Law Times

Law Times • October 7, 2013 Page 9 FOCUS Boyce lets insurers pick own limitation period, lawyer warns BY MICHAEL McKIERNAN For Law Times A n Ontario Court of Appeal decision gives insurance companies the power to pick their own limitation period, says the lawyer for small-business owners who saw an action against their insurers fail for missing the one-year deadline set in their property insurance contract. Thomas and Marilyn Boyce sued the Co-operators General Insurance Co. in February 2012, 16 months after they had to temporarily shut their women's fashion boutique in Portland, Ont., due to a foul smell on the property. The insurer had refused to pay out for the cleanup operation and lost inventory, claiming the policy didn't cover the damage since it was due to a skunk. The Boyces claimed they were the victims of Halloween-inspired vandalism, something that would fall within the scope of the policy. The Co-operators then moved for summary judgment, claiming the action was out of time because the one-year limitation included in the statutory conditions attached to the insurance policy overrode the standard two-year limitation that applies under the Limitations Act. The statutory conditions, contained in s. 148 of the Insurance Act, normally apply to fire insurance cases, but the Cooperators incorporated them as part of the multi-peril policy held by the Boyces. The motion judge sided with the Boyces, but they ultimately lost when the appeal court reversed the decision after finding the "business agreement" exception in s. 22 of the Limitations Act applied to the insurance contract between the parties. Jason Singer of Toronto's Singer Kwinter Personal Injury Lawyers wasn't involved in the appeal court case but is handling the Boyces' application for leave to appeal to the Supreme Court of Canada. "The way that the Court of Appeal has put the law on this issue is very unfair to insureds," he says. "It essentially means that the insurance company can unilaterally set however short a limitation period it wants in its policies. We feel the section of the Limitations Act that created exemptions for business agreements was really geared towards sophisticated business entities negotiating with each other, which is simply not the relationship that exists between an insurance company and its policyholders. These are contracts of adhesion. They're one-sided and unilaterally created. There's no negotiation there." According to Singer, until this case it was a commonly held belief in the insurance industry that the limitation period for fire loss was in fact two years despite what was in the statutory conditions. "Most insurers treated it that way even though the statutory conditions indicated it was one year. That reasonable expectation has now been turned upside down by the Court of Appeal decision," he says. In the lower court decision, Ontario Superior Court Justice Michael Quigley dismissed the Co-operators' summary judgment motion. He ruled parties could only contract out of the Limitations Act under s. 22 if the agreement contains specific reference to the two-year statutory limitation period; clear and unequivocal language that they were intending to vary the statutory protection; a provision clearly alerting policyholders that they were forgoing a statutory right to a longer timeline; and the signature of the person giving up the statutory provision acknowledging the forfeiture. But Ontario appeal court Justice David Doherty, writing on behalf of the unanimous three-judge panel in Boyce v. The Co-operators General Insurance Co., disagreed. "Nothing in the language of s. 22 offers any support for 'The way that the Court of Appeal has put the law on this issue is very unfair to insureds,' says Jason Singer. 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)," Doherty wrote in the May 8 decision. "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." Singer says he'd like the Supreme Court to clarify what constitutes the clear language necessary to vary the limitation period. In any case, he says the insurance policy shouldn't have been considered a business agreement. The Limitations Act defines a business agreement as any agreement between parties, "none of whom is a consumer as defined in the Consumer Protection Act, 2002." That act in turn defines consumers as an individual acting for "personal, family or household purposes and does not include a person who is acting for business purposes." Daniel Strigberger, a partner with Miller Thomson LLP's insurance litigation group, says the Co-operators policy will serve as a useful template for other insurers who wish to cut the standard two-year limitation period. "You've got language here that has worked and been upheld by the Court of Appeal," he says, adding it won't work in every case. Mark Mason, a partner at McCague Borlack LLP in Toronto, says subrogating insurers need to pay particular attention to the decision since some may have wrongly assumed the two-year limitation period would apply to cases involving businesses. "It highlights the importance of making sure that you pay close attention to any applicable contracts which may vary limitation periods," says Mason, who heads the subrogation practice group at his firm. LT "McKellar provided peace of mind for the rest of my life." LEANDRE CASSELMAN Development Coordinator Now you're sure. The McKellar Structured Settlement™ Financial security. Guaranteed payments. 100% tax free. Some decisions are easy. Untitled-6 1 www.lawtimesnews.com 13-04-29 11:04 AM

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