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Ontario court overturns arbitrator’s decision in delayed auto indemnification claim


October 2, 2013   by Canadian Underwriter


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An Ontario court has ruled that the “equitable doctrine of laches,” which applies in some cases to delays in claims, did not apply when Intact Insurance Company of Canada requested indemnification from Lombard General Insurance Company of Canada more than four years after a motor vehicle accident.

In a ruling released Monday, Madam Justice Victoria R. Chiappetta allowed an appeal by Intact of a decision by an arbitrator with the Financial Services Commission of Ontario.

The FSCO arbitrator had found that the laches doctrine did apply to a loss transfer claim made by one carrier to another under Section 275 of the Ontario Insurance act.

The case stemmed from a vehicle accident Feb. 13, 2007, in which Intact paid accident benefits. Court records indicate that Lombard covered a heavy commercial vehicle involved in the collision. Lombard denied Intact’s request for indemnification due the time that had elapsed between the accident and the date of Intact’s request.

The FSCO arbitrator found that the delay, of four years and eight months, was “inordinate, inexcusable” and “gave rise to a presumption of prejudice.”

But Judge Chiappetta found this week that “mere delay is insufficient to apply the laches defence.” She therefore ruled that Intact is not barred from pursuing loss transfer against Lombard.

A carrier relying on the laches defence “must show a combination of delay and either A, the plaintiff’s acquiescence, or B, prejudice to the defendant,” Judge Chiappetta wrote. She added that claims under section 275 of the Insurance Act are “devoid of equitable relief.”

That section of Ontario law stipulates that a carrier responsible for the payment of statutory accident benefits under an auto claim may, in certain cases, “be prescribed to indemnification in relation to such benefits paid by it” from carriers covering other vehicles in the incident.

“Granting the equitable laches defence pursuant to this particular statutory claim is not appropriate,” Judge Chiappetta ruled in Lombard vs Intact. “Only statutory limitation periods limit the statutory right to loss transfer indemnity.”

An insurance lawyer commenting on the case noted there are two things carriers need to know about loss transfer limitations.

“A two-year limitation period is triggered when the first party insurer sends the second party insurer a loss transfer request for indemnification,” wrote Daniel Strigberger, a Waterloo, Ont.-based partner in Miller Thomson’s insurance litigation group. He noted the “clock starts” the day after the second-party carrier receives the request.

“There is some debate in the industry as to whether sending a Notification of Loss Transfer form starts a clock,” Strigberger wrote on his law firm’s blog site, adding his view is that “only a loss transfer request for indemnification starts the clock.”

Strigberger based his view on the Ontario Court of Appeal’s ruling last year in Markel Insurance Company of Canada vs ING Insurance Company of Canada, which Judge Chiapetta cited in her ruling.

Commenting on Monday’s ruling in Intact vs. Lombard, Strigberger noted that a first party insurer “decides unilaterally” when it will send a loss transfer request.

“A delay in sending the initial loss transfer notice/request is seen as a reservation of rights instead of a waiver of rights,” Strigberger wrote. “This discussion applies only to loss transfer matters. Priority dispute matters are subject to different limitation periods.”


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