



COURT OF APPEAL FOR ONTARIO

CITATION: Kassburg v. Sun Life Assurance Company of Canada,
    2014 ONCA 922

DATE: 20141229

DOCKET: C58593

Watt, van Rensburg and Pardu JJ.A.

BETWEEN

Karen Kassburg

Plaintiff
    (Respondent/

Appellant by way of cross-appeal)

and

Sun Life Assurance Company of Canada

Defendant
    (Appellant/

Respondent by way of cross-appeal)

Duncan McDuff, for the appellant

Geoffrey Larmer, Andrew Wray and Niiti Simmonds, for the
    respondent

Heard: December 3, 2014

On appeal from the order of Justice M. Gregory Ellies of
    the Superior Court of Justice, dated March 7, 2014, with reasons reported at 2014
    ONSC 1523, 119 O.R. (3d) 620.

van Rensburg J.A.:

Overview

[1]

The respondent Karen Kassburg, an employee of the North Bay Police Service,
    was insured under a group policy issued by the appellant Sun Life Assurance
    Company of Canada to the North Bay Police Association, of which she was a
    member. The respondents claim for long-term disability benefits, submitted to
    the appellant in 2008, was denied.

[2]

The respondent started an action claiming entitlement to the disability
    benefits in February 2012. The appellant brought a motion for summary judgment,
    asserting that the action was out of time, as both of the potentially
    applicable limitation periods, either under the insurance contract or the
Limitations
    Act, 2002
, S.O. 2002, c. 23, Sched. B, had expired.

[3]

The appellant relied on a one year limitation period under the insurance
    contract, which it contended had been grandfathered as a pre-January 1, 2004
    contract limitation period (s. 22(2) of the
Limitations Act, 2002
) or
    as a limitation period provided under a business agreement (s. 22(5) of the
Limitations
    Act, 2002
). If the contractual limitation period was unenforceable, the
    appellant relied on the general two year limitation period under the
Limitations
    Act, 2002
.

[4]

The appellants motion was dismissed, and the motion judge granted a
    declaration that the respondents action was commenced within the applicable limitation
    period.

[5]

Sun Life appeals. For the reasons that follow, I would dismiss the
    appeal.

Facts

[6]

The parties agree that the contract consists of a group insurance policy
    entered into between the appellant and the North Bay Police Association (the NBPA)
    in 2003, which was amended once, in June 2007, before the respondent stopped
    working (the Contract Document), as well as an employee benefit booklet (the
    Booklet).

[7]

On October 22, 2007, the respondent stopped working, allegedly due to
    physical and psychological disabilities. In April 2008, five months before the
    expiry of the elimination period under the policy, she submitted her long-term
    disability (LTD) claim with the assistance of Susan Cousineau, a civilian employee
    of the NBPA.

[8]

After receiving the application, the insurer wrote to the respondent
    twice, in May and September 2008, asking for additional medical information to
    assess her claim. Additional medical information was forwarded on her behalf by
    Ms. Cousineau and the respondents physicians.

[9]

By letter dated December 4, 2008, the appellant informed Ms. Kassburg
    that the medical information was insufficient, and that it was unable to
    approve her claim based on the medical information received to date. The letter
    also stated that her claim for LTD benefits was declined. The letter advised the
    respondent, Should you wish to appeal our decision, you need to submit new
    medical information. The letter cautioned that [b]y considering an appeal, we
    are not nor do we intend to waive any of our rights under the policy, including
    our right to apply any available contractual or statutory limitation periods.

[10]

On
    January 20, 2009, Ms. Cousineau wrote to Sun Life acknowledging that the LTD
    claim was denied based on the information provided. She also set out two
    questions: first, if Ms. Kassburg submitted further medical information, would
    the application process start over again, and second, requesting the insurer to
    advise as to the procedure for the appeal process, as it was not described in
    the policy. The appellant did not answer these questions, despite a follow-up
    email and letter from Ms. Cousineau.

