Court File and Parties
COURT FILE NO.: CV-20-633978 DATE: 2023/08/01 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: NERO, Plaintiff AND: ALLSTATE INSURANCE COMPANY, Defendant
BEFORE: ASSOCIATE JUSTICE R. M. BROTT
COUNSEL: E. BLAIN, for the Plaintiff Email – eblain@tgplawyers.com S. BUTTA, for the Defendant Email – SBhutta@torkinmanes.com
Endorsement
[1] This action arises out of a residential fire that occurred on or about January 14, 2019. The plaintiff Ralph Nero (“Nero”) was the owner of the property at the time of the fire.
[2] Nero lived at the property from 1990 to 2008 at which time he moved out of the property and began to rent it out. Nero obtained an all-risks policy with Allstate Insurance Company of Canada (“Allstate”) when he began renting out the property.
[3] In September 2013 Nero rented the property to Jay Durie (“Durie”) who, shortly after moving in, advised Nero that he had a licence for medical marijuana. Nero obtained copies of the licence and subsequent applications and renewals. Nero inspected the property four times per year pursuant to the terms of his lease.
[4] On or about January 14, 2019, a fire occurred at the property and it sustained substantial damage. On March 15, 2019 a report issued to Allstate concluded that the fire was caused by the ignition of gaseous butane that was being used within the home as part of a butane honey oil extraction process. On October 21, 2019 Allstate denied coverage to Nero pursuant to exclusion 23 of the policy which states:
We do not insure:
- loss or damage resulting from any illegal activities within your knowledge or control; or due to any legal or illegal activities relating to either the growing, cultivation, harvesting, manufacture, distribution, or sale of any non-prescription controlled substance or substances enumerated in Schedule (Section 2) of the federal Controlled Drugs and Substances Act Narcotic Control Regulations, C.R.C., c. 1041 (as amended from time to time, whether you are aware of such activity or not).
[5] Nero claims against Allstate for breach of the contract of insurance alleging that he is entitled to be fully indemnified for the property damage sustained to the property.
[6] Examinations for discovery were conducted on March 4, 2021. Thereafter, Allstate produced its answers to undertakings including the insurance underwriting guidelines which had not previously been produced. The productions revealed that Allstate may deny home insurance to persons where that person or a tenant grows and cultivates marijuana for a medical purpose pursuant to a medical marijuana licence issued by the Government of Canada for reason of disability.
[7] In March 2022 the plaintiff delivered a draft Amended Statement of Claim. The plaintiff seeks:
(a) to amend the Statement of Claim to add allegations that Allstate’s underwriting policy constitutes discrimination under the Human Rights Code, RSO 1990, c H.19 (the “Code”) (“Code amendments”); and (b) to clarify facts and plead certain provisions of the Insurance Act, RSO 1990, c I.8 (“Insurance Act amendments”).
[8] Allstate refused to consent to the amendments for the following reasons;
- The court lacks jurisdiction over the proposed amendments; and
- The amendment is untenable at law, raises new causes of action beyond the expiry of the limitation period; and
- prejudices the defendant given the expiry of the limitation period.
[9] Prior to the hearing the defendant advised that it “takes no position” in relation to the Insurance Act amendments. The motion therefore was limited to Nero’s request for leave to amend the Statement of Claim to add allegations that Allstate’s underwriting policy constitutes discrimination under the Code.
Does the court have jurisdiction to hear the Code amendments?
[10] The plaintiff submits that Section 46.1 of the Code permits a person to advance a Code claim in civil court where that claim is brought together with a reasonable independent cause of action. Section 46.1 (1) states:
If, in a civil proceeding in a court, the court finds that a party to the proceeding has infringed a right under Part 1 of another party to the proceeding, the court may make either of the following orders, or both:
- an order directing the party who infringed the right to pay monetary compensation to the party whose right was infringed for loss arising out of the infringement, including compensation for injury to dignity, feelings and self-respect.
- An order directing the party who infringed the right to make restitution to the party whose right was infringed, other than through monetary compensation, for loss arising out of the infringement, including restitution for injury to dignity, feelings and self-respect.
46.1 (2) Subsection (1) does not permit a person to commence an action based solely on an infringement of a right under part 1.
[11] Allstate recognizes that in 2008 the Code was amended to allow a plaintiff to advance a breach of the Code as a cause of action in connection with another wrong, but asserts that the court’s remedial authority is limited to circumstances where it would be appropriate for judicial economy. It is the defendant’s position that the alleged Code violations should be addressed in the separate forum set out in the Code. The defendant submits that the plaintiff is attempting to circumvent jurisdiction by way of the proposed amendment as they are out of time to do so due to the expiry of the limitation period.
