



COURT OF APPEAL FOR ONTARIO

CITATION: Usanovic v. Penncorp Life Insurance Company (La
    Capitale Financial Security Insurance Company), 2017 ONCA 395

DATE: 20170518

DOCKET: C62558

Strathy C.J.O., Laskin and Trotter JJ.A.

BETWEEN

Fadil Usanovic

Plaintiff
(Appellant)

and

Penncorp Life Insurance Company also carrying on
    business as
La Capitale Financial Security Insurance Company

Defendant
(Respondent)

Daniel J. Fife and Maple Anne Cameron, for the appellant

Vincent Genova, for the respondent

Heard: February 24, 2017

On appeal from the judgment of Justice David A. Broad of
    the Superior Court of Justice, dated July 15, 2016, with reasons reported at
    2016 ONSC 4624.

Strathy C.J.O.:

[1]

The motion judge granted summary judgment dismissing the appellants action
    against his disability insurer because it was time-barred. He rejected the
    appellants allegation that the insurer breached its duty of good faith by
    failing to inform him of the limitation period when it terminated his benefits.
    The appellant re-iterates this submission on appeal.

[2]

I would dismiss the appeal. Under the
Limitations Act, 2002
, S.O.
    2002, c. 24, Sched. B, the limitation period began to run when the claim was
    discovered, as determined by s. 5. The insurers duty of good faith did not
    require it to give notice of the limitation period to its insured. While the
    legislatures of some provinces have imposed a statutory obligation to that
    effect, there is no such requirement in Ontario. Whether there should be is a
    matter I would leave to the legislature.

A.

BACKGROUND

(1)

The Facts

[3]

The appellant was a self-employed eavestrough installer. In 1999, he bought
    an insurance policy from the respondent. The policy insured him against
    disability arising from accidents. In 2004, he purchased additional coverage
    for disability arising from sickness.

[4]

In September 2007, the appellant fell from a roof and suffered serious
    injuries. He received disability benefits until November 2011, when the
    respondent terminated its payments because he no longer had a total
    disability, as defined by the policy.

[5]

On January 12, 2012, the respondents lawyer wrote to the appellant
    explaining that since benefits had been paid for 24 months, he was not entitled
    to receive further benefits unless he was unable to engage in any and every
    occupation for which he was reasonably fit by reason of his education, training
    and experience. A review of the medical information on his file did not support
    the conclusion that he had a total disability. Moreover, surveillance
    undertaken by the insurer was inconsistent with the limitations the appellant
    claimed to be suffering.

[6]

The lawyers letter added, If you disagree with this decision, please
    submit, within sixty days of receipt of this letter, medical records in support
    of your claim for total disability from any occupation for which you are
    reasonably trained and educated.

[7]

The appellant did not provide new medical records in response to the
    letter. He claimed in an affidavit that he had sent a letter to the insurer,
    dated February 3, 2011 [
sic
], protesting the termination of his
    benefits.
[1]
The insurer denied having received that letter.

[8]

In cross-examination, the appellant admitted that he knew his benefits
    had been terminated, had received the lawyers letter, had read the policy
    over, had discussed the matter with his wife many times and had considered
    hiring a lawyer, but could not afford to do so.

[9]

In early 2015, the appellant consulted counsel, who told him that there
    was a two-year limitation period on his claim. The appellant alleges that, had the
    insurance company told him about the limitation period when it denied his claim,
    he would have brought an action earlier. He commenced this action in April
    2015, more than two years after the termination of his benefits and receipt of the
    letter from the respondents lawyer.

(2)

The Policy

[10]

The disability policy issued by the respondent to the appellant covers
    total disability arising from accident or sickness. For the first 24 months,
    the insured is entitled to benefits if he or she is unable to perform any of
    the important daily duties pertaining to his occupation or profession and is
    not otherwise employed. After 24 months, as noted above, the definition changes
    to cover only the complete inability to engage in any occupation for which the
    insured is reasonably fitted.

[11]

The policy has Statutory Conditions attached. These include the
    following:

LIMITATION OF ACTIONS: An action or proceeding against the
    Insurer for the recovery of a claim under this Contract shall not be commenced
    more than one year after the date insurance money became payable or would have
    been payable if it had been a valid claim.