[11]

What
    followed during the next two years was correspondence between the appellant and
    respondent or her representatives. Additional medical information was provided.
    The insurer advised that the medical information was not sufficient to support
    total disability. The appellants letters invited the respondent to continue
    to appeal by submitting further medical information, which she did. Two of the
    letters repeated the caution that, by considering an appeal, the insurer did
    not intend to waive its rights under the policy, including the right to apply
    any available contractual or statutory limitation periods.

[12]

The
    letters advised that Ms. Kassburgs claim for LTD benefits would be given
    further consideration upon receipt of further medical information, and
    specified the type of information the insurer required.

[13]

On
    January 20, 2011, the appellant wrote to Ms. Kassburg, requesting additional
    medical information for her third and final appeal. This letter stated: we
    have determined that additional medical information is required to fully assess
    your claim for Long-Term Disability benefits. The medical information was
    provided.

[14]

On
    February 24, 2011, the appellant advised the respondent by letter that the
    information submitted was insufficient and did not support total disability.
    The appellant noted that her claim for benefits was declined at the third and
    final appeal level, and stated that Ms. Kassburg could either initiate a
    complaint with Sun Lifes Ombudsmans Office, or she could seek independent
    legal advice.

[15]

The
    respondent retained counsel and issued a statement of claim on February 21,
    2012.

[16]

The
    appellant brought a motion for summary judgment seeking a dismissal of the
    action based on expiry of the limitation period. In its motion the appellant relied
    first on the limitation period under the contract, alleging that it expired on
    December 11, 2009. The appellant calculated that claim forms for LTD benefits
    had to be submitted not later than 90 days after the end of the elimination
    period, that is, no later than December 11, 2008, and tied the one year
    limitation period to this deadline for the receipt of the documents. In the
    alternative, the appellant asserted that the statutory limitation period would
    run, at the latest, from December 4, 2008, the date of its first letter
    informing the respondent that her claim for benefits had been declined. All of
    the communications between the parties were before the motion judge as exhibits
    to affidavits. The respondent stated in her affidavit that, until Sun Lifes
    February 24, 2011 letter, she did not know that the insurer had made a final
    determination on her LTD benefits claim. There were no cross-examinations on
    the materials filed on the motion.

Decision of the Motion Judge

[17]

The
    motion judge first considered whether there was an effective contractual
    limitation period of one year.

[18]

Section
    22(2) of the
Limitations Act, 2002
provides that a limitation period
    under the Act may be varied or excluded by an agreement made before January 1,
    2004. The appellant argued that the contract in question, having been entered
    into in 2003, fell within that exception to the general limitation period. The
    respondent relied on a variation to the policy effective June 1, 2007. The
    question was whether this amendment took the contract outside the scope of s.
    22(2).

[19]

The
    motion judge concluded that it was unnecessary to decide the issue, because
    even if the amendment gave rise to a new contract, the policy would fit within
    the business agreement exception to contracting out of the statutory
    limitation period. Section 22(5) provides for the variation or exclusion of a
    limitation period by a business agreement made on or after October 19, 2006.
    A business agreement is defined to mean an agreement made by parties none of
    whom is a consumer as identified in the
Consumer Protection Act, 2002
,
    S.O. 2002, c. 30. The motion judge concluded that, because the parties to the
    insurance contract at issue were the NBPA and the appellant, the contract was
    not entered into by an individual acting for personal, family or household
    purposes. The contract, if newly formed following the 2007 variation as the
    respondent argued, would therefore qualify as a business agreement made after
    October 19, 2006. Whether or not the amendment resulted in a new contract, the
    parties had met the requirements under the
Limitations Act, 2002
, to contract
    out of the statutory limitation period.

[20]

The
    motion judge then considered whether the appellant met the requirements set out
    at para. 20 of
Boyce v. The Co-Operators General Insurance Co
., 2013
    ONCA 298, 116 O.R. (3d) 56, at para. 20, leave to appeal to S.C.C. refused,
    [2013] S.C.C.A. No. 296, that any contractual term purporting to shorten a
    statutory limitation period must in clear language describe the limitation
    period, identify the scope of its application, and exclude the operation of
    other limitation periods.

