


COURT OF APPEAL FOR ONTARIO

CITATION: Dundas v. Zurich
  Canada, 2012 ONCA 181

DATE:  20120322

DOCKET: C53291

Cronk and Blair JJ.A. and Strathy J. (
Ad Hoc
)

BETWEEN

Joyce Maebell Dundas,
    Christopher Howard Dundas, Pamela Joyce Cake, Roger Garnet Dundas, Karin Edith
    Thomas, Lisa Ella Marie Roach, Barbara Elizabeth Dundas, Irene Hickson, Robert
    Hickson, William Hickson, Geraldine Willan, Joan Gerard, May Hickson, Josephine
    Hines and Candace Hickson, a Minor, by her Litigation Guardian, William Hickson

Plaintiffs (Appellants)

and

Zurich
    Canada, Zurich Insurance Company and                                            Zurich
    Insurance Company of Canada

Defendants (Respondents)

Glenn A. Smith and Dena N. Varah, for the appellants

David F. Murray and Dylan Crosby, for the respondents

Heard: January 24, 2012

On appeal from the order of Justice T.L.J. Patterson of
    the Superior Court of Justice, dated January 20, 2011.

Strathy
    J. (
Ad Hoc
)
:

[1]

This appeal concerns the limitation period for a claim against an
    insurer for allegedly delaying settlement of the claims of third parties
    against its insured and failing to pay the policy limits into an
    interest-bearing account to accrue for the benefit of the third parties. The
    insured claimed that the resulting delay increased the damages for which it was
    liable and sued the insurer for the consequent exposure in excess of the policy
    limits. The insured assigned the cause of action against the insurer to two of the
    third parties, in exchange for an agreement that they would not pursue their
    judgment against the insured for the amount in excess of the policy limits. Those
    third parties thus stand in the shoes of the insured in this action against the
    insurer.

[2]

The appellants appeal from an order of Patterson J., dismissing their
    action on a summary judgment motion brought by the respondents (Zurich).
    Patterson J. found that the claim was brought outside the limitation period
    contained in the former Ontario Standard Automobile Policy (SPF No. 1) (SAP).

[3]

For the reasons that follow, it is my view that the appeal should be
    allowed and the action should be permitted to proceed.

The Facts

[4]

On November 1, 1988, four people died in an automobile accident,
    including the driver, Robert Reid, who was insured by Zurich under a standard
    automobile policy providing $1 million in coverage. The families of the three
    deceased passengers sued Reids estate.

[5]

On May 27, 1992, the passengers families offered to settle their claims
    for $1,657,032.00, an amount that was in excess of the policy limits, with
    issues of prejudgment interest and costs to be determined.

[6]

On April 6, 1993, the independent counsel for the Reid estate agreed to
    the proposed assessment of damages.

[7]

On October 12, 1993, counsel for the appellants and for Zurich (defending
    the claim on behalf of the Reid estate) met in chambers with Kennedy J. of the
    Superior Court of Justice. Minutes of settlement were agreed upon, with damages
    in the amount set out above. Prejudgment interest and costs had not yet been
    resolved. Zurichs lawyer advised counsel for the Reid estate that the minutes
    of settlement had been signed.

[8]

On December 3, 1993, Kennedy J. heard submissions on prejudgment
    interest and costs. Counsel for the appellants asserted that Zurich had
    breached its duty of good faith to the Reid estate by failing to promptly settle
    the third party claims and by failing to pay the insurance policy limits into
    an interest-bearing account, thereby exposing the estate to a judgment over the
    policy limits. Interest rates were significant at the time, with rates of 9%
    and 14% ultimately being awarded. Under the terms of the insurance policy, prejudgment
    interest in excess of the policy limits would fall on the insured.

[9]

On December 23, 1993, Zurich paid the insurance limits into an
    interest-bearing account.

[10]

On
    March 29, 1994, the insurance limits were paid out to the appellants and to the
    family of the third passenger in agreed proportions.

[11]

On
    November 25, 1994, Kennedy J. issued an endorsement dealing with interest and
    costs. He made critical comments about Zurichs failure to adjust the loss and
    to pay the policy limits into an interest-bearing account at an early date.