[12]

The respondent concedes that this provision is inapplicable as a result
    of s. 22(1) of the
Limitations Act, 2002
.

B.

DECISION IN THE COURT BELOW

[13]

Before the motion judge, the appellant argued, based on
Kassburg v.
    Sun Life Assurance Co. of Canada
, 2014 ONCA 922, 124 O.R. (3d) 171 and
Smith
    v. Co-operators General Insurance Co.
, 2002 SCC 30,
    [2002] 2 S.C.R. 129
, that the respondents denial was not sufficiently
    clear and unequivocal to trigger the limitation period. The motion judge found
    against him, holding that the limitation period began to run when the appellant
    received the lawyers letter on January 12, 2012.

[14]

The appellant did not pursue that argument before us.

[15]

The appellants alternative submission in the court below, and the one advanced
    in this court, was that the insurers duty of good faith and fair dealing
    obliged it to advise its insured of the applicable limitation period on denying
    or discontinuing insurance benefits and that the two-year limitation period did
    not begin to run until the insurer gave this notice.

[16]

The motion judge rejected this argument. He observed that, in my view,
    the extension of the law proposed by the plaintiff would represent a
    substantial shift in the boundaries of the obligation of good faith and fair
    dealing on insurers as they are presently understood (at para. 38).

[17]

His core conclusions, at paras. 40-42, were as follows:

It would appear that, at its highest, the obligation of good
    faith and fair dealing arguably carries with it a positive obligation on an
    insurer to inform its insured of the nature of the benefits available under the
    policy. There is a marked difference, however, between imposing on an insurer a
    positive obligation to advise with respect to rights and benefits internal to
    the policy and the imposition of an obligation to advise with respect to the
    application of law external to the policy, such as pursuant to the
Limitations
    Act
.

In my view the court should be circumspect in extending the
    common law to impose positive obligations of general application on parties,
    particularly where the implications of so doing are unknown. The law of insurance
    is broadly occupied by legislation and in my view it should be left to the
    legislature to regulate, if it deems it necessary and appropriate, the nature
    and extent of information which must be given by insurers to their insureds
    upon denial of benefits, including the existence and details of applicable
    limitation periods.

I find that there was no obligation in law on the defendant to
    advise the plaintiff of the applicable limitation period in the
Limitations
    Act
.

[18]

As will be apparent, I agree with these statements.

C.

THE PARTIES SUBMISSIONS

[19]

As I have noted, the appellant concedes that his claim was discovered
    under the
Limitations Act, 2002
on January 12, 2012, more than two
    years before he started his action.

[20]

The appellant submits, however, that the insurers failure to inform him
    of the limitation period precludes it from relying on the limitation period to
    defend his claim. He submits that the insurers common law duty of good faith
    and fair dealing should require it to inform the insured of the existence of
    the limitation period.

[21]

The appellant concedes that there is no statutory obligation to this
    effect in Ontario. He submits, however, that this obligation flows from the
    insurers duty to give the same consideration to the insureds interest as it
    does to its own interests and can be imposed through the development of the
    common law and need not be based on statute.

[22]

In support of this proposed development in the law, the appellant says
    that insurance law is consumer protection legislation and in applying that law the
    court should be concerned about the protection of consumers: see
Smith v.
    Co-operators
;
Esau v. Co-operators Life Insurance Co.
, 2006 BCCA 249, 55 B.C.L.R. (4th) 11, leave to appeal to S.C.C.
    refused, [2006] S.C.C.A. No. 307; and the companion case,
Pekarek v.
    Manufacturers Life Insurance Co.
, 2006 BCCA 250, 55
    B.C.L.R. (4th) 1, leave to appeal to S.C.C. refused, [2006] S.C.C.A. No. 305
.

[23]

The respondent, on the other hand, submits that there was a clear and
    unequivocal denial of the claim by the insurer, payments ceased, the appellant knew
    that his claim had been denied, and the limitation period had begun to run. The
    motion judge found that the appellant received unequivocal notice of the denial
    of benefits through the lawyers letter in January 2012.

[24]

The respondent submits that the court should not impose a duty to inform
    the insured of the limitation period when the legislature has declined to do
    so. Insurance law is broadly occupied by legislation and it is up to the
    legislature to impose such requirements, if it views them necessary.

