Court File and Parties

COURT FILE NO.: CV-16-548853 MOTION HEARD: 2019-12-23 REASONS RELEASED: 2020-03-24

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

STEFAN SAROKIN AND OLEG PERELYGIN Plaintiffs

• and-

JUN ZHE ZHANG Defendant

BEFORE: MASTER M.P. McGRAW

COUNSEL: A. Kuciej, for the Plaintiffs S. Katrycz, for the Proposed Defendant, TD Insurance Company o/a Security National Insurance Company

REASONS RELEASED: March 24, 2020

Reasons For Endorsement

I. Introduction

[1] This is a motion by the Plaintiffs for leave to amend their Statement of Claim to add their own automobile insurer, TD Insurance o/a Security National Insurance Company (“TD”) as a Defendant to this action.

[2] This motion considers the application of the Limitations Act, 2002 (Ontario) to claims for indemnification under the uninsured motorist endorsement in Ontario automobile insurance policies. The issues in dispute are: when does the limitation period begin to run on an insured’s indemnity claim against their own insurer and do discoverability and due diligence considerations apply?

II. The Parties and the Facts

[3] The Plaintiff Stefan Sarokin was the owner and operator of a motor vehicle which was involved in an accident on March 20, 2014 in Stouffville, Ontario. The Plaintiff Oleg Perelygin was a passenger. The Plaintiffs allege that their vehicle was rear-ended by the Defendant, Jun Zhe Zhang, an uninsured motorist, causing injuries and damages. Mr. Zhang no longer resides in Canada.

[4] On April 9, 2014, Plaintiffs’ counsel filed Applications with TD for Accident Benefits on behalf of both Plaintiffs.

[5] On April 25, 2014, Plaintiffs’ counsel sent a third party notice letter to Desjardins General Insurance (“DGI”), the Defendant’s insurer. On May 1, 2014, Plaintiffs’ counsel received a letter from DGI advising that the Defendant’s automobile insurance policy had been cancelled effective January 13, 2014, over 2 months prior to the accident.

[6] On May 5, 2014, Plaintiffs’ counsel sent notice letters (the “Notice Letters”) to TD for both Plaintiffs advising of their intention to commence an action against TD pursuant to the OPCF 44R Family Protection Endorsement (“OPCF 44R”) in their respective policies with TD (the “Policies”). OPCF 44R is an optional endorsement to the standard form Ontario automobile insurance policy which permits insureds to purchase additional coverage if they are injured in a motor vehicle accident involving an at-fault uninsured, underinsured and/or unidentified motorist. By letters dated May 28, 2014 to Plaintiffs’ counsel, TD confirmed coverage for both Plaintiffs under the Policies, advised that its investigation was continuing and requested supporting documentation.

[7] On May 8, 2015, Plaintiffs’ counsel settled Mr. Perelygin’s accident benefits claim with TD. On September 19, 2019, TD advised Mr. Sarokin that his impairment did not come within the definition of a Minor Injury in the Minor Injury Guideline. On October 25, 2019, Plaintiffs’ counsel served TD with numerous productions including the Motor Vehicle Accident Report, photographs of the accident, medical assessment reports, clinical notes and records and tax returns.

[8] On March 16, 2016, the Plaintiffs commenced this action against the Defendant by Statement of Claim seeking $500,000 in general damages and $1,000,000 in special damages. The Plaintiffs did not name TD. Mr. Zhang was noted in default on June 19, 2019.

[9] On November 29, 2018, Plaintiffs’ counsel provided TD with the Notice Letters, the Statement of Claim and other documentation and requested the adjuster’s identity and contact information. On December 13, 2018, Plaintiffs’ counsel spoke by telephone with the adjuster and made a verbal request for indemnification. Counsel proposed that the parties discuss an early resolution in advance of the Plaintiffs bringing a motion for leave to add TD. The adjuster advised that she would seek legal advice.

[10] Subsequent attempts by Plaintiffs’ counsel to contact the adjuster were unsuccessful and TD did not ultimately advise Plaintiffs’ counsel until March 14, 2019 that it would not engage in settlement discussions unless it was added as a Defendant. On March 15, 2019, TD advised that it could not provide its position until served with the Plaintiffs’ Motion Record. TD then advised on May 27, 2019 that it would oppose the motion. The Plaintiffs brought this motion on August 26, 2019.

[11] This motion first came before me on October 28, 2019. Only 30 minutes were booked, the Plaintiffs did not file a Factum and both parties failed to address material issues and case law regarding pleadings amendments. Therefore, the motion was adjourned to December 23, 2019.