[12]

On
    December 21, 1994, the endorsement of Kennedy J. was sent to the lawyer for
    Zurich who immediately sent it to counsel for the Reid estate.

[13]

In
    the result, consent judgments dated August 21, 1995 were issued against the
    Reid estate for the total amount of $2,067,399.35, inclusive of damages and prejudgment
    interest. Costs were awarded to the appellants but were not fixed. They were
    ultimately resolved in 1998 for approximately $600,000.

[14]

This
    action was commenced by the Reid estate against Zurich by notice of action
    issued on August 19, 1996  that is, just less than one year after the date of
    the consent judgments. A statement of claim was delivered, alleging that Zurich
    had:

·

breached its duty of good faith,

·

exposed the estate to claims in excess of the policy limits,

·

failed to pay the policy limits on a timely basis, and

·

failed to pay the limits into an interest-bearing account.

[15]

On
    January 9, 1997, this action was assigned to the families of two of the three
    passengers, in exchange for an agreement that those parties would not sue the
    Reid estate for the balance owing under the judgment.

Statutory Provisions

[16]

The
    one-year limitation period applicable to a claim against an automobile insurer
    at the material time was contained in the statutory conditions in the SAP.
    These conditions were included in every insurance policy issued in Ontario, as
    required by s. 207 of the
Insurance Act
, R.S.O. 1980, c. 218:

Time and Manner of Payment of Insurance Money

6(1) The insurer shall
    pay the insurance money for which it is liable under this contract within sixty
    days after the proof of loss has been received by it, or where an appraisal is
    made under subcondition 4(8), within fifteen days after the award is rendered
    by the appraisers.

When Action May be Brought

6(2) The insured
    shall not bring an action to recover the amount of a claim under this contract
    unless the requirements of statutory conditions 3 and 4 are complied with or
    until the amount of the loss has been ascertained as therein provided or by a
    judgment against the insured after trial of the issue or by agreement between
    the parties with the written consent of the insurer.

Limitation of Actions

6(3) Every action or
    proceeding against the insurer under this contract in respect of loss or damage
    to the automobile shall be commenced within one year next after the happening
    of loss and not afterwards, and in respect of the loss or damage to person or
    property shall be commenced within one year next after the cause of the action
    arose and not afterwards.

[17]

Statutory
    conditions 3 and 4, referred to in condition 6(2), pertain, respectively, to
    the obligations on the insured in the case of third party claims for loss or
    damage to persons or property and claims for loss or damage to the insured
    automobile. Both require the insured to give prompt written notice to the
    insurer and to verify the claim by statutory declaration in the case of damage
    to the insured automobile.

The Motion Judges Decision

[18]

On
    its motion for summary judgment, Zurich contended that the limitation period began
    on the date on which the material facts grounding the claim ought to have been
    discovered through the exercise of reasonable diligence. It asserted that this
    occurred, at the latest, on December 21, 1994, when counsel for the Reid estate
    received the endorsement of Kennedy J. containing critical comments about
    Zurichs handling of the claim.

[19]

The
    appellants argued that the limitation period did not begin to run until August
    21, 1995, when the consent judgments were taken out and the amount of the Reid
    estates exposure was ascertained.  As the action was commenced on August 19,
    1996, the appellants claimed that it had been initiated within time.

[20]

The
    motion judge began his analysis by noting that statutory condition 6(3)
    provides that the period to sue for loss or damage to an automobile is one
    year next after the happening of the loss and not afterwards. He then
    referred to
McNaughton Automotive Ltd. v. Co-Operators General Insurance Co.
(2003), 66 O.R. (3d) 112 (S.C.), revd on other grounds (2005), 76 O.R.
    (3d) 161 (C.A.), a group of proposed class actions involving automobile
    property insurance, in which Haines J. held that the limitation period might be
    extended based on discoverability issues and the doctrine of fraudulent
    concealment.

[21]

The
    motion judge found that the Reid estate had known for some time that it had
    exposure beyond the policy limits and, having received the endorsement of
    Kennedy J. on December 21, 1994, it was informed of a possible claim against
    Zurich. He concluded, at paras. 16-19:

I am of
    the opinion the exact amount of the claim is not required and the one year
    period starts to run from December 21, 1994, at which time the possible claim
    against Zurich was not only discoverable, it was known.