D.

ANALYSIS

[25]

There is no doubt that parties to an insurance contract owe each other a
    duty of utmost good faith:
Bhasin v. Hrynew
, 2014 SCC 71, [2014] 3
    S.C.R. 494, at para. 55;
Whiten v. Pilot Insurance Co.
, 2002 SCC 18, [2002]
    1 S.C.R. 595, at para. 79.

[26]

This court has held that this duty requires an insurer to deal with
    claims by its insured in good faith. See
702535 Ontario Inc. v. Non-Marine
    Underwriters, Lloyds London, England
(2000), 184 D.L.R. (4th) 687 (Ont.
    C.A.), at para. 27, leave to appeal to S.C.C. refused, [2000] S.C.C.A. No. 258:

The relationship between an insurer and an insured is
    contractual in nature. The contract is one of utmost good faith. In addition to
    the express provisions in the policy and the statutorily mandated conditions,
    there is an implied obligation in every insurance contract that the insurer
    will deal with claims from its insured in good faith.

[27]

The duty of good faith is not the same as a fiduciary duty:
Plaza
    Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co.
(1994), 18 O.R.
    (3d) 663 (C.A.), at p. 669. In contrast to a fiduciary duty, the insurer is not
    obliged to treat the insureds interests as paramount. However, the insurer
    must give as much consideration to the welfare of the insured as to its own
    interests:
Bullock v. Trafalgar Insurance Co. of Canada
, [1996] O.J.
    No. 2566 (Gen. Div.), at para. 101. This requirement is based on the
    recognition that the insured is typically in a vulnerable position when making
    a claim:
Bhasin
, at para. 55.

[28]

The scope of the duty of good faith has not been precisely delineated or
    definitively settled: Barbara Billingsley,
General Principles of Canadian
    Insurance Law
, 2d ed. (Markham: LexisNexis Canada, 2014), at p. 52;
Kang
    v. Sun Life Assurance Co. of Canada
, 2013 ONCA 118, 303 O.A.C. 64, at
    para. 39. Although the assessment is fact-specific and will depend on the
    particular circumstances of each case, courts have recognized some general
    requirements of the duty of good faith.

[29]

In
702535 Ontario Inc.
, at paras. 27-29, this court provided an
    overview of the insurers duty of good faith to act promptly and fairly when handling
    claims by the insured:

The duty of good faith requires an insurer to act both promptly
    and fairly when investigating, assessing and attempting to resolve claims made
    by its insureds.

The first part of this duty speaks to the timeliness in which a
    claim is processed by the insurer. Although an insurer may be responsible to
    pay interest on a claim paid after delay, delay in payment may nevertheless
    operate to the disadvantage of an insured. The insured, having suffered a loss,
    will frequently be under financial pressure to settle the claim as soon as
    possible in order to redress the situation that underlies the claim. The duty
    of good faith obliges the insurer to act with reasonable promptness during each
    step of the claims process. Included in this duty is the obligation to pay a
    claim in a timely manner when there is no reasonable basis to contest coverage
    or to withhold payment.

The duty of good faith also requires an insurer to deal with
    its insureds claim fairly. The duty to act fairly applies both to the manner
    in which the insurer investigates and assesses the claim and to the decision
    whether or not to pay the claim. In making a decision whether to refuse payment
    of a claim from its insured, an insurer must assess the merits of the claim in
    a balanced and reasonable manner. It must not deny coverage or delay payment in
    order to take advantage of the insureds economic vulnerability or to gain
    bargaining leverage in negotiating a settlement. A decision by an insurer to
    refuse payment should be based on a reasonable interpretation of its
    obligations under the policy. This duty of fairness, however, does not require
    that an insurer necessarily be correct in making a decision to dispute its
    obligation to pay a claim. Mere denial of a claim that ultimately succeeds is
    not, in itself, an act of bad faith. [Citations omitted.]