III. The Law and Analysis

Pleadings Amendments Generally

[12] Rules 26.01 and 26.02 of the Rules of Civil Procedure state:

“26.01 On motion at any stage of an action the court 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.

26.02 A party may amend the party’s pleading,

(a) without leave, before the close of pleadings, if the amendment does not include or necessitate the addition, deletion or substitution of a party to the action;

(b) on filing the consent of all parties and, where a person is to be added or substituted as a party, the person’s consent; or

(c) with leave of the court.

[13] Rule 5.04(2) of the Rules of Civil Procedure provides that at any stage of a proceeding the court may add, delete or substitute a party or correct the name of a party incorrectly named, on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment.

[14] Amendments should be presumptively approved unless they would result in prejudice that cannot be compensated by costs or an adjournment; they are shown to be scandalous, frivolous, vexatious or an abuse of the court's process; or they disclose no reasonable cause of action (Andersen Consulting v. Canada (Attorney General), 2001 ONCA 8587, at para. 37; Schembri v. Way, 2012 ONCA 620, at paras. 25 and 44).

[15] The Court of Appeal summarized the law on leave to amend motions in 1588444 Ontario Ltd. v. State Farm Fire and Casualty Co., 2017 ONCA 42:

“[25] The law regarding leave to amend motions is well developed and the general principles may be summarized as follows:

The rule requires the court to grant leave to amend unless the responding party would suffer non-compensable prejudice; the amended pleadings are scandalous, frivolous, vexatious or an abuse of the court's process; or the pleading discloses no reasonable cause of action: Iroquois Falls Power Corp. v. Jacob Canada Inc., 2009 ONCA 517, at paras. 15-16, leave to appeal to S.C.C. refused [2009] S.C.C.A. No. 367, 2010 CarswellOnt 425; and Andersen Consulting Ltd. v. Canada (Attorney General), 2001 ONCA 8587, at para. 37. [page688]

The amendment may be permitted at any stage of the action: Whiten v. Pilot Insurance Co. (1996), 1996 ONSC 8109, 27 O.R. (3d) 479, [1996] O.J. No. 227 (Gen. Div.), revd (1999), 1999 ONCA 3051, 42 O.R. (3d) 641, [1999] O.J. No. 237 (C.A.), revd [2002] 1 S.C.R. 595, [2002] S.C.J. No. 19, 2002 SCC 18.

There must be a causal connection between the non-compensable prejudice and the amendment. In other words, the prejudice must flow from the amendments and not from some other source: Iroquois, at paras. 20-21; and Mazzuca v. Silvercreek Pharmacy Ltd. (2001), 2001 ONCA 8620, at para. 65.

The non-compensable prejudice may be actual prejudice, i.e., evidence that the responding party has lost an opportunity in the litigation that cannot be compensated as a consequence of the amendment. Where such prejudice is alleged, specific details must be provided: King's Gate Developments Inc. v. Drake (1994), 1994 ONCA 416, at paras. 5-7; and Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1995), 1995 ONSC 7105, at para. 9.

Non-compensable prejudice does not include prejudice resulting from the potential success of the plea or the fact that the amended plea may increase the length or complexity of the trial: Hanlan v. Sernesky, 1996 ONCA 1762, at para. 2; and Andersen Consulting, at paras. 36-37.

At some point, the delay in seeking an amendment will be so lengthy, and the justification so inadequate, that prejudice to the responding party will be presumed: Family Delicatessen Ltd. v. London (City), 2006 ONCA 5135, at para. 6.

The onus to prove actual prejudice lies with the responding party: Haikola v. Arasenau (1996), 1996 ONCA 36, at paras. 3-4; and Plante v. Industrial Alliance Life Insurance Co. (2003), 2003 ONSC 64295, at para. 21.

The onus to rebut presumed prejudice lies with the moving party: Family Delicatessen, at para. 6.” (State Farm at para. 25).

[16] In determining whether an amended pleading is legally tenable, the only question is whether the amendments disclose a cause of action and they are to be granted unless the claim is clearly impossible of success (Plante at paras. 19-22). It is unnecessary to consider whether the amending party is able to prove its amended claim and the court must read the amendments generously with allowances for drafting deficiencies assuming that the facts pleaded in the proposed amendment (unless patently ridiculous or incapable of proof) are true (Plante at paras. 19-22).

