Ontario Court of Appeal lets auto claimant amend “poorly drafted” claim against insurer

The Ontario Court of Appeal recently ruled against Economical Insurance when it decided that a policyholder can amend a claim against the carrier under a family protection endorsement of an auto policy.

The case stemmed from a collision in November 2005. In essence, a lower court had ruled last year that Lynn Morgan’s October 2011 application to amend a nearly-three-year-old claim against Economical was really a new and distinct claim.

But on June 3, 2013, Ontario’s appeal court overturned the lower court ruling, finding that an amended statement of claim would actually “clarify” the original claim rather than constitute a “new cause of action.” A new claim would have been barred due to the statute of limitations.

Court records indicate that Morgan sued the owner and operators of the other vehicle in September 2007. Then in May, 2008 she notified Economical of a “potential claim” under her family protection endorsement.

The Ontario Policy Change Form (OPCF) 44R endorsement is intended to cover policyholders if they are involved in an accident, where they are not at fault, with someone who carries less insurance, no insurance or is an unidentified driver.

Morgan’s original statement of claim alleged the owner of the other vehicle was “insufficiently insured” and pleads that she is “entitled to claim damages against Economical, as her damages were caused by the negligence of the underinsured motorist.”

Morgan applied in October 2011 to amend the claim to change the term “underinsured” to “underinsured/uninsured.” In January 2012, Case Management Master Joan Haberman of the Ontario Superior Court of Justice ruled that Morgan could amend her claim but Economical appealed that decision. The insurer argued that allowing the amended claim would actually add “a new and distinct claim for uninsured coverage,” after the limitation period was up.

In a decision released in September 2012, Madam Justice Carole Brown overturned Master Haberman’s decision, ruling that when Morgan applied in October 2011 to amend her claim, she actually “advances a new claim and does so after the limitation period.”

Using an extended two-year “discoverability doctrine,” Judge Brown found that the limitation period in Morgan’s claim would have expired on Oct. 22, 2010. That was two years to the day after Morgan’s lawyer “notified the Economical that they had learned that the driver of the third party vehicle was not insured at the date of the loss and they would be issuing a claim” against Economical.

“While the plaintiff argues that the statement of claim, read with the notice letters makes clear what the claim was, the statement of claim is ultimately paramount in establishing and giving the defendant notice of the claim actually being brought and must be properly pleaded so that the defendant knows the case to be met,” Judge Brown wrote in September 2012.

Morgan successfully appealed Judge Brown’s ruling and on June 3, the Ontario Court of Appeal over-ruled Judge Brown’s decision, restoring Master Haberman’s original ruling.

“There is also no doubt that this claim is inelegantly, even poorly, drafted,” wrote Mr. Justice Stephen Goudge, Madam Justice Eileen Gillese and Madam Justice Sarah Pepall of the Court of Appeal. “However, it must be read as generously as possible, with a view to accommodating any inadequacies in the form of the allegations due to drafting deficiencies.”

The Court of Appeal added Morgan’s amended statement of claim will “clarify, rather than assert a new cause of action.” This is despite Morgan’s use of the terms “insufficiently insured,” which the appeal court noted is not a “term of art” in insurance law.

“In this context it could reasonably encompass someone who had no insurance because such a person would be insufficiently insured,” the appeal court wrote. “As we read the appellant’s claim, as a whole, it reasonably communicates to (Economical Insurance) that (Morgan) is advancing an uninsured motorist claim along with an underinsured motorist claim.”