[21]

The
    Contract Document provides for a one year limitation period from the end of
    the time period in which proof of the claim is required. The Booklet provides
    for a one year limitation period from after the date [the insurer] must
    receive [the insureds] claim forms.

[22]

After
    reviewing the language in the Contract Document and the Booklet together, the
    motion judge concluded that the contractual limitation period was not clear,
    and that the appellant had not effectively contracted out of the statutory
    limitation period.

[23]

The
    Booklet tied the limitation period to receipt of claim forms, whereas the
    Contract Document tied the limitation period to receipt of proof of claim. It
    was unclear whether claim forms are the same thing as proof of claim. The
    motion judge noted that, reading the contract as a whole, it appears that proof
    of claim is broader than claim forms. Proof of claim is the entire process
    of providing information to the insurer to enable it to decide whether to pay
    benefits. As indicated by the language in the Booklet, filling out the claim
    forms is only one step in providing proof of claim.

[24]

The
    motion judge stated, it would not be unreasonable to interpret the limitation
    period in the contract as providing that the limitation period of one year
    begins to run once Sun Life receives sufficient proof of the claim, and not
    simply the claim forms. He found that it would be reasonable to believe, as
    did the respondent, that the appeal procedure formed part of the application
    process. In support of his conclusion on ambiguity, he noted that the appeal
    procedure was confusing to the respondents representative, who had not
    received a response to her questions about the process.

[25]

The
    motion judge then turned to the statutory limitation period. He held that,
    because of the language in the policy referring to proof of the claim
    acceptable to Sun Life, the respondent only knew that she was out-of-pocket
    when the insurer denied the claim after receiving proof acceptable to it. He
    also concluded that the respondent would not have known that it was legally
    appropriate to start an action until she received a clear denial of the claim,
    which occurred when she was advised that the appeal procedures had been
    exhausted. That is when the two year statutory appeal period began to run.

[26]

The
    motion judge granted a declaration that the limitation period had not expired
    when the respondent commenced her action. He concluded that, although the
    respondent had not brought her own motion for determination of the limitation
    period, such a declaration was consistent with the Supreme Courts call for
    proportional, timely and affordable access to justice in
Hryniak v. Mauldin
,
    2014 SCC 7, [2014] 1 S.C.R. 87.

Issues on Appeal

[27]

The
    appellant raises the following broad issues on appeal:

1.

Did the motion judge err in finding that the contractual limitation
    period was ambiguous and therefore unenforceable?

2.

Did the motion judge err in concluding that the statutory limitation
    period did not begin to run until after the respondent had exhausted the appellants
    internal appeal process?

3.

If the motion judge did not err in dismissing the summary judgment
    motion, did he err in granting judgment in favour of the respondent, and not
    directing to trial the issue of when the limitation period expired?

Analysis

Issue One: Interpretation of the Contract

[28]

As
    I will explain, regardless of whether the contract was formed before January 1,
    2004, or whether it constitutes a business agreement pursuant to s. 22(5), the
    motion judge did not err in concluding that the contractual limitation period
    was ambiguous. The parties therefore did not validly contract out of the
    statutory limitation period.

[29]

The
    parties agree that the insurance policy consists of the Contract Document and
    the Booklet, which is incorporated by reference into the contract. The
    limitation period is expressed in different terms in each.

[30]

The
    appellant contends that the motion judge erred in finding that there was an
    ambiguity in the insurance contract. It argues that there was no ambiguity if
    the Booklets wording is considered on its own. At the same time, the appellant
    urges the court to apply the interpretive principle of reading the words of the
    limitation period in the context of the contract as a whole:
Progressive
    Homes Ltd. v. Lombard General Insurance Co. of Canada
, 2010 SCC 33, [2010]
    2 S.C.R. 245, at para. 22.