[17] After exceptional, inordinate delay, non-compensable prejudice will be presumed absent evidence to the contrary such that the presumption in favour of granting leave shifts to a presumption that non-compensable prejudice will result if leave is granted (Family Delicatessen at para. 6; State Farm at para. 22). There are no hard and fast rules for what constitutes inordinate delay or when the shift in onus takes place, i.e., the point at which the delay will be so lengthy that prejudice will be presumed or what evidence is required to rebut the onus (State Farm at paras. 25, 36-38, 44).

[18] Where an amendment is sought after the expiration of a limitation period, prejudice is presumed and the party seeking the amendment must lead some evidence to explain the delay and rebut the presumption of prejudice (Skrobacky (Litigation Guardian of) v. Frymer, 2014 ONSC 4544, at para. 14; Robinnson Motorcycle Ltd. v. Fred Deeley Imports Ltd., [2009] O.J. No. 401 (S.C.J.) at para. 10; Deaville v. Boegeman, (1984) 48 O.R. 2(d) 725 (C.A.) at p. 5). The prejudice referred to under Rule 26.01 is prejudice to a party’s rights in prosecuting the action (Godoy v. 475920 Ontario Ltd. (2007), 2007 ONSC 38394, 52 C.P.C. (6th) 149). Where there is an issue of fact or credibility relating to the discoverability of the proposed claim, the matter will usually be left to the trial judge to determine (Skrobacky at paras. 9-26).

Pleadings Amendments and the Limitations Act

[19] Sections 4 and 5 of the Limitations Act, 2002 state:

“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.

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).

(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.”

[20] Section 21(1) of the Limitations Act, 2002 further provides that where a limitation period with respect to a claim against a person has expired, the claim shall not be pursued by adding the person as a party to an existing proceeding.

[21] The Court of Appeal summarized the law with respect to actual knowledge and discoverability in Har Jo Management Services Canada Ltd. v. York (Regional Municipality), 2018 ONCA 469:

“A claim is discovered on the earlier of two dates: when the plaintiff actually knew of its claim, or when a reasonable person, with the plaintiff's abilities and in its circumstances, would have discovered the claim. If a plaintiff fails to exercise the diligence a reasonable person would, the claim is potentially discoverable earlier than the date the plaintiff had actual knowledge of the claim. Due diligence is therefore only relevant to the period of time preceding a plaintiff's actual knowledge of its claim, not the period after. Once a claim has been discovered, there is no ongoing duty on a plaintiff to further investigate the claim. Once the plaintiff has knowledge of its claim, then the limitation clock has begun running, and all the plaintiff is required to do is commence an action before the limitation period expires.”(Har Jo at para. 42)

[22] Section 5(2) of the Limitations Act, 2002 creates a presumption that a person had actual knowledge of its claim on the day the acts or omissions took place under s. 5(1)(a), however this presumption does not apply to the inquiry under s.5(1)(b) which asks when the claim ought reasonably to have been discovered (Har Jo at para. 39; Fennell v. Deol, 2016 ONCA 249, at paras. 21 and 26). A plaintiff rebuts the presumption under s. 5(2) by demonstrating when it gained actual knowledge of its claim and does not need to show that it exercised due diligence in order to rebut this presumption because it is only relevant to the objective inquiry under s. 5(1)(b), not the inquiry into subjective knowledge under s. 5(1)(a) (Har Jo at para. 40; Fennell at paras. 23-24).

[23] It is not sufficient that a plaintiff has a suspicion of a potential claim to conclude that the plaintiff has actual knowledge under s. 5(1)(a) of the Limitations Act, 2002, though it may be sufficient to put a plaintiff on inquiry and trigger due diligence obligations in which the issue under s. 5(1)(b) where the test is whether a reasonable person with the abilities and in the circumstances ought reasonably to have discovered the claim (Crombie Property Holdings Ltd. v. McColl-Frontenac Inc., 2017 ONCA 16, at para 42).

[24] At the pleadings amendment stage, the plaintiff will not require much evidence to establish that there is a triable issue that a proposed defendant could not have been identified with due diligence within the limitation period and it is rare that the applicability of the discoverability principle based on due diligence will be determined on a motion to add a party (Colin v. Tan, 2016 ONSC 1187, at para. 58). If the plaintiff provides a reasonable explanation on proper evidence as to why the essential facts were not known or obtainable with due diligence such that the court determines there is a triable issue of fact or credibility on the discoverability allegations, the court will normally permit the amendments with leave to plead a limitations defence (Skrobacky at para. 26).

