The Supreme Court of Canada held in Smith v Co-operators General Insurance Co that there are two requirements for an insurer to trigger the two year limitation period:2
(a) There must be a clear and unequivocal refusal, with reasons, for the insurer's determination.3 A “clear and unequivocal” refusal has been interpreted as meaning “unambiguous and not susceptible to misunderstanding.”4
(b)There must be an adequate explanation, in lay terms, of the right of the insured person to dispute the refusal and the process for doing so.5
The above legal test has been recognized and followed consistently by adjudicators and is a settled legal principle.6
It is important to note that an insurer may be stopped from relying on a limitation period defence if a claimant reasonably relies on the insurer's conduct after the refusal to his or her detriment.7For example, if an insurer's otherwise unambiguous denial is subsequently made ambiguous (e.g. by a letter, conversation, or other form of conduct that would suggest to a reasonably minded claimant that the insurer may not be relying upon the earlier denial), then this may invalidate the limitation period. This occurs most often when an insurer is presented with new information (such as clinical notes and records or an independent medical report) and reconsiders its earlier decision. If the insurer's reconsideration misled the claimant as to the status of his or her claim for benefits or suggests that the insurer changed its position in respect to the benefit,8 or suggests that the time limit for arbitration was waived or induced the Applicant into a false sense of security about the running of the limitation period,9 then the insurer could be prevented from relying upon a limitation period defence.
That said, the fact that an insurer reconsiders its earlier decision does not automatically re-start the limitation period. The tribunal in Zeppieri v Royal Insurance Company of Canada acknowledged that an insurer is obliged to adjust claims in good faith, which necessitates reconsidering a terminated benefit once it is provided with new information (rather than ignoring the new information in favour of blindly relying upon the earlier denial). Arbitrator Naylor in Zeppieri held that to suggest this reconsideration would re-start a limitation period would effectively render the two-year limitation period meaningless. This case has been followed in subsequent cases.10
If a letter of refusal contains clear and unequivocal language, and with that letter are enclosures, which indicate both the dispute resolution process and the limitation period, then the limitation period will be triggered. In 17-006863 v Aviva General Insurance Company, Aviva sent the insured a letter of refusal, which included reasons why the claimant was not eligible for Income Replacement Benefits. After giving all the reasons, the letter stated: “Based on the above noted information, you do not qualify for Income Replacement Benefit”. Aviva enclosed with the letter a document which provided a step by step guide to disputing the insurer’s decision. This letter also included a clear warning about the two-year limitation. This is a valid trigger for the limitation date11.The Ontario Licence Appeal Tribunal (“the Tribunal”) made clear that even if there is an invitation for the claimant to submit further documentation, this does not override a valid refusal and the limitation period is still triggered.
Submitting a fresh application after a valid refusal will not restart the limitation period... |
An insurer mistaking the correct termination date in subsequent correspondence to a claimant will not prevent an insurer from relying upon a limitation period defence. Specifically, if an insurer terminates a benefit on a specific date and then, in subsequent correspondence, mistakenly references a later date as being the date of termination, such a mistake will not invalidate the refusal provided the claimant understood the termination was not later than the incorrect date.12 In other words, the mistake must be such that a reasonable person would be confused about whether a limitation period is running or has expired.
To ensure the limitation period is triggered after a denial, an insurer should explicitly state that coverage is denied, refused, terminated and/or stopped (as simply stating that coverage or a benefit is “unavailable” is ambiguous). Submitting a fresh application after a valid refusal will not restart the limitation period as long as the insurer relies upon the earlier denial as the basis for denying the fresh application. Finally, suspending benefits is not considered a valid refusal (as a “suspension” is considered temporary whereas a “denial” is considered clear and unambiguous).
In 16-000216 v Aviva Insurance Company Canada, the insurer sent the claimant a refusal letter that stated: “You do not qualify for the Attendant Care benefit as there is no coverage for this under the Minor Injury Guideline.” In the same letter, Aviva had denied coverage of other benefits by stating “Not Eligible/Stoppage of Benefit.”13 The Tribunal held that advising a claimant that they do not qualify for a benefit because there is “no coverage” is not the same as refusing to pay a benefit that has been claimed. The Tribunal reasoned this was an invalid refusal. Although the letter stated what recourse the claimant had if the benefits were denied with the phrase “Not Eligible/Stoppage of Benefit”, but it did not indicate what recourse the claimant had when the insurer stated “coverage not available.” Therefore, they found this to be language that did not fit the Smith criteria of being clear and unequivocal. This was not a proper refusal, and the limitation period was not triggered.
