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November 2015

Developments in Loss Transfer:

Does the doctrine of laches apply to bar delayed claims?

Canada v. Lombard General Insurance Company of Canada1 and Zurich Insurance Company v. TD General Insurance Company2, have left the law unclear with respect to the doctrine of laches as applied to Ontario's loss transfer regime. We do however, expect to hear from the Ontario Court of Appeal in the near future as Intact v. Lombard's leave to appeal was granted and was heard earlier this spring (Court File No. C58290). Unfortunately, until the Court of Appeal passes judgment, we are left with conflicting rulings with respect to the doctrine of laches as it applies to loss transfer.

Below is a summary of both cases.

I. Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada

Intact v. Lombard is significant as Justice Chiappetta made two important conclusions: (1) the right to loss transfer indemnity is purely statutory and thus, only statutory limitation periods limit the statutory right to loss transfer indemnity; and (2) as the doctrine of laches is an equitable relief, it could not be applied to loss transfer claims as claims of this sort do not have a “distinctively equitable flavour".

A. Background

In Intact v. Lombard, Intact Insurance Company of Canada (“Intact") paid accident benefits to their insured as a result of a motor vehicle accident that occurred on February 13, 2007.

(The arbitrator) barred Intact from pursuing its loss transfer claim against Lombard due to the delayed notice...

On September 7, 2011, Intact made its first indemnification request to Lombard General Insurance Company of Canada (“Lombard"). Lombard refused to indemnify Intact based on the amount of time that had elapsed from the date of the accident to the date of Intact's first indemnification request. The matter was submitted to arbitration where the arbitrator agreed with Lombard that laches applied to the circumstances of the case. He barred Intact from pursuing its loss transfer claim against Lombard due to the delayed notice under s. 275 of the Insurance Act.

B. On Appeal to the Superior Court of Justice

On appeal to the Superior Court of Justice, Justice Chiappetta concluded that the doctrine of laches did not properly apply to loss transfer claims. Justice Chiappetta stated that the right to loss transfer indemnity is purely statutory. Lombard's claim did not have a "distinctively equitable flavour" and was therefore, devoid of equitable relief.3 As such, Justice Chiappetta concluded that “only statutory limitation periods limit the statutory right to loss transfer indemnity."4

Since the Ontario Court of Appeal had recently confirmed that the two-year limitation period to initiate arbitration for a loss transfer claim begins to run the day after the first party insurer sends an indemnification request to a second party insurer,5 a first loss insurer retains full control and can unilaterally determine when to trigger the limitation period. This could, according to Justice Chiappetta, prove contrary to the legislative purpose of the Insurance Act to provide an "expedient and summary method" of reimbursement and indemnification.6 However, it was "nonetheless not appropriate to purposely re-characterize the equitable doctrine of laches in an effort to fill a perceived legislative omission, or to augment a statutory limitation period."7

Further, Justice Chiappetta concluded that even if the doctrine could apply, Lombard could not establish the necessary elements of the defence.8 Mere delay is insufficient to apply the laches defence. A defendant relying on the laches defence must show a combination of delay and either (a) the plaintiff's acquiescence or (b) prejudice to the defendant.9 She concluded that the arbitrator's finding of both acquiescence and prejudice was unreasonable.

With respect to the plaintiff's acquiescence, Justice Chiappetta stated that Intact chose not to start the limitation period on its rights for four years and eight months. The delay reserved, rather than waived, Intact's loss transfer rights.10 With respect to prejudice to the defendant, Lombard had to establish both delay and prejudice under the second branch of the laches defense. The arbitrator found that mere delay was sufficient to presume prejudice and thereby presume that laches applied. However, this presumption effectively rejected the Supreme Court's statement that "mere delay is insufficient" to establish that laches applies.11 Justice Chiappetta concluded that Lombard did not submit any facts demonstrating prejudice or that Intact's delayed indemnification request affected Lombard's investigation of the accident. Therefore, delay was present however, acquiescence and/or prejudice was not. Even if the doctrine could apply, it was not reasonable for the arbitrator to conclude that Lombard established the necessary elements of the defence.

The appeal was allowed and Lombard was ordered to indemnify Intact.