[31]

Contrary
    to the appellants argument, that is exactly what the motion judge did. He considered
    the wording of the entire contract, including the Contract Document, and he found
    an ambiguity. Because the limitation period was not clear, as required under
Boyce,
it was not capable of being enforced against the respondent.

[32]

The
    motion judge considered all of the relevant terms employed in the contract with
    respect to claims and proof of claim in arriving at his conclusion that the
    contractual limitation provisions were ambiguous.

[33]

The
    interpretation of a contract involves questions of mixed fact and law. An
    appellate court should not interfere with the interpretation of a contract by a
    lower court, in the absence of a palpable and overriding error of fact or an
    extricable legal error, including the application of an incorrect principle,
    the failure to consider a required element of a legal test or the failure to
    consider a relevant factor:
Sattva Capital Corp. v. Creston Moly Corp.
,
    2014 SCC 53, 373 D.L.R. (4th) 393, at para. 53. The appellant has not
    demonstrated any legal error in the motion judges interpretation of the
    contract in this case.

[34]

I
    would therefore not give effect to this ground of appeal.

Issue Two: The Statutory Limitation Period and Discovery
    of the Claim

[35]

In
    the absence of an enforceable contractual limitation period, the applicable
    limitation period is the two year general limitation period under s. 4 of the
Limitations
    Act, 2002,
which runs from the day on which the claim was discovered.

[36]

Section
    5 provides:

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or
    damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person
    against whom the claim is made, and

(iv) that, having regard to the
    nature of the injury, loss or damage, a proceeding would be an appropriate
    means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and
    in the circumstances of the person with the claim first ought to have known of
    the matters referred to in clause (a).

[37]

In
    its second ground of appeal, the appellant invites the court to revisit the
    motion judges conclusions with respect to when the claim was discovered by
    the respondent under s. 5 of the
Limitations Act, 2002
.

[38]

The
    motion judge made a determination, based on the evidence, as to when the
    respondent discovered her claim in this particular case. He concluded that the
    claim was discovered on February 24, 2011, the date of the letter in which the appellant
    advised the respondent that her final appeal had failed.

[39]

The
    appellant contends that, if the statutory limitation period applies, the claim
    was discovered by the respondent on December 4, 2008 when her claim for LTD
    benefits was initially denied. The claim was discovered because the respondent
    knew the material facts giving rise to her cause of action. The fact that there
    was an appeal process did not extend the limitation period. The fact that the
    respondent may have believed that the limitation period had not expired is
    irrelevant to the legal analysis; in any event her attention was repeatedly
    drawn to the potential application of limitation periods to her claim in the
    insurers correspondence.

[40]

Whether
    a limitation period expired prior to the issuance of a statement of claim is a
    question of mixed fact and law:
Longo v. MacLaren Art Centre Inc.
,
    2014 ONCA 526, [2014] O.J. No. 3242, at para. 38. The question of when the
    respondent discovered her claim for the purposes of s. 5 is, in the
    circumstances here, essentially a question of fact.

[41]

The
    appellant asserts that the motion judge failed to consider certain evidence
    that it put forward on the motion. In particular, the appellant points to
    various passages in the correspondence between the parties where the insurer
    communicated that the claim had been denied and reserved its rights to rely on
    limitation defences.

[42]

I
    would not give effect to this argument. There is no indication in his reasons
    that the motion judge ignored the parts of the correspondence referred to by
    the appellant. Indeed, he was aware of the appellants position with respect to
    the statements respecting the limitation periods in the correspondence and the
    fact that certain letters communicated that the respondents claim for LTD
    benefits was declined. Since the appellant relied on the December 4, 2008
    letter as providing the date on which the respondent discovered her claim, it
    was appropriate for the motion judge to consider what was in fact communicated
    to the respondent at that time, and whether the claim had been clearly and
    unequivocally denied, as asserted by the appellant. His conclusion that the
    denial was not clear was open to him on the evidence, which included the
    contract wording and the communications between the parties.

