



COURT OF APPEAL FOR ONTARIO

CITATION: Boyce v. The Co-Operators General Insurance
    Company, 2013 ONCA 298

DATE: 20130508

DOCKET: C56369

Doherty, Cronk and Lauwers JJ.A.

Thomas Boyce and Marilyn Boyce

Respondents
    (Plaintiffs)

and

The Co-Operators General Insurance Company

Appellant
    (Defendant)

Mitchell K. Kitagawa, for the appellant (defendant) the
    Co-Operators General Insurance Company

Richard Knott, for the respondents (plaintiffs) Thomas
    and Marilyn Boyce

Heard:  April 30, 2013

On appeal from the order of Justice Michael Quigley of
    the Superior Court of Justice, dated November 13, 2012.

By the Court:


I



[1]

The respondents own and operate a womans fashion boutique known as
    Portside Boutique.  Their business has been insured by the appellant
    (Co-Operators) for a number of years.

[2]

On October 30, 2010, Ms. Boyce arrived at the store to discover a foul
    odour emanating from the entrance area.  The business had to be closed for a
    time, substantial clean-up costs were incurred, and a great deal of inventory could
    not be salvaged.  The respondents contacted the Co-Operators immediately.  Co-Operators
    took the position that the smell was caused by a skunk and that any damage was
    not covered by the policy.  The respondents claimed that the business had been
    vandalized, a peril covered by the policy.

[3]

The respondents filed a proof of loss claim in December 2010 and
    commenced this action by Statement of Claim issued in February 2012, more than
    one year, but less than two years after the incident.

[4]

Co-Operators moved for summary judgment, claiming that the action was time
    barred by a one-year limitation period.  Co-Operators relied on the one-year statutory
    limitation period in s. 148 of the
Insurance Act
, R.S.O. 1990, c. I8.

[5]

On the motion, Co-Operators expanded its argument to include the submission
    that the action was out of time by virtue of the contractual provisions in the
    policy that incorporated the one-year limitation set out in the
Insurance
    Act
.  Co-Operators also argued that Mr. Boyce was not a party to the
    policy of insurance.

[6]

The motion judge found that the one-year statutory limitation
    period in the
Insurance Act
had no
    application.  Co-Operators does not challenge that finding on appeal.  The
    motion judge also held that Thomas Boyce was a party to the insurance
    contract.  That finding is not challenged on appeal.

[7]

The motion judge further held that the provision in the policy limiting
    coverage to claims made within one year of the loss did not override the
    statutory two-year limitation period set out in s. 4 of the
Limitations
    Act, 2002
, S.O. 2002, c. 24.  In so holding, the motion judge held that
    the term in the policy lacked the specific language necessary to override the
    statutory limitation period and that in any event, the contract of insurance
    was not a business agreement as required under s. 22(5) of the
Limitations
    Act, 2002
.


II



[8]

Co-Operators does appeal from the motion judges holding that the
    contract of insurance does not contain an enforceable one-year limitation
    period.  The appeal raises three questions.

1)

Is there a term in the
    contract of insurance that provides for a one-year limitation period?

2)

If there is a term in
    the contract imposing a one-year time limit on claims, is that term capable of
    overriding the otherwise applicable two-year limitation period set out in the
Limitations
    Act, 2002
?

3)

Is the contract of
    insurance a business agreement as defined in s. 22(6) of the
Limitations
    Act, 2002
?


III



the relevant terms of the insurance contract

[9]

The contract contains the following provisions:

Conditions

The Statutory Conditions apply to the peril of fire and as
    modified or supplemented by forms or endorsements attached apply as Policy
    Conditions to all other perils insured by this policy.

Statutory Conditions



14.
Action

Every action or proceeding against the insurer for recovery
    of any claim under or by virtue of this contract is absolutely barred unless
    commenced within one year* next after the loss or damage occurs.

* Two years in province of Manitoba and Yukon Territory

[10]

These provisions
    purport to incorporate the statutory conditions in s. 148 of the
Insurance
    Act
into the contract.

the relevant provisions of the limitations act, 2002

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.



22. (1) A limitation period under this Act applies despite any
    agreement to vary or exclude it, subject only to the exceptions in subsections
    (2) to (6).

Exception

(2) A limitation period under this Act may be varied or
    excluded by an agreement made before January 1, 2004.