In my
    opinion, the limitation period started on December 21, 1994.

Section
    6.3 of the statutory conditions in the Standard Automobile Policy requires that
    the action must be commenced within one year next after the happening of the
    loss and not afterwards.

Therefore
    the claim issued by the Reid estate claim August 19, 1996, against Zurich is
    out of time.

[22]

The
    motion judge therefore dismissed the action.

[23]

Two
    aspects of the reasons of the motion judge are noteworthy. First, he focussed
    on the date of the happening of the loss, which triggers the limitation
    period applicable to claims relating to the insured vehicle. The action in this
    case is in respect of loss or damage to third parties or their property, which must
    be commenced within one year after the cause of the action arose. Second, the
    motion judge applied a discoverability analysis to the determination of when
    the limitation period began to run.

[24]

I
    turn to the positions of the parties on this appeal.

Positions of the Parties

[25]

The
    appellants submit that the limitation period only began to run when the consent
    judgments against the Reid estate were issued on August 21, 1995. They submit
    that the motion judge erred in applying the one-year limitation period in
    statutory condition 6(3) of the SAP without considering statutory condition
    6(2).

[26]

The
    appellants further submit that condition 6(2) defines when an action can be
    brought by an insured and when the limitation period begins to run. They say
    that condition 6(2) provides a series of pre-conditions to the commencement of an
    action, all of which relate to ascertaining the amount of loss. The provision aims
    at delaying the action until the amount of loss is definitively ascertained. 
    The use of or in condition 6(2) is disjunctive, meaning each condition stands
    alone. The party to whom the provision applies must elect which condition is
    appropriate in its case.

[27]

The
    appellants cite one case in support of their interpretation of the interplay
    between conditions 6(2) and 6(3):
Jeffery v. Guarantee Co. of North America
(1985),
    50 O.R. (2d) 494 (H.C.J.).  I will discuss this decision below.

[28]

Zurich
    submits that condition 6(2) has no bearing on the commencement of the
    limitation period in condition 6(3), which, subject to the discoverability
    rule, starts to run from the time when the cause of action arose. It says that
    the case law establishes that the one-year limitation period under condition
    6(3) (or its equivalent in other provinces) runs regardless of compliance with
    the statutory preconditions in condition 6(2):
Terroco Industries Ltd. v.
    Sovereign General Insurance Co.
, 2007 ABCA 149, 404 A.R. 252;
Raymond v.
    Canadian Surety Co.
, [1995] A.J. No. 1561 (Q.B);
Burnett v. Palatine
    Insurance Co.
(1965), 54 D.L.R. (2d) 378 (N.B.S.C. App. Div.).

[29]

Zurichs
    position is that if a statutory precondition cannot be complied with prior to
    the expiry of the limitation period, the correct procedure is to commence an
    action within the limitation period and argue about the preconditions later.

[30]

Furthermore,
    Zurich says that if, as the appellants argue, the limitation period does not
    begin to run until the amount of loss has been ascertained, then the limitation
    period will never begin to run upon the happening of the loss.  This, it says,
    would render condition 6(3) meaningless.

[31]

Zurichs
    alternative submission is that the action is statute-barred because it was not
    brought within two years of Mr. Reids death, relying on ss. 38(1) and (3) of
    the
Trustee Act
,

R.S.O. 1990, c. T.23,

which stipulate
    that all actions brought by an estate must be brought within two years of the
    death of the deceased. This limitation period relates to all actions of a
    personal nature, whether in tort or in contract:
Roth v. Weston Estate
(1997),
    36 O.R. (3d) 513 (C.A.), at pp. 514-515.

Analysis

[32]

The
    appeal was argued primarily on the basis of the trial judges interpretation of
    the statutory conditions. While I agree with the appellants that the trial
    judges interpretation was incorrect, it is my view that the appeal should also
    be allowed because the claim in this action does not engage the statutory
    conditions at all. It is not a claim under the insurance contract. Rather, it
    is a claim for breach of the insurers independent duty of good faith and fair
    dealing and is subject to the general six-year limitation period that applied at
    the time.