[25] The Court of Appeal provided the following guidance regarding the addition of a defendant after the apparent expiry of a limitation period in Mancinelli v. Royal Bank of Canada, 2018 ONCA 544:

i.) the motion judge is entitled to assess the record to determine, as a question of fact, if there is a reasonable explanation on proper evidence as to why the plaintiff could not have discovered its claim through the exercise of reasonable diligence. If a plaintiff does not raise any credibility issue or issue of fact about when its claim was discovered that would merit consideration on a summary judgment motion or a trial and there is no reasonable explanation on the evidence as to why the plaintiff could not have discovered the claim by exercising reasonable diligence, the motion judge may deny the motion (para. 23);

ii.) the evidentiary threshold to be met by a plaintiff is low and whether the plaintiff and its counsel acted with reasonable diligence must be considered in context (para. 24);

iii.) in considering whether the plaintiff has provided a reasonable explanation as to why they could not have identified the party (or cause of action), the explanation is to be given a generous, contextual reading (para. 27);

iv.) a plaintiff’s failure to take reasonable steps to investigate a claim is not a stand-alone or independent ground to find a claim out of time, rather, the reasonable steps a plaintiff ought to take is a relevant consideration in deciding when a claim is discoverable under s. 5(1)(b)(para. 30);

v.) where the issue is due diligence, the motion judge will not be in a position to dismiss the plaintiff’s motion in the absence of evidence that the plaintiff could have obtained the requisite information with due diligence, and by when the plaintiff could have obtained such information, such that there is no issue of credibility or fact warranting a trial or summary judgment motion (paras. 28 and 31);

vi.) the same approach and the same low threshold is warranted where the motion is opposed based on the apparent expiry of any statutory limitation period subject to the discoverability principle (para. 25).

[26] To determine whether a reasonable person in the circumstances ought to have discovered its claim, it is necessary to determine the date of discoverability (Morrison v. Barzo, 2018 ONCA 979, at para. 30). It is insufficient to assert that the claim was discoverable before the expiry of the limitation period without explaining why, and it may be the case that the date of discoverability can only be determined at a later date in which case the motion for leave to add a party should be granted with leave to plead limitations defences and reply (Morrison at para. 30).

[27] The determination of when an action is an “appropriate means” under s. 5(1)(a)(iv) of the Limitations Act, 2002 to recover a loss depends on the specific statutory setting of each case and may postpone the start date of the two-year limitation period beyond the date when a plaintiff knows it has incurred a loss because of the defendant’s actions (407 ETR Concession Company Limited v. Day, 2016 ONCA 709, at paras. 33-34).

Limitation Periods and Uninsured Motorist Claims

[28] Section 265 (1) of the Insurance Act (Ontario) sets out the mandatory provisions for uninsured automobile coverage to be contained in all Ontario automobile insurance policies:

265 (1) Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that,

(a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile;

(b) any person is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injury to or the death of a person insured under the contract resulting from an accident involving an automobile; and

(c) a person insured under the contract is legally entitled to recover from the identified owner or driver of an uninsured automobile as damages for accidental damage to the insured automobile or its contents, or to both the insured automobile and its contents, resulting from an accident involving an automobile,

subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations.

[29] Regulation 676 under the Insurance Act sets out the applicable terms, conditions, provisions, exclusions and limits to payments under an automobile insurance policy pursuant to s. 265(1) of the Insurance Act. Section 6 of Regulation 676 sets out the mandatory notice provisions for claims made under s. 265(1) of the Insurance Act:

6. (1) A person entitled to make a claim in respect of the bodily injury or death of a person insured under the contract shall do so in accordance with this section.

(2) The claimant shall give the insurer written notice of the claim within thirty days after the accident or as soon as is practicable after that date.

(3) The claimant shall give the insurer, within ninety days after the accident or as soon as is practicable after that date, such proof as is reasonably possible in the circumstances of the accident, the resulting loss and the claim.

(4) The claimant shall provide the insurer upon request with a certificate of the medical or psychological advisor of the person insured under the contract stating the cause of the injury or death and, if applicable, the nature of the injury and the expected duration of any disability.

[30] The applicable limitation periods for claims under s. 265(1) are set out in section 8 of Regulation 676:

8. (1) No person is entitled to bring an action to recover an amount provided for under the contract, as required by subsection 265 (1) of the Act, unless the requirements of this Schedule with respect to the claim have been complied with.