Same

(3) A limitation period under this Act, other than one
    established by section 15, may be suspended or extended by an agreement made on
    or after October 19, 2006.

Same

(4) A limitation period established by section 15 may be
    suspended or extended by an agreement made on or after October 19, 2006, but
    only if the relevant claim has been discovered.

Same

(5)
The
    following exceptions apply only in respect of business agreements:

1.
A
    limitation period under this Act, other than one established by section 15, may
    be varied or excluded by an agreement made on or after October 19, 2006.

2. A limitation period established by section 15 may be varied
    by an agreement made on or after October 19, 2006, except that it may be
    suspended or extended only in accordance with subsection (4).

Definitions

(6) In this section,

business
    agreement means an agreement made by parties none of whom is a consumer as
    defined in the
Consumer Protection Act, 2002
; (accord commercial)

vary includes extend, shorten and suspend.


IV



(1)

is
    there a term in the contract of insurance providing for a one-year limitation?

[11]

The language in the
    policy set out above tracks very closely the language in the insurance contract
    considered in
International Movie Conversions Ltd. v. ITT
    Hartford Canada
(2002), 57 O.R. (3d) 652 (C.A.).  In that case, the judge
    on the summary judgment motion described the language in the policy as clear
    and not requiring any reference to a statute for clarification.  Cronk J.A., after
    outlining the language and the analysis of the motion judge, indicated, at
    para. 28:

I agree with these conclusions by the
    motion judge.  Clause 14 is clear and unambiguous.  Indeed, in my view, it is
    difficult to conceive how it could have been made more explicit.
Use of the
    heading statutory conditions does not render it ambiguous or confusing. 
    [Emphasis added.]

[12]

The motion judge in
    this case described the provision as misleading in that it suggested that the
    one-year limitation was mandated by legislation and not by contract.  In coming
    to his conclusion, the motion judge made no reference to
International
    Movie Conversions Ltd.
That case had direct application to this case.    This
    policy, like the policy in
International Movie Conversion
    Ltd.
, provides for a one-year limitation on claims in clear and unambiguous
    language.

(2)

is
    the term in the contract providing for a one-year limitation capable of
    overriding the otherwise applicable two-year limitation period in the
limitations
    act, 2002
?

[13]

The
    motion judge recognized that a term in a contract purporting to vary an
    otherwise applicable limitation period under the
Limitations Act, 2002
had to comply with s. 22 of the
Limitations
    Act, 2002
.  Co-Operators relied on s. 22(5).  As set out above, that section
    allows parties to vary or exclude, by agreement, the otherwise applicable
    statutory limitation period.  Section 22(5), however, applies only to business
    agreements as defined in s. 22(6).

[14]

Before
    considering whether the insurance policy qualified as a business contract,
    the motion judge, relying principally on
Bell Canada v. Plan Group Inc.
,
    2012 ONSC 42, determined that an agreement could be effective for the purposes
    of s. 22 of the
Limitations Act, 2002
, only if it contained the
    following:

·

specific reference to the statutory limitation period;

·

clear and unequivocal language that the parties were intending to
    vary the statutory protection; and

·

a provision clearly alerting the insured that they were foregoing
    a statutory right to a longer limitation period.

[15]

The
    motion judge added a fourth requirement, at para. 46:

For the purposes of s. 22 of the
Limitations Act, 2002
,
    I would further add that any agreement to forego the statutory protection
    contained in the
Limitations Act, 2002
ought, at a minimum, to be
    signed by the person(s) foregoing such a right in order to make clear that
    he/she understands the forfeiture of that statutory right.

[16]

We
    cannot accept that an agreement purporting to vary the statutory limitation
    period is enforceable under s. 22 of the
Limitations Act, 2002
only if
    it contains the specific requirements set out by the motion judge.  Nothing in
    the language of s. 22 offers any support for imposing these requirements.  The
    only limitation in s. 22(5) is found in the definition of business
    agreement.  No other limitation appears, expressly or by implication, and
    certainly no content related requirements appear in s. 22(5).

[17]

The
    case law relied on in
Bell Canada
also does not support the judicial imposition
    of the various specific requirements set out in
Bell Canada
and
    adopted by the motion judge.
Bell Canada
refers to two authorities.  One,
Armak Chemicals Ltd. v. Canadian National Railway Co.
(1991), 3 O.R.
    (3d) 1 at 16, involved a contractual term that shifted statutorily imposed liability
    for fires from the railway to the other contracting party.  The second case,
Hunter
    Engineering Company Inc. v. Syncrude Canada Ltd.
, [1989] 1 S.C.R. 426 at
    449-50, involved a contractual provision that one party claimed replaced a
    broad statutory warranty with a narrower contractual warranty.