Interpretation of the
    Statutory Conditions

[33]

I
    will begin by explaining my view that the motion judge erred:

·

in failing to consider the provisions of conditions 6(2) and
    6(3), requiring that claims for loss or damage to
persons or property
be
    commenced within one year after the cause of action arose; and

·

in importing a discoverability analysis into the issue.

[34]

Statutory
    condition 6(2) sets out conditions precedent to bringing an action against the
    insurer, specifically, compliance with statutory conditions 3 and 4 or until
    the amount of the loss has been ascertained by judgment against the insured
    after trial or by agreement between the insured and the third party with the written
    consent of the insurer.

[35]

In
    the case of third party claims (for loss or damage to person or property),
    condition 6(3) requires that the claim be commenced within one year after the
    cause of action arose:

Every
    action or proceeding against the Insurer under this contract   in respect of
    the loss or damage to person or property shall be commenced
within one year
    next after the cause of the action arose and not afterwards
. [Emphasis
    added.]

[36]

It
    is noteworthy that this limitation period is different from the limitation
    period in condition 6(3) applicable to a claim for damage to the insured
    automobile, which begins to run on the happening of loss and expires one year
    later.

[37]

The
    question then is: When did the cause of action of the Reid estate arise
    against Zurich?

[38]

In
    my view, the cause of action did not arise until Zurich had a liability to indemnify
    the Reid estate under the policy of insurance. This only occurred when the
    liability of the Reid estate had been finally ascertained by judgment after
    trial or by settlement between the parties with the consent of the insurer,
    using the language of condition 6(2). On the facts, this did not occur until
    the issues of interest and costs had been resolved by the consent judgments
    that were taken out on August 21, 1995. It was at this time that the Reid estate
    had a liability to pay the third parties and it was at this time that it was
    entitled to demand indemnity from Zurich.

[39]

Interpreting
    the statutory conditions in this fashion results in consistency between
    conditions 6(2) and 6(3). It also promotes certainty, by fixing a date that is
    readily ascertainable, as opposed to being dependent on subjective questions of
    discoverability.

[40]

The
    courts have held that a limitation period, which by definition circumscribes
    the rights of action of the citizen, should be strictly interpreted and
    ambiguities should be resolved in favour of the person whose rights are being truncated:
Berardinelli v. Ontario Housing Corp
., [1979] 1 S.C.R. 275, at p. 280.
    To the extent the statutory conditions are capable of more than one reasonable
    interpretation, it is appropriate to adopt the least restrictive one.

[41]

This
    interpretation is, moreover, consistent with the only Ontario authority
    directly on point:
Jeffrey v. Guarantee Co. of North America
, referred
    to above. The accident in that case occurred on April 22, 1975. The insured was
    served with a statement of claim, claiming property damages and damages for personal
    injury, on June 7, 1976. The insurer denied coverage under the policy and
    refused to defend the claim. In January 1984, eight years after the initial
    denial of coverage, the insured commenced an action for a declaration that he
    was covered under the insurance policy. Trainor J. held that the cause of
    action arose at the time of judgment against the insured, although the insured
    was entitled to bring an action at an earlier date, after he had complied with
    statutory conditions 3 and 4. He stated at p. 495:

Counsel
    for Jeffrey submitted that Jeffrey's cause of action will arise when the amount
    of Wilson's claim is ascertained by a judgment within the meaning of stat. con.
    6(2). Therefore, the limitation period has not even begun to run. In my opinion
    this is the correct reading of stat. con. 6(2):

6(2)
    The insured shall not bring an action to recover the amount of a claim under
    this contract ... until the amount of the loss has been ascertained ... by a
    judgment against the insured after trial ...

Under
    stat. con. 6(3) it is when judgment is awarded against the insured that the
    cause of action arises and time begins to run.

Counsel
    for the insurer suggested, that if my reading is correct, this action is
    premature. I disagree. Statutory condition 6(2) provides two alternate times
    when the insured's cause of action arises. The other time is when the
    "requirements of statutory conditions 3 and 4 are complied with". The
    use of the word "or" in stat. con. 6(2) means that either of the
    dates can be relied on. Upon complying with stat. con. 3, Jeffrey had a cause
    of action entitling him to commence this action against the insurer for a
    declaration that Jeffrey is covered by the insurance policy. Such a declaration
    will have a substantial practical result. Section 212(b) (now s. 214(b)) would
    require the insurer to defend the Wilson action on behalf of Jeffrey.
The
    limitation period, however, does not begin to run until the last cause of
    action, judgment, arises.
[Emphasis added.]