[12] The court must examine the proposed amendment and so long as it is permitted by the court as being a tenable cause of action, and there is no prejudice that cannot be compensated by costs, it should be allowed. In Rivers v Waterloo Regional Police Services Board, 2008 ONSC 4307 Justice Baltman dismissed the claim making a finding that all of the alleged wrongs were in substance sexual discrimination allegations which are captured by the Code. In the circumstances of this action, on the other hand, there is an independent cause of action for breach of the contract of insurance flowing from the same factual circumstances. The Code amendment therefore can ‘piggy-back’ on the plaintiff’s claim for breach of contract.
Is the Claim barred by the expiry of a limitation period?
(A) Does the limitation period apply to the Code amendments?
[13] Subsection 16(1)(a) of the Limitations Act, 2002 states:
There is no limitation period in respect of, (a) A proceeding for a declaration if no consequential relief is sought.
[14] In this case, the proposed Code amendments seek declaratory relief only – that the Allstate practice violates the Code. There is no consequential relief flowing from the declaration sought. Accordingly, the limitation period with respect to the Code amendments does not apply.
(B) If however the limitation period does apply to the Code amendments, has it expired?
[15] The two-year limitation period is set out in s. 4 of the Limitations Act, 2002:
Unless the 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.
Subsection 5(1) of the Limitations Act, 2002 sets out the criteria for determining when a claim is discoverable:
A claim is discoverable 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 a clause (a)
[16] Allstate argues that Nero had notice of the Allstate Practice when Allstate delivered its Statement of Defence in which it pleaded Section 23 of the Residential Fire Insurance policy. It argues that marijuana and its derivatives are a “non-prescription controlled substance” and therefore Nero had knowledge of the Allstate Practice.
[17] In response to undertakings, Nero received the underwriting guidelines which state:
Ineligibility – Residential Fire Rentals Occupancy
- Known to be currently or previously involved in cannabis grow operations or drug laboratories;
- Growing 5 or more cannabis plants for personal or medical reasons (per household)
[18] Section 23 does not specifically state that Allstate would deny insurance coverage to persons growing five or more cannabis plants for medical reasons and with a valid licence. Nero maintains that it will be up to a trial judge to determine the meaning of the contractual language of the words “non-prescription controlled substance.”
[19] In my view, Nero discovered additional information and only had actual knowledge of the Allstate Practice in or about March 2021, so it was then that the limitation period was triggered.
Prejudice
[20] Pursuant to Rule 26.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg.194 the court shall grant leave to amend unless prejudice would result that cannot be compensated for by costs or an adjournment.
[21] The Court of Appeal has held that an expired limitation period creates a presumption of prejudice. Here, the limitation period has been found to have not expired. Nero has led evidence to demonstrate that Allstate’s underwriting guidelines, while known to Allstate, were not discovered by the plaintiff until after examinations for discovery. It was that discovery that led to Nero’s proposed amendments. If a presumption of prejudice does exist, Nero has rebutted that presumption.
[22] The material facts amendments outlined in paragraphs 46 to 52 of the Draft Amended Statement of Claim are necessary in order for the plaintiff to comply with Rule 25.06(1) which requires every pleading to contain a concise statement of material facts. These facts are necessary to support the cause of action pleaded – namely the Code amendments.
[23] The plaintiff is hereby granted leave to amend the Statement of Claim in accordance with the draft Amended Statement of Claim.
[24] The parties had each uploaded their Costs Outlines to CaseLines and requested that this court fix costs when the decision is rendered. The plaintiff seeks partial indemnity costs in the amount of $8317.37 and the defendant’s costs outline is in the amount of $8022.10 on a partial indemnity basis.
[25] It is the objective of Rule 57.01 that costs be fixed in an amount that is fair and reasonable for the unsuccessful party. Taking into account the Rule 57.01 factors, the quantum of costs that the unsuccessful party could reasonably expect to pay in relation to the permission to amend, the fact that the defendant will now have to incur costs to likely amend their Statement of Defence, and what is fair and reasonable, it is ordered that the defendant shall pay forthwith to the plaintiff costs fixed in the amount of $6000.00.
ASSOCIATE JUSTICE RONNA M. BROTT Date: August 1, 2023