November 6, 2015 by Canadian Underwriter
The Supreme Court of Canada will not hear an appeal, from AXA General Insurance, of a Newfoundland and Labrador court ruling allowing a lawsuit to proceed four years after a pedestrian was hurt in a hit-and-run in St. John’s, the highest court announced Thursday.
In October, 2007, Ian Tucker was injured by a vehicle which hit him as he was crossing a street. The vehicle did not stop and was not identified. Tucker was insured by AXA. His coverage included damages resulting from an accident involving an uninsured or unidentified vehicle.
In 2009 – two years to the day after he was hit – Tucker filed a negligence lawsuit against the “unknown person” who hit him.
In November, 2010, Tucker presented a demand to AXA claiming recovery under his policy. The following February, AXA advised him it was denying his claim. Section D 2(1)(a) of the insurance contract stipulates: “Every action or other legal proceeding against an insurer for the recovery of an amount of damages shall be commenced within 2 years after the date on which the cause of action against the insurer arose and not afterward.”
In 2011, Tucker applied to have AXA added as a defendant. He also sued AXA, alleging the insurer was in breach of its contract. The Canadian operations of AXA group was acquired that year by Intact Financial Corp.
In September, 2012, the Supreme Court of Newfoundland and Labrador dismissed Tucker’s lawsuit against AXA due to the two-year limitation period.
That ruling was overturned on appeal, in a divided ruling released April 21, 2015. On June 22, AXA filed its application for leave to appeal to the Supreme Court of Canada. On November 5, the Supreme Court of Canada announced it dismissed AXA’s leave application.
Newfoundland’s appeal court did not rule on whether AXA was actually in breach of contract. It only allowed Tucker’s lawsuit to proceed against the insurer.
In 2012, Mr. Justice David B. Orsborne, of the province’s Supreme Court, had initially dismissed Tucker’s lawsuit based on his finding that a “cause of action is complete when the plaintiff knew or ought to have known that the driver was unidentified and unidentifiable.”
Justice Orsborne cited case history, including several Court of Appeal for Ontario decisions during the mid-1980s.
Tucker’s appeal was allowed, in a divided ruling.
“It was AXA’s refusal to indemnify Mr. Tucker in accordance with Section D 2(1)(a) that caused Mr. Tucker’s loss, that being his legal right to recovery of his damages resulting from the accident,” wrote Madam Justice Lois Hoegg on behalf of herself and three other appeal court judges hearing the case.
Mr. Justice Malcolm Rowe – who would not have altered the lower court ruling – dissented.
“Although a cause of action taken pursuant to Section D 2(1)(a) requires an insured to establish that he or she is legally entitled to recover damages from the driver or owner of an unidentified automobile, it is the insurer’s refusal of its alleged obligation to indemnify that causes the insured’s loss of his right to recovery which crystallizes the insured’s cause of action and triggers the limitation period,” Justice Hoegg wrote on behalf of the majority.
The court reinstated Tucker’s action against AXA.
“It is always open to an insurer to expressly refuse to indemnify under Section D 2(1)(a) and thereby trigger the applicable two-year limitation period set out in Section D 9(2),” Justice Hoegg wrote.
“Once a claimant presents a demand to an insurer alleging the insurer’s obligation to indemnify under Section D 2(1)(a) and setting out his or her damages, the insurer is fixed with the knowledge that the claimant is asserting a claim and becomes obligated to honor its contractual obligation to pay it,” Justice Hoegg added on behalf of the majority of appeal court judges hearing the case.
Concurring with the majority ruling were Chief Justice J.D. Green, Madam Justice Gale Welsh and Mr. Justice Michael Harrington.
“Unless and until the insurer pays the claim, it can be said to have refused to do so, putting it in breach of Section D 2(1)(a) of the contract,” Justice Hoegg wrote. “In this way, an insured is not left in a state of limbo waiting for an express refusal to crystallize a cause of action. Once the claim is submitted and not paid, the insured is on notice that the insurer, by not paying the claim, is in breach and he or she must file an action at any time within the ensuing two years, but no later, to preserve his or her right of action.”