In 16-000920 v Unica Insurance Inc, the Tribunal held that:
The submissions of new applications for benefits by the applicant following a clear refusal by the respondent to pay benefits do not restart the limitation clock. Instead, when the respondent has denied Attendant Care Benefits, the applicant’s remedy was then to seek recourse within the limitation period and not submit further application for benefits in 2016.14
In other words, once an Applicant has their benefits denied, their recourse is to appeal to the Tribunal within the limitation period. The limitation period cannot be circumvented by a fresh application for benefits.
A suspension of benefits does not trigger the limitation period if the refusal letter says the benefit will be reconsidered once the insured completes the outstanding task. In 16-003508 v Intact Insurance Company, the insurer sent a letter to the claimant stating that the benefits were not going to be paid, because they were suspended until the claimant attended another insurer-examination15. This case followed Daniel v ARBC General Insurance, where it was held that if a refusal letter only suspends benefits, the limitation period does not begin to run16. However, in Kanapathipillai and Personal Insurance Company of Canada, a denial for non-compliance that met the Smith standards did, in fact, trigger the limitation period.17
The key to trigger a limitation period is to not beat-around-the-bush-insurers should use words like “denied”, “refused” and “terminated” when declining payment. Although harsh, such language is necessary in order for the insurer’s decision to be considered clear, unequivocal and unambiguous. Reasons for the insurer’s determination, as well as an adequate explanation (in plain language) of the right to dispute the denial, the process for disputing, and the limitation period for doing so, must also be included. If these rules are followed, and the earlier termination date is relied upon in all future reconsiderations, then the limitation period will not be reset and the insurer should be able to rely upon the powerful limitations defence.
1 O Reg 34/10 (in force between Dec 1, 2014 and Dec 31, 2014), s. 56(1) [Old Schedule]; O Reg 34/10 (in force since June 1, 2016), s. 56 [New Schedule].
2 Smith v Co-operators General Insurance Co., [2002] 2 S.C.R. 129, 2002 SCC 30 at paras 14 and 20 [Smith]..
3 New Schedule and Old Schedule, supra note 3, s. 36(4)(b) and s. 36(7)(b).
4 See Fournier v Zurich Insurance Company (September 23, 1997), OIC A96-001341, 1997 CarswellOnt 3994 at page 4 [Fournier].
5 Ibid, s. 54.
6 See Klimitz v Allstate Insurance Company of Canada (March 21, 2013), FSCO Appeal P12-00026, 2013 CarswellOnt 6615 at paras 7 and 25, aff’d 2014 ONSC 7108 (Div Ct); see also Turner v State Farm Mutual Automobile Insurance Co., 2005 CanLII 2551 (ONAC) at para 5.
7 See, for example, Zeppieri v Royal Insurance Company of Canada (February 17, 1994), OIC A-005237, 1994 CarswellOnt 7389 at para 50 [Zeppieri], aff’d (December 22, 1994), OIC Appeal P-005237, 1994 Carswell Ont 7390.
8 Ibid. at pages 3 and 6, Zeppieri, supra note 9 paras 61 to 62.
9 Ibid.
10 Fournier, supra note 8 at pages 5 to 6.
11 17-006863 v Aviva General Insurance Company, 2018 CanLII 132574 (ON LAT) [17-006863].
12 Zeppieri, supra note 7 paras 54 to55.
13 16-000216 v Aviva Insurance Company Canada, 2016 CanLII 78332.
14 16-000920 v Unica Insurance Inc., 2017 CanLII 69295 (ON LAT).
15 16-003508 v Intact Insurance Company, 2017 CanLII 77360 (ON LAT).
16 Daniel v ARBC General Insurance, 2013 FSCO, A09-001163.
17 Kanapathilillai and Personal Insurance Co. of Canada, 2016 FSCO A13-014660.