[42]

As
    I have said, Zurich submits that Canadian cases have consistently held that the
    one-year limitation period under the equivalent of statutory condition 6(3)
    will run regardless whether the statutory preconditions to bringing an action,
    set out in condition 6(2), have been complied with. It refers to
Raymond v.
    Canadian Surety Co.
and
Burnett v. Palatine Insurance Co.,
above. It
    also relies on an observation to this effect in Craig Brown & Thomas
    Donnelly,
Insurance Law in Canada,
looseleaf (Scarborough: Carswell,
    1999) vol. 1 at 10-22:

Faced with this dilemma [non-compliance with statutory
    conditions 3 and 4] the customer should commence the action before the
    expiration of the limitation period notwithstanding that the appraisal
    proceedings have not been completed. It is this formal step which avoids the
    consequences of the limitation section. The worst that will happen in terms of
    the action will be that it will be stayed on the application of the insurer.
    [Citations omitted.]

[43]

The
    authorities referred to by Zurich are, in my view, distinguishable as they were
    dealing with first party claims  that is, claims for damage to the insured
    automobile  as opposed to third party claims. The citation from Professor
    Browns work likewise deals with claims for damage to the insured automobile.
    Moreover, one of the authorities referred to by Zurich,
Terroco Industries
    Ltd. v. Sovereign General Insurance Co
., to which I shall refer in a
    moment, actually supports a different conclusion  a claim against the insurer
    that is not founded on a claim under the policy is not subject to the
    limitation period at all.

[44]

In
    my opinion, therefore, the motion judge erred in failing to consider that the
    claim in question was in respect of the loss or damage to person or property
    and in failing to consider when the cause of action against Zurich arose
    under condition 6(3), in the context of condition 6(2). Had he done so, he
    would have concluded that the cause of action arose only once the insureds
    loss had been ascertained by a judgment against the insured after trial of the
    issue or by agreement between the parties with the written consent of the
    Insurer, within the meaning of condition 6(2).

[45]

I
    turn to the second reason why the appeal should be allowed.

The Action is not a Proceeding under the Contract

[46]

In
    my view, this action is not an action or proceeding against the Insurer under
    [the insurance contract]  in respect of the loss or damage to person or
    property within the meaning of statutory condition 6(3). As a result, the
    limitation period in condition 6(3) does not apply and the action is subject to
    the general six-year limitation period then contained in the
Limitations Act
,
    R.S.O. 1980, c. 240.

[47]

In
    their statement of claim, the appellants claim, among other things, a
    declaration that Zurich breached its duty of good faith to the Reid estate by:

·

failing to advise its insured, on a timely basis, that the claim
    would exceed the policy limits;

·

failing to pay its limits on a timely basis, thereby enjoying the
    benefit of interest on its limits;

·

failing to take reasonable steps to negotiate a settlement within
    the limits; and

·

failing to place the limits in an interest-bearing account on a
    timely basis.

[48]

Counsel
    for Zurich submitted that the words [
E]very
    action or proceeding against the Insurer
in respect of
the loss or
    damage to person or property shall be commenced within one year next after the
    cause of the action arose  (emphasis added) in statutory condition 6(3) are
    very broad. He refers to
Arsenault v. Dumfries Mutual Insurance Co.
(2002),
    57 O.R. (3d) 625 (C.A.), at para. 16 and
Nowegijick v. The Queen et al.
,
    [1983] 1 S.C.R. 29, at p. 39, in support of the proposition that:

The phrase "in respect
    of" is probably the widest of any expression intended to convey some
    connection between two related subject matters.

[49]

While
    that is no doubt true, it is my view that this is not an action to recover a
    claim under [this] contract within the meaning of statutory condition 6(2).
    Nor is it an action or proceeding under this contract  in respect of the loss
    or damage to person or property within condition 6(3). It is not a claim for
    indemnity under the contract at all.