(2) An action or proceeding against an insurer in respect of loss or damage to the insured automobile or its contents shall be commenced within one year after the loss or damage occurs.

(3) An action or proceeding against an insurer in respect of bodily injury or death, or in respect of loss or damage to property other than the insured automobile or its contents, shall be commenced within two years after the cause of action arises.

[31] The leading case with respect the application of the Limitations Act, 2002 to claims under OPCF 44R is Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 86. Following its decision in Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, the Court of Appeal held that the limitation period for claims under OPCF 44R starts to run on the day after a demand for indemnity is made:

“[20] ….Once a legally valid claim for indemnification under the OPCF 44R is asserted, the underinsured coverage insurer is under a legal obligation to respond to it. To paraphrase and adapt Sharpe J.A.'s observations, at para. 27 of Markel, the claimant for indemnity under the OPCF 44R "suffers a loss from the moment [the insurer] can be said to have failed to satisfy its legal obligation [under the OPCF 44R]". Thus, the claimant suffers a loss "caused by" the underinsured [page700] coverage insurer's omission in failing to satisfy the claim for indemnity the day after the demand for indemnification is made.” (Schmitz at paras. 20 and 26)

[32] Unlike the claim of an injured party against a tortfeasor, the cause of action for an insured’s claim against his or her own insurer for the insurer’s failure to indemnify pursuant to the unidentified motorist endorsement is for breach of contract which does not arise until the insurer breaches its insurance contract to indemnify by failing or refusing to pay the insured’s claim (Jones v. Doe et al, 2018 ONSC 4780, at paras. 25-26; Chahine v. Grybas, 2014 ONSC 4698, at paras. 34-35; Tucker v. Unknown Persons, 2015 NLCA 21, at paras. 38-39).

[33] In Schmitz, the Court of Appeal rejected the insurer’s submission that the definition of discoverability in s. 17 of OPCF 44R applies, holding that both ss. 4-5 of the Limitations Act, 2002 apply to determine the commencement of the limitation period for an OPCF 44R claim (Schmitz at para. 16). The Court of Appeal also held that insurers are not prejudiced as they could require that insureds provide timely notice pursuant to other provisions in OPCF 44R and other insurance contracts (Schmitz at para. 22). The Court of Appeal also rejected the insurer’s arguments that the limitation period should begin to run on the day a claimant accumulates a body of evidence that would permit it a reasonable chance of persuading a Judge that his or her claims will exceed the limits of their policy and that starting the limitation period when a demand for indemnification is made does not limit when the demand could or should be made such that an insured does not need to wait until the outcome of the trial is known (Schmitz at paras. 23-24).

[34] Markel arose from a loss transfer claim made by one insurer against another seeking indemnification for statutory accident benefits paid to an insured. The Court of Appeal held that the earliest the limitation period can start to run is the date the first party insurer demands indemnification from the second party insurer (Markel at para. 36). However, the Court also held that a claim cannot be delayed for tactical or other reasons and must be commenced when it is “legally appropriate”:

“[34] This brings me to the question of when it would be "appropriate" to bring a proceeding within the meaning of s. 5(1)(a)(iv) of the Limitations Act, 2002. Here as well, I fully accept that parties should be discouraged from rushing to litigation or arbitration and encouraged to discuss and negotiate claims. In my view, when s. 5(1)(a)(iv) states that a claim is "discovered" only when "having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it", the word "appropriate" must mean legally appropriate. To give "appropriate" an evaluative gloss, allowing a party to delay the commencement of proceedings for some tactical or other reason beyond two years from the date the claim is fully ripened and requiring the court to assess to tone and tenor of communications in search of a clear denial would, in my opinion, inject an unacceptable element of uncertainty into the law of limitation of actions.” (Markel at para. 34)

[35] These issues were considered more recently by Justice LeMay in Howell v. Jatheeskumar, 2016 ONSC 1381, a case decided in the context of an OPCF 44R claim similar to the present case. In Howell, plaintiff’s counsel sent a third party notice letter to the defendant’s presumptive insurer 7.5 months after the accident. Plaintiff’s counsel did not follow up with the presumptive insurer for 2 years and 4 months. At that time, the presumptive insurer advised that it was not the defendant’s insurer. Five months later, the plaintiff brought a motion to add the plaintiff’s own automobile insurer, TD.

