in his oral submissions, counsel for MVACF, (which did not file written materials on the motion), jointly urged the Court to consider that, until service of the Chung affidavit, which was not sworn until March 28, 2018, Viking had not disclosed that it had signed a PAU.

[24] The jurisprudence does not require that a plaintiff know with certainty that a defendant is liable, but only that the plaintiff make a reasonable inquiry and investigation to ascertain all potentially liable parties[^5]; or that the plaintiff “might reasonably have been aware of the possibility that the proposed defendant could potentially be held responsible.”[^6]

[25] Section 5(1) of the Limitations Act provides, in part, that a claim is discovered on the earlier of the day on which the person with the claim first knew that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it ((a)(iv)); and 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) ((b)).

[26] The plaintiffs submit that the issue of whether Ms. Karafiloski is insured under the Viking policy as a triable one. I accept the plaintiffs’ submission on that issue; this Court is not being asked to, nor, on the evidence, could the Court properly determine Viking’s liability, if any. Indeed, given the communications from MVACF’s counsel to plaintiffs’ counsel, an argument could be made that the plaintiffs were encouraged by MVACF both to wait until the Priority Dispute was resolved before taking any steps to pursue other potential insurers and also to rely on the inquiries made by GCNA respecting Viking.

[27] However, such an argument, if made in the future, cannot be advanced against Viking. Viking was not a party to the Priority Dispute and the plaintiffs put forth no evidence that, until this motion was brought in July 2017, more than five years post-accident, the plaintiffs made any inquiries of Viking respecting Viking’s potential liability as a defendant. There is no evidence upon which to find that anything Viking did could be seen as a basis to suspend the running of the limitation period.

[28] Viking correctly asserts that the onus is on the plaintiffs to show that it was “highly unlikely, if not impossible, with due diligence, to have obtained the necessary information within the limitation period.”[^7] There is no evidence of any due diligence taken by the plaintiffs.

[29] In oral submissions, counsel for the plaintiffs suggests that even if they had requested it, Viking would not have provided that information. The plaintiffs submit that the evidence suggests that Viking held back that information when requested by GCNA and that it was not until the Chung affidavit of March 28, 2018 that Viking disclosed that it was a signatory to the PAU. The plaintiffs’ argument is based on speculation: the plaintiffs did not request information from Viking.

[30] The plaintiffs assert that they could do nothing to advance their claim while the Priority Dispute was ongoing as between the potential Accident Benefit insurers as counsel for MVACF had made it clear that MVACF would not consider payment until the Priority Dispute was resolved. While that is accurate, the Priority Dispute dealt only with Accident Benefits and not with the tort claim and, as it turned out, the resolution of that Dispute did not result in an insurer admitting liability.

[31] The outcome of the Priority Dispute had no bearing upon the plaintiffs’ entitlement to seek recovery from MVACF, which is governed by its enabling statute that makes MVACF a pocket of last resort.[^8]

Disposition

[32] For the reasons set out above, the plaintiffs’ motion to add Viking as a defendant is dismissed.

Costs

[33] As the successful party on the motion, Viking is presumptively entitled to its costs. If the parties cannot agree on costs, then Viking may file its written costs submissions, not to exceed three pages, together with a Bill of Costs, supporting dockets, and any applicable offers to settle, within 21 days of the release of these reasons. The plaintiffs’ responding submissions shall be similarly limited, and shall be filed within 7 days of service upon the plaintiffs of Viking’s submissions.

Sheard J.

Date: June 18, 2018

[^1]: R.R.O. 1990, Reg. 194 [^2]: S.O. 2002, c. 24, Schedule B [^3]: Arcari v. Dawson, 2016 ONCA 715, at para. 7 [^4]: Exhibit “A” to the Chung affidavit [^5]: Higgins v. Barrie (City), 2011 ONSC 2233, quoting from Blinn v. Burlington (City), 2010 ONSC 3446, at paras. 24 and 26 [^6]: Supra, at para 24, quoting from Hamilton (City) v. Svedas Koyanagi Architects Inc.,[2009] O.J. No. 1039 (Ont. S.C.J.), at para. 13 [^7]: Supra, at para. 19 [^8]: See s. 22, Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41