March 16, 2015 by Canadian Underwriter
The Court of Appeal for Ontario recently ruled in favour of the Dominion of Canada General Insurance Company, in a lawsuit over a disputed auto insurance claim, which The Dominion said was barred by a two year limitation period but which the claimant alleged was handled in bad faith.
In a decision released Friday, the appeal court upheld a 2013 Ontario Superior Court of Justice decision, which found that Michelle Blake’s statement of claim had not been filed within the two-year limitation period stipulated in the province’s Insurance Act. Mr. Justice Alan Whitten also found, in 2013, that The Dominion (now owned by The Travelers Companies Inc.) had not acted in bad faith in denying Blake’s claim for caregiver benefits.
Blake, who was insured by The Dominion, was rear-ended while driving a vehicle in November, 2002.
“Ms. Blake’s head slammed into the headrest on impact and, as the car lurched forward, her head hit the side window,” Justice Whitten wrote in September, 2013. “Immediately following the accident, she accompanied the driver of the other vehicle to the police station to make a report.” Blake later went to hospital due to her head injury.
A Dominion adjuster testified that based on reports received from insurers’ assessments, Black “did not suffer a substantial inability to complete her caregiving duties,” Justice Whitten wrote. “A notice to this effect was sent to Ms. Blake on January 14th, 2004.”
Court records indicate that after receiving The Dominion’s notice Jan. 14, 2004, she submitted additional caregiving expense claims to The Dominion.
“After the accident, Ms. Blake found she was unable to be as active as before,” Justice Whitten noted.
As a result of mediation held in March, 2005, The Dominion “agreed to honor Ms. Blake’s reasonable caregiving expenses for the period between November 18, 2002 and January 31 2004,” Justice Whitten wrote.
“At mediation, Dominion also agreed to pay Ms. Blake $398.00 (inclusive of interest) for caregiving expenses incurred between November 12, 2004 and January 11, 2005,” Justice Whitten noted. “In correspondence to Ms. Blake dated March 12, 2005, Dominion acknowledged they had approved these expenses in error.”
Then on Aug. 10, 2006, The Dominion “received 19 separate applications for caregiving expenses from January 2005 to July 2006 totaling $6190.00,” Justice Whitten added. “The Dominion sent her a letter dated Aug. 21, 2006 advising she was not qualified for that benefit.”
Blake filed her statement of claim in 2007.
Ontario’s Insurance Act stipulates that when a claimant sues an insurer for a denial of benefits, that a court proceeding “shall be commenced within two years after the insurer’s refusal to pay the benefit claimed.”
Blake argued that “the limitation period did not start to run until Dominion’s August, 2006 denial of caregiver benefits,” Mr. Justice David Brown of the Court of Appeal for Ontario wrote, in the decision released Mar. 13, 2015. “I do not accept that argument. First, the submission of new applications for benefits by the claimant following a clear refusal by the insurer to pay benefits does not re-start the limitation clock. Where an insurer has denied statutory accident benefits, the claimant’s remedy is to seek recourse for the termination of benefits within the limitation period, not to submit further applications for benefits.”
The other two judges hearing Blake’s appeal – Madam Justice Karen Weiler and Madam Justice Gloria J. Epstein – concurred.
They also did not dispute Justice Whitten’s finding that The Dominion had not acted in bad faith.
Whitten had cited a 2002 ruling, by the Supreme Court of Canada, against Pilot Insurance Company, which was successfully sued in 1996 by Daphne Whiten, whose home was destroyed by fire in 1994.
“A breach of the contractual duty of good faith is independent of and in addition to the breach of contractual duty to pay the loss,” wrote Mr. Justice Ian Binnie, in 2002, in the case of Whiten vs Pilot, on behalf of the majority of Supreme Court justices hearing the case.
Pilot, alleging arson, had denied Whiten’s $345,000 home insurance claim. The Court of Appeal for Ontario found in 1999 that “everyone who investigated the fire in the six months after it occurred concluded that it was accidental,” though it reduced the punitive damages from $1 million to $100,000. Three years later, the Supreme Court of Canada restored the award of $1 million in punitive damages against Pilot.
The trial judge, in Whiten vs Pilot, instructed the jury that punitive damages in a contract case “are very much the exception rather than the rule” and are “imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour,” Justice Binnie wrote in 2002.
In the case of Blake vs The Dominion, court records indicate that some errors were made in processing Blake’s claim.
For example, The Dominion approved an occupational therapy treatment plan, then informed an occupational therapist that a bill for $869.21 could not be paid because the treatment plan was denied. The Dominion’s adjuster “could not explain this oversight, however, did express that it was not purposeful on his part,” Justice Whitten wrote, adding “an error in the processing of a claim may not be illustrative of bad faith in itself if it is an isolated event in the course of conduct.”
Justice Brown of the Court of Appeal saw “no error in the trial judge’s application of the Whiten principles to the evidence which would justify appellate intervention,” he wrote.