[36] LeMay J. held that that there were 3 possible outcomes. The court could determine that: i.) there was insufficient due diligence on the part of the Plaintiff and no other reason to extend the time limits thereby defeating any claim the plaintiff may have to extend the time limits as a result of the principles of discoverability; ii.) there was a triable issue about the issues of discovery and whether the claim was timely as a result of the application of the discoverability principles which could include whether there was any other statute under which the limitations period could be extended; or iii.) on the materials filed there was clearly an issue of discoverability that made the claim timely (Howell at para. 35).

[37] LeMay J. concluded that it was clear from Schmitz and Markel that there were good arguments available to the plaintiff to defeat any limitations defence advanced by TD:

37 In this case, the Plaintiff has a reasonable argument that the claim against TD General Insurance was not discoverable until August of 2015. However, there may be issues relating to the Plaintiff's due diligence that TD General Insurance may wish to raise. As a result, I am prepared to find that this claim falls at least into the second category, that there was a triable issue about discovery. As a result, the claim should be amended.

38 The Plaintiff is not required to plead any discoverability issues at this stage (see Colin v. Tan, 2016 ONSC 1187, at paragraph 15). Instead, if TD General Insurance raises a Limitations Act issue in its defence, then the Plaintiff will be required to plead the relevant facts on discoverability in reply to TD's defence. (Howell at paras. 37-38)

Application to the Present Case

[38] For the reasons set out below, I conclude that leave should be granted to add TD as a Defendant. In arriving at this conclusion, I largely adopt the approach and reasoning of LeMay J. in Howell.

[39] The Plaintiffs’ claims for indemnity against TD under the Policies are contractual claims. The cause of action for these claims does not arise or crystallize until TD breaches its obligation under the Policies to indemnify the Plaintiffs. Consistent with Schmitz and Markel, this does not occur until the day after a request for indemnification is made by the Plaintiffs and TD breaches its obligation by failing or refusing to indemnify. On its face, since the Plaintiffs requested indemnification on December 13, 2018 and TD did not agree to indemnify them, it would seem that the Plaintiffs’ cause of action arose on December 14, 2018. Therefore, it would appear that the limitation period started to run on December 14, 2018 such that the Plaintiffs’ motion for leave to amend was brought within the 2-year limitations period.

[40] However, I decline the Plaintiffs’ request to conclude on the record before me that the Plaintiffs’ claims are timely. At the same time, I also decline to find that, as TD submits, the Plaintiffs exercised insufficient due diligence and there is no other reason to extend the limitation period thereby defeating any claims the Plaintiffs may have on discoverability (outcome i. in Howell). Having considered the relevant factors and circumstances, I conclude that there are triable issues of discoverability and due diligence (outcome ii. in Howell). In short, I disagree with the Plaintiffs that discoverability and due diligence should not apply and I disagree with TD that any discoverability issues can or should be decided on this motion. In my view, these issues are more properly considered at trial or on a summary judgment motion.

[41] Just as the facts in Howell are similar to the present case so are my reasons. In Howell, the time period at issue was the insured’s delay of approximately 2 years and 4 months between counsel’s third party notice letter to the defendant’s presumed insurer and follow-up. In the present case, the time period in question is approximately 4 years and 7 months between May 5, 2014 when the Notice Letters were delivered and December 14, 2018, the day after the Plaintiffs requested indemnification. In these circumstances, I conclude that there are numerous triable issues. Following Schmitz, Markel and Howell, the Plaintiffs have strong arguments that the limitation period did not begin to run until December 14, 2018. At the same time, Howell suggests that TD may have reasonable arguments regarding discoverability and the Plaintiffs’ due diligence in requesting indemnification and seeking leave to amend such that the Plaintiffs could or should have made a request for indemnity or sought leave to amend earlier than they did. These issues are more pronounced in the present case where the alleged delay between the Notice Letters and the request for indemnification is over 4.5 years, approximately twice as long as the delay at issue in Howell.

[42] TD acknowledges that the circumstances of this case are analogous to Howell but asks that I arrive at a different conclusion. TD submits that the Plaintiffs should have made their request for indemnity at the same time as the Notice Letters on May 5, 2014, or at the latest, on May 28, 2014 when TD confirmed coverage under the Policies but did not take immediate steps to indemnify the Plaintiffs. I am not prepared to draw these conclusions. In Schmitz, the Court of Appeal did not consider discoverability or impose any due diligence obligations on the insured. In Tucker, the Newfoundland Court of Appeal explicitly rejected the date of the notice letter as the relevant date for limitations purposes. However, Howell suggests that it may be open to TD to raise due diligence defences in the current circumstances. In my view, it would be consistent with Markel and Howell to provide TD with the opportunity to raise defences as to when it was legally appropriate for the Plaintiffs to commence their claims for indemnity. These issues are more appropriately considered at trial or on a summary judgment motion after TD delivers its Defence and the Plaintiffs their Reply and after oral and documentary discoveries on a complete evidentiary record. It would not be appropriate to make these findings and deny leave to amend on the record before me. In this regard, I disagree with TD that the current record is complete, that all factual issues have been canvassed and that no further evidence is required for me to make the findings they seek.