[43]

The
    fact that the motion judge extracted certain passages from the correspondence
    and included them in his reasons does not mean that he disregarded or ignored
    other parts. To the contrary. In other parts of his reasons he cited some of
    the passages relied on by the appellants. It cannot be said the motion judge
    was unaware of or ignored these passages in rejecting the appellants arguments
    with respect to both the denial of the claim and the reservation of rights contained
    in a number of the letters sent by the insurer.

[44]

The
    appellant is inviting this court to reweigh the evidence that was considered by
    the motion judge to arrive at a different factual conclusion. That is not our
    function. Where the evidentiary record on a Rule 20 motion permits the motion
    judge to resolve the issues justly and fairly, his exercise of discretion in
    making factual determinations is entitled to considerable deference.

[45]

In
Hryniak
, Karakatsanis J. for the Supreme Court stated that the
    exercise of a power under the summary judgment rule attracts deference and that
    when the motion judge exercises the fact-finding powers under Rule 20.04(2.1)
    and determines whether there is a genuine issue requiring a trial, this is a
    question of mixed fact and law (at para. 81). Where there is no extricable
    error in principle, findings of mixed fact and law should not be overturned,
    absent palpable and overriding error (at para. 81).

[46]

Finally,
    I note that three cases relied on before the motion judge and in this court do
    not assist the appellant, either because in those cases, the date from which
    the limitation period ran was not at issue, or because they involve different
    factual findings. In
Maracle v. Travellers Indemnity Co. of Canada
,
    [1991] 2 S.C.R. 50, while the case involved the denial of a claim for LTD
    benefits and an appeal process, the issue was whether a limitation period was
    extended by the insurers actions constituting promissory estoppel. The date
    from which the limitation period ran was clear and not at issue.

[47]

In
Esau v. Co-Operators Life Insurance Company
, 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, the
    applicable contractual limitation period ran from one year of the date of proof
    of loss. The fact that the limitation period had commenced and expired was
    conceded at trial, and the only issue was whether the limitation period was
    extended by virtue of promissory estoppel. On appeal, the insured attempted to
    reassert the limitations issue, but the British Columbia Court of Appeal held
    that the insured was precluded from doing so (at paras. 26-27 and 31). Further,
    the court held that, to the extent it was necessary to consider an alternative
    limitation period, on the whole of the evidence the appellant understood the
    notice of termination of benefits and that she was involved in an appeal
    process (at para. 35). In the present case, the motion judge reached a
    different conclusion on the facts about what the respondent understood from the
    appellants communications.

[48]

Similarly,
Halter v. Standard Life Assurance Co. of Canada
, 2013 ABQB 99, 557
    A.R. 353, affd on other grounds, 2014 ABCA 57, 569 A.R. 148, is another case
    where the trial judge concluded that the claimant had received clear notice of
    the denial of benefits both from his lawyer and the insurer, notwithstanding
    that he was offered and pursued an internal appeal process (at para. 18). In
    the present case the motion judge found otherwise. This he was entitled to do
    on the evidence before him.

[49]

Accordingly
    I would reject this ground of appeal.

Issue Three: Granting
    Summary Judgment in the Respondents Favour

[50]

The
    appellant asserts that the motion judge, having decided to dismiss its motion
    for summary judgment, and in the absence of a motion by the respondent, erred
    in granting a declaration that determined the limitations question on a final
    basis. The appellant contends that it should have the opportunity of exploring
    at trial the question of when the respondent discovered the claim.

[51]

The
    appellant points to the clinical notes and records of one of the respondents
    physicians, which contain a reference to something the respondent said to her
    doctor. The appellant says this reference indicates that she understood that her
    LTD claim had been denied before the receipt of the February 24, 2011 letter,
    notwithstanding her participation in the internal appeal process. According to
    the appellant, this suggests that there is a triable issue respecting the expiry
    of the limitation period. This was argued before the motion judge and rejected.

