Many insurers across Canada provide the SEF 44 family protection endorsement with their automobile insurance products. When collisions occur, the extent of an insured’s claim may not become clear until time has passed allowing the insured to recover from physical injuries. While one might assume that the limitation period for an individual to launch a claim under the SEF 44 endorsement would be two years from the date of the automobile collision that gave rise to the injuries, recent case law from across Canada illustrates that the time period for an insured to launch his or her claim is a complicated matter, and may stretch for many years beyond the collision. Further, the analysis of when the limitation period begins to run may be different depending upon the province in which the collision occurs.
A recent decision of the Court of Queen’s Bench for Saskatchewan illustrates the difficulty that insurers face in determining when their insureds will be limitations barred against bringing a lawsuit pursuant to the well-known SEF 44 family protection endorsement common in many automobile insurance policies used throughout Canada. In Seaman v. Saskatchewan Mutual Insurance Company, 2015 SKQB 197, the Plaintiff was injured in a motor vehicle accident on August 17, 2002. She commenced two lawsuits. The first was against both the owner of the “at fault” vehicle and the driver of the “at fault” vehicle. The owner and driver had basic insurance coverage provided under The Automobile Accident Insurance Act of Saskatchewan, which included a $200,000 coverage limit on the compensation available to the Plaintiff. The Plaintiff received her own insurance benefits including income replacement benefits pursuant to this legislation. The income replacement benefits provided in the legislation are not intended to be a complete indemnity and did not cover the amount of income the Plaintiff alleged she lost as a result of the accident, which she argued totalled $1,080,989.
The Plaintiff’s second lawsuit was commenced against SMI. This second lawsuit was filed because the Plaintiff was a beneficiary in a policy of insurance called a “Saskatchewan Extension Automobile Policy”, which included the SEF 44 – family protection endorsement. The SEF 44 endorsement was intended provide indemnity for damages in excess of the amount available from the insurance coverage of “at fault” parties. The Plaintiff claimed indemnity from SMI for amounts in excess of the $200,000 available pursuant to the applicable Saskatchewan legislation on automobile insurance. SMI advised the Plaintiff on September 12, 2012 that it would not provide indemnity to the Plaintiff for the excess loss of income. In response, the Plaintiff launched a lawsuit on July 18, 2013. SMI’s position was that the terms of the contract, as contained in the policy and as modified by The Limitations Act of Saskatchewan, dictated that the limitation period for the commencement of the Plaintiff’s action had expired before her lawsuit was launched. Specifically, SMI argued that a combination of the provisions in The Limitations Act and paragraph 6(c) of the SEF 44 endorsement required that a claim was to be commenced within 24 months from the date the Plaintiff or her lawyer knew or ought to have known her claim exceeded the $200,000 available from the “at fault” driver and owner.
Section 221 of The Saskatchewan Insurance Act provided that any action against an insurer under an automobile insurance contract in Saskatchewan shall be commenced within the limitation period specified in the contract; however, any such limitation period is subject to one exception:
The contractual limitation period must not be “less than the limitation period established by The Limitations Act” that would otherwise apply.
This required that the Court determine the applicable limitations period as set out in The Limitations Act, then compare it to the limitation period set out in the contract to determine whether the Plaintiff’s lawsuit against SMI was actually barred.
The Court in Seaman cited the Alberta Court of Appeal’s decision in Shaver v Co-operators General Insurance Co., 2011 ABCA 367, which was another case where the Plaintiff had been injured in an automobile collision but had his own insurance that included the SEF 44 endorsement. Mr. Shaver commenced an action against his own insurer under the SEF 44 endorsement approximately 10 years and 2 weeks after the collision occurred. Mr. Shaver’s claim was not statue-barred, for reasons discussed below. The Court in Seaman held that the limitation period was 2 years after the date SMI denied payment to the Plaintiff. As the Plaintiff’s Statement of Claim was filed on July 18, 2013, the Court held that she acted well within the 2 year limitation period allowed, so her claim was not statue barred, despite the fact her automobile collision nearly 11 years before she issued her Statement of Claim against SMI.
The Court in Seaman, however, pointed out that a very different factual landscape may result in a circumstance where the last day of the contractual limitation period is actually later than the last day allowed by the provisions of The Limitations Act. Such a fact pattern would require interpretation of the meaning of clause 6(c) in the SEF 44 endorsement. Courts in Alberta and Ontario have reached different conclusions on that point.
Firstly, the Court of Appeal of Alberta determined in Shaver that the limitations in defence did not apply in a situation where the lawsuit was brought a little over 6 months after the unsatisfied judgment fund in Alberta decided how to apportion its coverage limits among the Plaintiff and another individual injured in the same collision. Payment issues before the unsatisfied judgment fund’s decision were unclear, which delayed Mr. Shaver’s lawsuit. The Defendant insurer in that case relied on the ultimate 10 year period in section 3(1)(b) of The Limitations Act. Mr. Shaver argued that the ultimate 10 year period did not apply because in his view the limitation period began to run when he knew or should have known that he had a claim bigger than the insurance or other compensation available elsewhere. The insurer argued that the ultimate 10 year limitation period did not depend on discoverability, so Mr. Shaver’s lawsuit was statute-barred regardless of when he determined he could not obtain full recovery from other sources.