[50]

On
    the contrary, this action contains a claim for breach of the independent duty
    of the utmost good faith, which an insurer owes to its insured. In
Whiten v.
    Pilot Insurance Co.
, [2002] 1 S.C.R. 595, at para. 79, Binnie J. described the
    duty as independent of and in addition to the breach of contractual duty to
    pay the loss. Similarly, in
Ferme G
érald Laplane & Fils Lt
ée.
    v. Grenville Patron Mutual Fire Insurance Co.
(2002),

61 O.R. (3d)
    481 (C.A.), at para. 78, leave to appeal refused, [2002] C.S.C.R. No. 488,
    Charron J.A. observed:

A breach of the duty to act fairly
    and in good faith gives rise to a separate cause of action that is distinct
    from the cause of action founded on the express terms of the policy and that is
    not restricted by the limits in the policy. Hence it may result in an award of
    consequential damages distinct from the proceeds payable under the policy.

[51]

In
702535 Ontario Inc. v. Non-Marine Underwriters, Lloyds of London
(2000),

184 D.L.R. (4th) 687 (Ont. C.A.), at para. 31, leave to appeal refused,
    [2000] S.C.C.A. No. 258, OConnor J.A. stated that a breach of the duty to act
    in good faith gives rise to a separate cause of action from an action for the
    failure of an insurer to compensate for loss covered by the policy. He noted,
    at paras. 28-31, that the duty of good faith requires the insurer to deal
    promptly and fairly with a claim under the policy, including paying the claim
    in a timely manner where there is no reasonable basis to contest coverage or
    withhold payment. Although OConnor J.A. was speaking of a first party claim,
    his observations are equally applicable to a claim under a liability policy
    where the insurers delay in the resolution of the claim or in paying the
    policy limits into court may result in the accumulation of prejudgment interest
    in excess of the policy limits to the detriment of the insured.

[52]

The
    alleged breach of duty in this case was not a claim for indemnity under the
    insurance contract and was not a claim to which statutory conditions 6(2) and
    6(3) applied. It was not, therefore, subject to the one-year limitation period
    contained in those conditions and was, instead, subject to the six-year
    limitation period in the general
Limitations Act
of the time.

[53]

This
    result is consistent with
Terroco Industries Ltd. v. Sovereign General
    Insurance Co
, one of the cases referred to by Zurich. In that case, which
    was governed by Alberta legislation, the insured claimed under an insurance
    policy for damages to a truck as a result of a fire. Each party had appointed
    an appraiser, but the appraisers could not agree. It was decided that an umpire
    would be appointed to fix the amount of the loss, with the result binding on
    both parties. There was a delay on the part of the insured in getting their
    appraisal documents to the umpire and the one-year limitation period passed
    without the claim having been resolved. The insurer took the position that the
    claim was time-barred. The Alberta Court of Appeal held that the one-year
    limitation period in the statute was not interrupted by the appointment of the
    appraiser and endorsed the approach suggested by Professor Brown, above.
    However, it held that on the facts there had been an admission of liability and
    an agreement to make payment of the claim once the amount had been determined
    by the appraisal process. The claim was for enforcement of that agreement  the
    Court stated, at para. 36:

In these circumstances, the limitation
    period in the statutory condition is not engaged and is inapplicable. The
    limitation period is directed against actions against the insurer
under this
    contract
, i.e., the insurance policy. Here the action is not brought to
    enforce the policy but rather to enforce the agreement to value the loss as a
    prelude to its payment. Any defences under the policy are not available to the
    Insurer. [Emphasis in original.]

[54]

The
    same is true in this case. I conclude that the appellants claim falls outside
    the statutory conditions and is subject to the general limitation period.

The Trustee Act

[55]

I
    turn to Zurichs alternative submission under the
Trustee Act.

[56]

Zurich
    submits that the appellants claim is barred by s. 38(3) of the
Trustee Act
.
    The relevant provisions are:

38.
(1) Except in
    cases of libel and slander, the executor or administrator of any deceased
    person may maintain an action for all torts or injuries to the person or to the
    property of the deceased in the same manner and with the same rights and remedies
    as the deceased would, if living, have been entitled to do, and the damages
    when recovered shall form part of the personal estate of the deceased; but, if
    death results from such injuries, no damages shall be allowed for the death or
    for the loss of the expectation of life, but this proviso is not in derogation
    of any rights conferred by Part V of the
Family Law Act
.