[30]

The motion judge observed that at its highest, the obligation of good
    faith and fair dealing arguably carries with it a positive obligation on an
    insurer to inform its insured of the nature of the benefits available under the
    policy (at para. 40). See, for example,
Atchison v. Manufacturers Life
    Insurance Co.
, 2002 ABQB 1121, 332 A.R. 72 and
Clarfield v. Crown Life
    Insurance Co.
(2000), 50 O.R. (3d) 696 (S.C.). The issue of whether an
    insurer breaches its duty of good faith when it fails to inform the insured of
    available policy benefits is not squarely before us and we need not decide it.

[31]

In this case, however, we are asked to do something
more
than impose a duty of good faith on insurers to
    disclose the contents of the insurance policy. We are asked to extend the duty
    of good faith to require an insurer to disclose information outside the policy
     namely, the existence of a limitation period.

[32]

Some commentators have suggested that it would be severe and unfair for
    the insured to be denied benefits when the insurer was aware of the limitation
    period, but the insured was not: see, for example, Roderick Winsor,
Good
    Faith in Canadian Insurance Law
(Toronto: Thomson Reuters Canada, 2016),
    at para. 2.30. The appellant adopts this argument, submitting that it would be
    preferable, and simple, for the insurer to advise the insured of the limitation
    period when it denies the claim.

[33]

The appellant acknowledges that no Canadian case has gone that
    far. Although two decisions of this court might have afforded an opportunity to
    address the issue, neither is directly on point:
International Movie
    Conversions Ltd. v. ITT Hartford Canada
(2001), 27
    C.C.L.I. (3d) 102, affd on other grounds (2002), 57 O.R. (3d) 652 (C.A.) and
LeBlanc
    & Royle Enterprises Inc. v. United States Fidelity & Guaranty Co.
(1994), 17 O.R. (3d) 704 (C.A.).

[34]

The British Columbia Court of Appeal has directly addressed
    this issue and concluded that the insurer is not obliged to advise the insured
    of the limitation period, although some members of the court suggested that it
    may be advisable to do so.

[35]

In
Balzer v. Sun Life Assurance Co. of Canada
, 2003 BCCA 306,
    227 D.L.R. (4th) 693, the British Columbia Court of Appeal suggested that in
    order to trigger the start of the limitation period the insurer must give an
    unequivocal denial and the preferred course of action may be to bring the
    limitation period to the insureds attention. The court said, at para. 45:

Any ambiguity in the communication of a refusal of benefits, as
    to whether it is a clear and unequivocal denial, should be resolved in favour
    of the insured.  To avoid any doubt, the preferred course for an insurer
    intending to deny coverage should be to include an alert in the letter drawing
    the insured's attention to the one year limitation  and informing the insured
    that the insurer will rely on the denial as starting the running of time.

See also
Dachner Investments Ltd. v. Laurentian
    Pacific Insurance Co.
(1989), 59 D.L.R. (4th) 123 (B.C.C.A.), at pp. 130-31.

[36]

In
Esau
,
Thackray J.A.

clearly rejected the argument that an insurer is obliged to notify the
    insured of the limitation period, holding, at para. 42:

While I have sympathy for the plea of the appellant, this Court
    cannot, as acknowledged by the appellant, mandate the ideal. It cannot order
    legislative changes.  Nor can it mandate that insurers must advise
    insureds as to policy or statutory limitation provisions.  It would
    clearly be advisable for insurers to advise insureds as to the existence of
    limitation periods, but even here caution must be exercised because there are
    different limitation provisions with inconsistent commencement dates. Insurers
    could not, therefore, as suggested by the appellant, advise their insureds
    that their letter of denial  commences the running of a one year limitation
    period.

[37]

Similarly, Levine J.A. held, at para. 52:

The British Columbia
Insurance Act
includes no such
    statutory obligation [to advise of limitation periods], and, as my colleague
    points out, it is not within the power of this Court to require insurers to
    provide specific information regarding limitation periods. But the judicially
    imposed requirement to provide a clear and unequivocal denial,  reflects the
    same principle: that insurers have an obligation to provide clear information
    to insured persons, who are consumers, about their claims under the policy.

See also
Falk v. Manufacturers Life Insurance Co.
,
    2008 BCSC 173, 80 B.C.L.R. (4th) 347, at para. 61.