II. Zurich Insurance Company v. TD General Insurance Company

Zurich v. TD, a case tried 7 months after Intact v. Lombard distinguished Justice Chiappetta's conclusions in the following three ways: (1) Ontario's loss transfer regime possesses an “equitable flavor"; (2) in “unique circumstances" (such as delaying 11 years to bring a loss transfer claim) the doctrine of laches may apply to a loss transfer claim; and (3) acquiescence and prejudice are separate branches of laches and in some circumstances, acquiescence can justify the application of laches in the absence of prejudice.

Though Zurich v. TD distinguished Intact v. Lombard in those ways, Justice Lederman followed Markel and stated that the limitation period to initiate arbitration for a loss transfer claim begins to run the day after the first party insurer requests loss transfer from the second party insurer.

A. Background

In Zurich v. TD, Zurich appealed a loss transfer arbitration proceeding arising from a multi-vehicle collision that occurred on July 14, 1999. The accident involved an automobile insured by TD and a heavy commercial vehicle insured by Zurich. The driver of the automobile applied for accident benefits in August 1999. Over the next decade, TD paid benefits to its insured. In February 2010, approximately 11 years after the accident, TD sent Zurich a Notice of Loss Transfer alleging that Zurich's insured was 100 percent at fault and made two loss transfer requests for indemnification. In August 2011, TD brought an application for an order requiring Zurich to participate in a loss transfer arbitration. TD and Zurich agreed to proceed with a preliminary issue of a motion brought by Zurich to dismiss TD's application for loss transfer. Zurich argued that TD's loss transfer was barred by the equitable doctrine of laches and by operation of the Limitations Act 2002.13

Prior to the appeal, the arbitrator acknowledged that he was bound by Justice Chiappetta's decision in Intact v. Lombard but stated that he disagreed with her finding that laches could not be applied to a statutory claim for loss transfer. The arbitrator held that in any event, Zurich had failed to establish “the necessary components of laches... one of them being presumed prejudice or actual prejudice."14

With respect to the Limitations Act, the arbitrator agreed with the analysis and finding of the Ontario Court of Appeal in Markel whereby the limitation period runs the day after the first party insurer requests loss transfer from the second party insurer. As TD's application for an order requiring Zurich to participate in arbitration was brought within two years of requesting indemnity, TD had satisfied its requirements under the Limitations Act.15

B. On Appeal to the Superior Court of Justice

Upon appeal to the Superior Court, Justice Lederman agreed that Markel was still binding law in Ontario. Even though the delay in the case at hand was more egregious than in Markel, the Markel decision applied to the facts of the case and as in Intact v. Lombard, Zurich's argument that TD's claim was statute barred by virtue of the Limitations Act was rejected.16

However, Justice Lederman's analysis of the doctrine of laches is where this case differs...

However, Justice Lederman's analysis of the doctrine of laches is where this case differs from Intact v. Lombard. He concluded that in the unique circumstances of the case at hand, the doctrine of laches applied where a "first party insurer delays for approximately 11 years in requesting loss transfer from a second party insurer."17

Traditionally, the doctrine of laches had only been applied to equitable, and not legal, claims. However following the fusion of law and equity, courts had been more flexible in applying the doctrine to legal claims under "certain circumstances."18 Justice Lederman stated that Ontario's loss transfer regime possessed an "equitable flavor" as it was designed to address unfairness between participants in the province's insurance industry, and this is a sufficient basis to permit the application of the doctrine of laches.19 He pointed to Bulletin A-11/94, where the former Ontario Insurance Commission (now the Financial Services Commission of Ontario ("FSCO")) stated that "loss transfer was introduced in order to balance the cost of providing accident benefits between specified classes of vehicle."