(2) Except in cases of
    libel and slander, if a deceased person committed or is by law liable for a
    wrong to another in respect of his or her person or to another persons
    property, the person wronged may maintain an action against the executor or
    administrator of the person who committed or is by law liable for the wrong.

(3) An action under this
    section shall not be brought after the expiration of two years from the death
    of the deceased.

[57]

The
Trustee Act
limitation period is concerned with the survival of claims
    for wrongs done to the deceased in his or her lifetime. At common law, personal
    causes of action for negligence died with the person. This harsh consequence was
    mitigated by statute, ultimately by the
Trustee Act
in this
    jurisdiction. The history and purpose of the legislation were described by
    Abella J.A., as she then was, in
Waschkowski v. Hopkinson Estate
(2000), 47 O.R. (3d) 370 (C.A.), at paras. 2
  and 9:

At common law, no action in
    negligence could be brought on behalf of or against someone who had died. This
    prohibition was lifted in most jurisdictions by statute. In Ontario, the
    legislative entitlement to maintain an action in tort by or against the estate
    of a deceased person is found in s. 38 of the Trustee Act, R.S.O. 1990, c. T.23



The underlying policy
    considerations of this clear time limit are not difficult to understand. The
    draconian legal impact of the common law was that death terminated any possible
    redress for negligent conduct. On the other hand, there was a benefit to
    disposing of estate matters with finality. The legislative compromise in s. 38
    of the Trustee Act was to open a two-year window, making access to a remedy
    available for a limited time without creating indefinite fiscal vulnerability
    for an estate.

[58]

As
    this court explained in
Lafrance Estate v. Canada (Attorney General)
(2003),
    64 O.R. (3d) 1, [2003] O.J. No. 1046, at paras. 54-55, one must ask whether the
    claim is for injury of a personal nature in order to  determine whether the
Trustee
    Act
applies:

In determining whether the estate
    claims fall within the scope of s. 38(1) of the
Trustee Act
, the focus
    is not upon the form of the action but, rather, the nature of the injury. The
    question to be asked in determining its applicability is whether the alleged
    wrong constituted an injury to the deceased person. See
Smallman v. Moore
,
[1948]
    S.C.R. 295
, and
Roth v. Weston Estate
(1997), 36 O.R. (3d)
    513 (C.A.).

Whether the claim for forced
    labour is framed in tort, contract, quasi-contract or breach of fiduciary duty,
    the claim is for injury of a personal nature. The core of the alleged
    wrongdoing is the failure of those running the residential schools to compensate
    the deceased persons for the work they were forced to perform. In other words,
    the claims arise out of the treatment that the deceased plaintiffs endured at
    the residential schools. As such, the claims for forced labour are within the
    meaning of "injuries to the person". Accordingly, they fall squarely
    within the provisions of s. 38(1) of the
Trustee Act
and are subject to
    the applicable two-year limitation period in s. 38(3).

[59]

Here,
    the policy of insurance issued by Zurich to Mr. Reid passed to his estate on
    his death. The injury in question was not an injury to Mr. Reid, but an injury to
    his estate. The
Trustee Act
has no application: see
English Estate v.
    Tregal Holdings Ltd.,
[2004] O.J. No. 2853 (S.C.J.), at paras. 19, 21-24;
Lafrance
    Estate.

[60]

I
    therefore agree with the submission of the appellants that the claim against
    Zurich does not arise from an injury to the late Mr. Reid during his lifetime
    and that the limitation period set out under the
Trustee Act
is
    inapplicable.

Conclusion

[61]

Accordingly,
    for the reasons given, I would allow the appeal, with costs of the appeal to
    the appellants in the agreed amount of $20,000, inclusive of disbursements and all
    applicable taxes.

Signed:        G. R. Strathy J. (ad hoc)

I agree E. A. Cronk J.A.

I agree R. A. Blair J.A.

Released:EAC MARCH 22, 2012