[38]

While no court has imposed a duty on the insurer to inform the insured
    of the limitation period, some legislatures have done so. In British Columbia,
    a regulation introduced in 2012
requires the insurer to give
    written notice to the claimant of the applicable statutory limitation period when
    it denies the claim or within a short time thereafter:
Insurance
    Regulation
, B.C. Reg. 403/2012, s. 4. There are
    exceptions for claimants represented by legal counsel and those making certain
    types of claims. If the insurer fails to provide the requisite notice, the
    running of the limitation period is suspended.

[39]

Alberta has also adopted specific notice requirements. Pursuant to a
    2012 amendment to the
Fair Practices Regulation
,
    Alta. Reg. 128/2001, s. 5.3, an insurer must give written notice of the
    applicable limitation period within five business days of denying a claim. The
    notice is not required when the insurer is aware the claimant is represented by
    counsel and for certain types of claims. If the insurer fails to give that
    notice, the court may, on application of the claimant, order that the
    applicable limitation period be extended and grant any other remedy that the
    court considers appropriate: s. 5.3(7).

[40]

In
Dhillon v. Anderson
, 2014 ABQB 609, 597 A.R. 189, the
    Alberta Court of Queens Bench held that this amendment was more than
    procedural; instead, it fundamentally altered a substantial defence available
    to a defendant. Further, [i]t imposes a new obligation on insurers to provide
    advice to claimants, an obligation that did not exist previous to the
    introduction of the
Regulation
 (at para. 34).

[41]

Ontario has not gone as far as Alberta and British Columbia. However,
    the
Insurance Act
, R.S.O. 1990, c. I.8 was amended in 2012 to require life,
    disability and creditors insurers to include the following statement in the
    insurance policy and certificate:

Every action or proceeding against an insurer for the recovery
    of insurance money payable under the contract is absolutely barred unless
    commenced within the time set out in the
Limitations Act, 2002
.

[42]

This amendment came into force on July 1, 2016.

[43]

The appellant relies on
Smith v. Co-operators
in support of his
    argument for imposing a duty on an insurer to advise the insured of the
    limitation period when the claim is denied. In that case, the Ontario
    regulation pertaining to the Statutory Accident Benefits Schedule required the
    insurer to inform the insured, in writing, at the time a claim was denied, of
    the statutory procedure for the resolution of disputes. That statutory
    procedure specified a two-year limitation period. The Supreme Court held that
    the effect of the regulation was to require the insurer to inform the insured of
    the most important points of the process, such as the right to seek mediation,
    the right to arbitrate or litigate if mediation fails, that mediation must be
    attempted before resorting to arbitration or litigation
and
    the relevant time limits that govern the entire process
 (at para. 14;
    emphasis added). Without providing that information to the insured, it could
    not be said that the insurer had given a valid refusal and the time limit did
    not begin to run.

[44]

There is no statutory provision in this case similar to that considered
    by the Supreme Court in
Smith v. Co-operators
. Further, as Gonthier J.
    cautioned in
Smith v. Co-operators
, it is not the role of this Court
    to set out the specific content of insurance refusal forms. This task is better
    left to the legislature (at para. 14).

[45]

The Ontario legislature might have gone further than it has, for example,
    by adopting the approach taken in Alberta or British Columbia. It presumably
    chose not to do so and, in my respectful view, the court should not impose
    consumer protection measures on insurers, outside the terms of their policies, that
    the legislature has not seen fit to require. A properly crafted regime, such as
    those in effect in Alberta and British Columbia, would not only have to specify
    the requirement to give notice, but also the consequences of failing to do so.

[46]

The consequences of the appellants proposed expansion of the duty of
    good faith are significant. The appellants interpretation would effectively
    judicially overrule the provisions of the
Limitations Act, 2002
by
    making notice given by an insurer to an insured the trigger for the limitation
    period, rather than discoverability of the underlying claim.
This would defeat the purpose of the statute and bring
    ambiguity, rather than clarity, to the process.

E.

CONCLUSION AND ORDER

[47]

For these reasons, I would dismiss the appeal with costs to the
    respondent in the amount of $15,000, inclusive of disbursements and all
    applicable taxes.

Released: G.R.S.  May 18, 2017

George R. Strathy
    C.J.O.

I agree  John Laskin
    J.A.

I agree  G.T.
    Trotter J.A.





[1]

As the benefits had been terminated in November 2011, the date
    of the letter was obviously incorrect.