[43] Among the triable issues are the effect, if any, of the ongoing discussions between Plaintiffs’ counsel and TD to settle the Plaintiffs’ accident benefits claims since 2014, which continued after this motion was brought. I distinguish these accident benefits discussions from any settlement discussions regarding the Plaintiffs’ indemnity claims which were the subject of the Court of Appeal’s concerns about uncertainty in Markel. In addition, TD has also put the effectiveness of the Plaintiffs’ verbal request for indemnity itself at issue given that it was not in writing. I am not prepared to determine these issues on the record before me including whether it would have been legally appropriate for the Plaintiffs to request indemnity sooner than they did or that they should have named TD initially.

[44] I am also not satisfied that, as TD submits, the Plaintiffs delayed their request for indemnity until December 13, 2018 for “tactical or other reasons”. TD concedes that there is no evidence before me to conclude that the Plaintiffs delayed for tactical reasons. However, TD suggests that in the absence of any other reasonable explanation, I must conclude that the Plaintiffs delayed their request for impermissible reasons. TD also cites numerous cases outside the context of OPCF 44R claims in support of its position that the Plaintiffs delayed their claims for tactical reasons or in circumstances that would later require the court to decide when settlement discussions had become fruitless (407 ETR at para. 47; Lilydale Cooperative Limited v. Meyn Canada Inc., 2019 ONCA 761, at para. 54; Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, at paras 46-48. Western Life Assurance Co. of Canada v. Penttila, 2019 ONSC 14 (Div. Ct.), at para. 35). The evidence before me does not support these conclusions. This includes the potential effect of discussions between Plaintiffs’ counsel and TD regarding the Plaintiffs’ accident benefits claims (as distinct from any discussions regarding settlement of their indemnity claims), including the production of documents, on the timing of the Plaintiffs’ indemnity request. This must be examined more closely, which is not possible on this motion.

[45] Further, the additional cases cited by TD are distinguishable for various reasons including that they consider the effect of different statutory and/or regulatory regimes and alternative procedures and other jurisdictions. Given the existing case law in the statutory and regulatory context of OPCF 44R, it is unnecessary for me to consider these cases except insofar as they adopt the general principle from Markel that a limitation period cannot be delayed for tactical or other reasons. I accept that this may apply to the Plaintiffs’ claims, however, I do not accept that these issues can or should be decided on this motion.

[46] TD also argues that the Plaintiffs’ claims should be barred because the Plaintiffs did not comply with s. 6 of Regulation 676 under the Insurance Act to provide proof and documentation with respect to their claims and therefore are not entitled to bring a claim under s. 8. For numerous reasons, I disagree. I am unable to conclude on the record before me that the Plaintiffs did not make reasonable efforts to obtain the proof required under s. 6(3) of Regulation 676 or that they made insufficient efforts to respond to TD’s requests for financial and medical documents. TD’s characterizations raise issues of fact and credibility which I cannot reconcile on the record before me and it would be inappropriate to do so. More importantly, this argument was rejected in Buurman v. The Dominion of Canada General Insurance Company, 2015 ONSC 6444, where Faieta J. held that the relief from forfeiture provisions in s. 129 of the Insurance Act are available to remedy imperfect compliance with the notice requirements in s. 6(2) of Regulation 676. As s. 129 also applies to non-compliance with ss. 6(3)-(4) of Regulation 676, this is yet another issue of discoverability which should be pleaded, discovered and dealt with on summary judgment or at trial and not one which should be determined here.

[47] In addition, s. 19 of the Limitations Act, 2002 provides that ss. 4-5 of the Limitations Act, 2002 prevail over the limitation periods in Regulation 676 (Buurman at para. 13). Among other things, this means that the discoverability provisions in s. 5 of the Limitations Act, 2002 apply to ss. 6 and 8 of Regulation 676. I am also of the view that it would be inconsistent with Schmitz to prevent the Plaintiffs’ claims from proceeding by reliance on Regulation 676 where ss. 4-5 of the Limitations Act, 2002 apply. These additional discoverability issues cannot and should not be decided at this stage. TD can plead these defences and they can be dealt with on a full evidentiary record at trial or on a summary judgment motion.