[18]

In
Armak
, this court indicated that very clear language was required before
    a contractual provision could successfully shift a statutory obligation from
    one party to another.  In
Hunter Engineering Company Inc.
, the
    majority of the Supreme Court of Canada required clear and direct language
    before interpreting a term in a contract as relieving against a statutorily
    imposed warranty.

[19]

Neither
    judgment purported to detail the contents of the language needed to meet the
    standards described in the two cases.  Certainly, neither case suggested the kind
    of detailed requirements described by the motion judge.  In fact, a close
    reading of
Hunter Engineering Company Inc.
, at p. 439,
indicates the contrary.  In
Hunter
,
    one of the parties (Allis-Chalmers) had a term in its contract that provided
    that the warranty in the contract was the only warranty  and no other
    warranty or conditions statutory or otherwise, shall be implied.  The majority
    in the Supreme Court of Canada had no difficulty in finding that this express
    term excluded the statutory warranty despite the absence of any reference to
    the terms of the statutory warranty and the absence of any specific
    acknowledgement that the other contracting party was giving up a statutory
    right.  Clearly, the provision in the Allis-Chalmers contract would not have
    satisfied the prerequisites set down by the motion judge.

[20]

A
    court faced with a contractual term that purports to shorten a statutory
    limitation period must consider whether that provision in clear language describes
    a limitation period, identifies the scope of the application of that limitation
    period, and excludes the operation of other limitation periods.  A term in a
    contract which meets those requirements will be sufficient for s. 22 purposes,
    assuming, of course, it meets any of the other requirements specifically
    identified in s. 22.

(3)

is
    the insurance contract a business agreement?

[21]

As
    outlined above, business agreement is defined in s. 22(6) as an agreement
    made by parties, none of whom is a consumer as defined in the
Consumer
    Protection Act, 2002
, S.O. 2002, C.30
. 
    That
Act
defines consumer as:

Consumer means an individual acting for personal, family or household
    purposes and does not include a person who is acting for business purposes.

[22]

By using the definition of consumer as found in the
Consumer
    Protection Act, 2002
, the legislature drew a bright line for the purposes
    of s. 22(5) between agreements entered into for personal, family or household
    purposes and other agreements.  Subject to the potential application of the
    other parts of s. 22, persons entering into agreements for personal, family or
    household purposes cannot contract out of the limitation periods in the
Limitations
    Act, 2002
.  Persons contracting for
    other purposes can do so.

[23]

The motion judge concluded that the
insurance
    contract was not a business agreement under s. 22(5) for two reasons.  First,
    he described the contract as a peace of mind contract.  That characterization
    may be appropriate.  It does not, however, have any effect on whether the
    insurance contract falls within the meaning of business agreement for the
    purposes of s. 22(5) of the
Limitations Act, 2002
. That determination
    is made solely by reference to the definition of consumer in the
Consumer
    Protection Act, 2002
.

[24]

Second, the trial judge concluded that because insurance
    contracts were not covered by the
Consumer Protection Act, 2002
, they could not be business agreements under s.
    22(5).  The scope of the
Consumer Protection Act, 2002
is irrelevant.  The only relevance of the
Consumer
    Protection Act, 2002
flows from the incorporation
    of the definition of consumer from that
Act
into s. 22(5) of the
Limitations Act,
    2002
.

[25]

The respondents
    contracted with Co-Operators for insurance covering various risks related to
    the operation of their business.  The contract was not for personal, family or
    household purposes.  The contract fell within the definition of business
    agreement in s. 22(6) of the
Limitations Act, 2002
.


V



conclusion

[26]

The
    appeal must be allowed, the order below set aside, and an order made dismissing
    the action insofar as it is based on a claim made under the insurance policy.

[27]

Co-Operators
    is entitled to its costs on the motion and in this court.  We fix those costs
    at $6,000 on the motion and $5,000 on the appeal, both amounts inclusive of
    disbursements and relevant taxes.

RELEASED:  DD  MAY 08 2013

Doherty J.A.

E.A.
    Cronk J.A.

P. Lauwers
    J.A. 