Additionally, Justice Lederman concluded that there is currently no limitation period governing when a first party insurer ought to make a loss transfer claim to a second party insurer. In the case at hand, this had resulted in a loss transfer claim being made almost 11 years after the accident giving rise to the loss. "Applying laches in these circumstances is ...consistent with the principle that the fusion of law and equity has evolved in order to achieve just results."20

In furtherance of this, Justice Lederman also stated that applying the doctrine of laches to loss transfer claims was consistent with the purposes of the Limitations Act, which was for the "promotion of certainty and clarity in the law of limitation period." 21 Applying laches in the current situation where a first party insurer had waited approximately 11 years to request indemnification met this objective.22

Important to note, Justice Lederman concluded that prejudice is not a necessary requirement for a finding of laches and rather acquiescence is sufficient on its own to apply the doctrine of laches to preclude TD from pursuing indemnity.23 Justice Lederman stated that the leading case on laches, M. (K.) v. M. (H.)24 suggested that acquiescence and prejudice are separate branches of laches and in some circumstances, acquiescence can justify the application of laches in the absence of prejudice.25

With this in mind, Justice Lederman reviewed how the courts had previously described acquiescence. He noted that the Supreme Court of Canada stated that acquiescence depended on "knowledge, capacity and freedom" and at least implied that in some cases, delay might also be interpreted as a clear act by the plaintiff that amounts to acquiescence.26 Looking at the facts of the case, Justice Lederman pointed out that Bulletin A-11/94 stated that a first party insurer should notify a second party insurer of a loss transfer "promptly".

...TD's delay in requesting loss transfer gave rise to an inference that it had abandoned or waived its rights to the claim.

Justice Lederman concluded that given this direction, the fact that TD was a sophisticated insurer that had knowledge, capacity and freedom with respect to its rights, and perhaps most importantly, the almost 11-year delay, Justice Lederman ultimately concluded that "TD's delay in requesting loss transfer gave rise to an inference that it had abandoned or waived its rights to the claim."27

Therefore, under the unique circumstances of the case, TD acquiesced, and therefore its loss transfer claim against Zurich was barred by the doctrine of laches. The appeal was allowed, the arbitrator's decision was set aside and TD's loss transfer application was dismissed.

III. Conclusion

As these two cases illustrate, the Ontario Superior Court of Justice has written conflicting decisions on whether the doctrine of laches applies to loss transfer claims. Unfortunately, no other cases are available to aid us in understanding what direction the Ontario Superior Court is leaning to over this issue. However, as the Ontario Court of Appeal is set to review Justice Chiappetta's decision shortly, we will be better able to assess the merit of this defence in the context of the current claim once they release their decision. Until then, the law is in a state of flux with regards to the applicability of the doctrine of laches with regards to Ontario's loss transfer regime.


1 2013 ONSC 5878 [Intact v. Lombard].
2 2014 ONSC 3191 [Zurich v.TD].
3 Ibid, at para. 7.
4 Ibid.
5 See Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 (CanLII), 109 O.R. (3d) 652, at para. 27 [Markel].
6 See Jevco Insurance Co. v. Canadian General Insurance Co.
(1993), 1993 CanLII 8451 (ON CA), 14 O.R. (3d) 545 (C.A.), at para. 547.
7 Intact v. Lombard
, at para. 10.
8 Intact v. Lombard
, at para. 27.
9 Ibid, at para, 15.
10 Ibid, at para, 20.
11 M. (K.) v. M. (H.)
, [1992] 3 S.C.R. 6, 1992, at pp.77-78, CanLII 31 (SCC).
12 Intact v. Lombard
, at para. 25.
13 S.O. 2002, c. 24.
14 Zurich v. TD, at para. 6.

15 Ibid, at para. 7.
16
Ibid, at para. 13.
17 Ibid, at para. 17.

18 Ibid, at para. 18. See generally Canson Enterprises Ltd. v. Boughton & Co., 1991 CanLII 52 (SCC), [1991] 3 S.C.R. 534 at pp. 585-586 (where La Forest J. stated that the “maxims of equity can be flexibly adapted to serve the ends of justice...)
19 Zurich v. TD, at para. 22.
20 Ibid, at para. 25.
21 Dilollo Estate (Trustee of) v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550, 117 O.R. (ed) 81, at para. 61..
22 Zurich v. TD, at para. 26.
23 Ibid, at para. 32.
24 See pp.77-78. This is also supported by R.P. Meagher, W.M.C Gummow and J.R.F. Lehane. Equity Doctrines & Remedies (Sydney, Butterworths, 2002). (“…if [a defendant] can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant's conduct or (b) caused the defendant to alter his position....")
25 Zurich v. TD, at para. 37.
26 See Manitoba Métis Federation, at para. 147
27 Zurich v. TD, at para. 47.


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