[48] I further conclude that no presumption of prejudice arises and to the extent that it does, the Plaintiffs have rebutted it. TD relies on Family Delicatessen in arguing that the Plaintiffs’ delay was extraordinary and inordinate giving rise to a presumption of actual prejudice that they have not rebutted. I disagree. In the present case, TD has had notice of both the Plaintiffs’ accident benefit claims and indemnity claims since May 2014. TD has been engaged in discussing the Plaintiffs’ accident benefits claims for almost 6 years. This is not a situation where there has been inordinate delay or a dramatic change in the litigation as against TD which has been involved in the Plaintiffs’ claims from the outset, settling Mr. Perelygin’s accident benefits and determining that Mr. Sarokin’s impairment does not qualify as a Minor Injury. The Court of Appeal has commented that it is not available to an insurer to claim prejudice in having to provide uninsured vehicle coverage where, as here, the insurer has been fully engaged as the insured’s accident benefits provider (Lingard v. Mine-McIsaac, 2015 ONCA 213, at para. 12).

[49] Further, to the extent to which any presumption arises, I am satisfied that the Plaintiffs have rebutted it and in the absence of any presumption, TD has not met its onus to demonstrate actual prejudice. In particular, I am satisfied that the production of documents by the Plaintiffs, albeit imperfect, demonstrates that sufficient documentation has been preserved and that trial fairness would not be jeopardized. The Plaintiffs have produced clinical notes and records and assessments, some dating back to 2013, tax returns and photos of the accident. Mr. Perelgyin’s accident benefits have been settled and as recently as September 2019, TD was able to conclude that Mr. Sarokin’s impairment did not meet the definition of a Minor Injury. In this respect, TD’s assertion that key documents “may” no longer be available appears to be nothing more than a bald assertion. While the Defendant has left the country and is unavailable, there is no evidence that he left Canada more recently such that his absence arises directly from any delay of the Plaintiffs. Further, given the nature of the accident, a rear-end collision, it appears that liability may not be an issue such that the Defendant’s participation would be unnecessary.

[50] In my view, Family Delicatessen is also distinguishable from the present circumstances. The City in that case was a nominal defendant cooperating with the other parties until the plaintiffs asserted new causes of action against it 6 years into the litigation. The Court of Appeal held that the motion for leave could have been brought at any time and that the new causes of action were a “dramatic change” in the course of the litigation such that the City’s litigation strategy may have been different had the motion been brought sooner (Family Delicatessen at paras. 6-7). As set out above, that is not the case here, where TD has been aware of and/or engaged in the Plaintiffs’ claims for almost 6 years and there has been no inordinate delay or dramatic change on the part of the Plaintiffs.

[51] Granting leave is also consistent with the law on pleadings amendments generally and in the context of limitations periods. This includes the presumption that leave should be granted where adding TD will not result in non-compensable prejudice. Further, even assuming this motion has been brought after the passage of an apparent limitation period, granting leave is also consistent with the low threshold of establishing that there is a triable issue with respect to discoverability and that the usual approach is for TD to plead limitations defences, the Plaintiffs to plead in Reply and the issues canvassed fully on discovery and addressed at trial or on a summary judgment motion.

[52] It was also suggested by the parties that the Plaintiffs’ delay in requesting indemnification or failure to initially name TD may be the result of the conduct of Plaintiffs’ counsel. Accordingly, granting leave is consistent with the Court of Appeal’s preference for deciding matters on their merits which is more pronounced where delay results from an error committed by counsel and that the law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed with a claim by reason of the inadvertence of its counsel (H.B. Fuller Co. v. Rogers, 2015 ONCA 173, at para. 27).

[53] Finally, as Master Short held in Khoury v. Scottish and York Insurance, 2018 ONSC 3881, adding TD will also ensure that the true lis of this matter is decided without the possibility that TD might escape liability on a technical limitations defence (Khoury at para. 20).

III. Disposition

[54] Order to go granting the Plaintiffs leave to amend their Statement of Claim in the form of the Proposed Amended Statement of Claim attached as Exhibit “AA” of the Affidavit of Bonnie Wan sworn October 8, 2019.

[55] If the parties are unable to agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding Costs Outlines) with me through the Masters’ Administration Office on a timetable to be agreed upon by counsel.

Released: March 24, 2020

Master M.P. McGraw