The Alberta Court of Appeal held that it may well take over 9 years to learn of inadequate insurance on the part of the “at fault” party, or of total claims exceeding minimum insurance limits, or both. This practical point means the contractual clause 6(c) in the SEF 44 endorsement quite often will purport to let the injured person sue later than the “ultimate” 10 year period in The Limitations Act of Alberta. The Court of Appeal held that the discoverability provisions in The Limitations Act allow for that extended limitation period and, therefore, the Defendant Insurer did not have a valid limitations defence.
The Court of Appeal for Ontario came to the opposite conclusion in Roque v Pilot Insurance Company, 2012 ONCA 311. A third party motorist injured the Plaintiff in Roque during December of 1996. He brought an action against the third party motorist, claiming damages of $1,750,000. In 2002, the Plaintiff learned that the third party motorist only had $200,000 in insurance coverage, so the Plaintiff commenced an action against his own insurer under the underinsured motorist endorsement of his policy. The Court of Appeal for Ontario held that the motions judge was correct in dismissing the action on the basis that it was not commenced within 12 months from the date that the Plaintiff knew or ought to have known that the quantum of his claim exceeded the minimum limits for motor vehicle liability insurance in Ontario. The Court held that the limitation period does not begin to run when the Plaintiff knows that the quantum of the claim is greater than the “at fault” driver’s insurance coverage. Instead, the Court held that the limitation period began to run when the Plaintiff had a body of evidence accumulated that would give him a reasonable chance of persuading a judge his claim would exceed $200,000.
An additional relevant decision on this relatively murky issue is the Supreme Court of Nova Scotia’s decision in Oliver v Elite Insurance Company, 2014 NSSC 413. In that case, Mr. Oliver was injured in three different motor vehicle accidents in 2001, 2005, and 2006. He returned to work for a short period of time, but ultimately ceased being employed in October of 2004 and received Canada Pension Plan Disability Benefits thereafter. His counsel filed an action against the owner of the “at fault” vehicle from the 2001 accident, but did not file the lawsuit against the “at fault” driver until October 14, 2003. It was not until a mediation in June 2008 that the Plaintiff and his counsel became aware that the “at fault” driver’s coverage limit was the minimum $200,000. The Plaintiff’s claim exceeded that amount and therefore his counsel notified the Defendant SEF 44 insurer that a claim for the excess amounts would be brought against the insurer. Negotiations between the Plaintiff and that insurer occurred sporadically until June of 2010, when the claims specialist assigned to the file retired. Long periods of time thereafter were unaccounted for in the evidence, but there remained some contact between the parties, and ultimately in May of 2013, a Statement of Claim was launched against the SEF 44 insurer. The insurer filed a defense in which it relied upon the expiration of the 12-month contractual limitation period, which commenced according to the SEF 44 endorsement “from the date upon which the eligible claimant or its’ legal representatives knew or ought to have known that the quantum of the claims respect to an insured person exceeded the minimum limits for motor vehicle insurance in the jurisdiction in which the accident occurred”.
The Court noted there were no previous reported cases in Nova Scotia directly on point, while there were two conflicting authorities in Alberta and Ontario (discussed above). The Court ultimately endorsed the Ontario approach, which was interpreted as meaning the limitation period began to run from the point of time the Plaintiff had a body of evidence accumulated that would give him a reasonable chance of persuading a judge that his claims would exceed $200,000, with an allowance or “latitude” in relation to Plaintiff’s counsel’s assessment thereof. The Court commented that it was not until preparation of a June 2008 mediation brief that the Plaintiff and his counsel knew that the Plaintiff’s claim would exceed $200,000. Moreover, given the fluctuating circumstances of the Plaintiff’s medical condition, and difficulty contributing to which accident or pre-existing condition his inability to work related, the Plaintiff only “ought to have known” that his claim exceeded $200,000 sometime between March and June of 2008.
Therefore, according to the Court, the 12 month contractual limitation period began to run on June 16, 2008. Interestingly, however, the Court held that the insurer’s knowledge and conduct of the SEF 44 claim created a promissory estoppel regarding when the contractual limitation period started to run, and thereby was estopped from relying on the contractual limitation period until at least June of 2009, and possibly as late as March 29, 2010. The Plaintiff’s claim would have been limitations barred, but for a provision in the applicable limitations legislation in Nova Scotia which allowed for a party to apply to extend the applicable limitations period where it would be equitable for the Court to do so. While the Oliver decision was ultimately determined by limitations period legislation specific to Nova Scotia, the acknowledgement of the dichotomy between the Ontario authority and the Alberta authority is important to note for all insurers across Canada, particularly those in jurisdictions in which this issue has not yet been decided.
The complex and unclear situation the differences in case authorities have created in this area means insurers would be well-advised to seek legal advice early on in the claims process where they are aware that their insured has the SEF 44 endorsement but will be commencing litigation against the “at fault” driver from the motor accident resulting in the claim. It will often be difficult to assess when an insured will have sufficient information to know his or her claim will exceed $200,000, as is required under the Ontario approach. Under the Alberta approach, determining the date on which the insured becomes aware of the “at fault” party’s insurance limits becomes crucial.
Regardless of the approach ultimately taken in other provinces, the case law discussed above underscores the importance of thoroughly documenting your insured’s progress during his or her lawsuit against the “at fault” driver. The point of time where your SEF 44 insured becomes aware of the value of his or her claim or alternatively the “at fault” driver’s coverage limits may determine whether the SEF 44 claim is able to proceed at all.