[52]

I
    would not give effect to this ground of appeal. Consistent with the decision of
    the Supreme Court in
Hryniak
and the clear wording and purpose of the
    summary judgment rule, it was open to the motion judge to determine the issue
    of the limitation defence on a final basis on the record before him in this
    case. The parties put a comprehensive record before the court, which the
    appellant considered sufficient for the limitation period issues to be able to
    be determined. The appellant could have cross-examined on the respondents
    affidavit filed on the motion, but chose not to do so. It is in the interests
    of justice that the issue was determined on a final basis by the motion judge
    at this stage. In my view, the motion judge did not err in making the
    declaration he did as part of his disposition of the summary judgment motion.

Cross-Appeal

[53]

Dismissal
    of the appeal would render the cross-appeal moot, as the statutory limitation
    period, and not the contractual period, applies. However, I would not want this
    courts judgment to be interpreted as endorsing the motion judges conclusion
    that the insurance policy in this case is a business agreement for the
    purpose of ss. 22(5) and (6) of the
Limitations Act, 2002
. As the
    issue was fully argued before us and as it involves an important issue that may
    recur, it is appropriate for this court to consider it.

[54]

Section
    22(5) provides that a limitation period under the Act may be varied or excluded
    by a business agreement made on or after October 19, 2006. Business agreement
    is defined in s. 22(6) to mean an agreement made by parties none of whom is a
    consumer as defined in the
Consumer Protection Act, 2002
. Consumer
    is defined in s. 1 of that statute as an individual acting for personal,
    family or household purposes and does not include a person who is acting for
    business purposes.

[55]

Citing
Boyce
, the motion judge concluded that the group insurance policy is a
    business agreement based on the fact that it was entered into by the NBPA and
    the appellant, neither of whom is an individual.

[56]

The
    respondent asserts that the motion judge erred in failing to consider the
    purpose of the contract, which is to provide personal insurance coverage for loss
    of income in the event of disability. The insurance contract clearly had a
    personal, and not a business purpose.

[57]

The
    appellant contends that the only parties to the group insurance policy were the
    NBPA, which is an association, and the appellant itself, and that the
    respondent was simply a beneficiary of the policy.

[58]

The
    clear wording of s. 22(5) permits contracting out of the statutory limitation
    period, unless the parties to the contract include an individual,
and
the
    contract was for personal, family or household purposes. There are therefore
    two requirements for a business agreement to exist: the parties must not
    include individuals, and the contract must not have been for personal, family
    or household purposes.

[59]

The
    literal reading of the parties aspect of the section that appears to have
    been accepted by the motion judge, in my view, is inconsistent with the
    objective of s. 22 of the
Limitations Act, 2002
, which is to restrict
    the circumstances in which the statutory limitation periods under the Act can
    be altered by contract. In my view, the word parties in s. 22(6) should be
    given a broader, purposive reading to accord with the objective of s. 22.

[60]

In
    this action, the respondent is asserting a personal claim for LTD benefits
    provided under a group policy. She is entitled to assert the claim directly
    against the insurer under s. 318 of the
Insurance Act
, R.S.O. 1990, c.
    I.8
.
Although the group insurance contract under which she is making
    her claim was entered into between the NBPA and the appellant, the appellant relies
    on a limitation period contained in that contract to exclude her claim. The
    respondent is in effect deemed to be a party for the purpose of asserting her
    claim, and for the purpose of the appellants limitations defence.

[61]

With
    respect to the purposes requirement, the contract is for personal purposes,
    and accordingly is not a business agreement under s. 22(5).

[62]

Accordingly
    while I would dismiss the cross-appeal as moot, it is my view that the motion
    judge erred in concluding that the disability policy in this case constituted a
    business agreement for the purpose of s. 22(5) of the
Limitations Act, 2002
.
Boyce
is properly distinguished by the respondent, as the insurance
    policy in that case was for business purposes.

Disposition

[63]

For
    these reasons, I would dismiss the appeal and the cross-appeal, with costs to
    the respondent fixed at $15,000, inclusive of disbursements and applicable
    taxes.

Released: (DW) DEC 29 2014

K. van Rensburg J.A.

I agree David Watt J.A.

I agree G. Pardu J.A.


