Supreme Court denies insurer leave to appeal ruling on auto insurance family protection endorsement

The Supreme Court of Canada recently dismissed an application, from Lombard General Insurance Company of Canada, for leave to appeal a court ruling against Lombard over the limitation period on claims under the Ontario auto family protection endorsement.

In July 2006, Eckhart Schmitz was hit by a car driven by Ervin Bakonyi, according to court records. Schmitz had an auto policy, with an optional “family protection” endorsement, with Lombard, which is owned by Toronto-based Northbridge Financial Corp. The endorsement, known as OPCF 44R, is essentially intended to cover a vehicle accident victim who sues a defendant whose liability limit is not enough to cover the losses.

In 2007, Schmitz and his family sued Bakonyi “for damages in excess of” $1 million from injuries Schmitz suffered in the 2006 accident. Bakonyi’s liability limit was $1 million. In 2010, Schmitz sought coverage under his family protection endorsement with Lombard. But Lombard argued Schmitz sought coverage after the expiry of the 12-month limitation period, stipulated in Section 17 of the family protection endorsement.

Section 17 stipulates that every action against an insurer under “shall be commenced within 12 months of the date” that claimant “knew or ought to have known that the quantum of claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the accident occurred.”

Schmitz relied on section 4 of Ontario’s Limitations Act, which stipulates that a lawsuit shall not be commenced more than two years after a claim was “discovered,” according to background provided by the Court of Appeal for Ontario in its Feb. 4, 2014 ruling against Lombard. The definition of “discovered” is covered in section 5 of the Limitations Act.

In its decision, the Court of Appeal for Ontario ruled that a policyholder making a claim under a family protection endorsement “suffers a loss ’caused by’ the underinsured coverage insurer’s omission in failing to satisfy the claim for indemnity the day after the demand for indemnification is made.”

That ruling was the subject of an article in the Spring 2014 E-Counsel newsletter, published by law firm Dutton Brock LLP. The ruling against Lombard, in effect, “could mean that there no longer exists a limitation period on claims under the OPCF 44R,” Dutton Brock student Lauren Chen wrote in E-Counsel.

“The Court did leave an avenue of defence open for insurers” Chen wrote at the time. “The Court looked to section 14 of the OPCF 44R, which provides that the findings of a court are not binding on an insurer unless that insurer has had the opportunity to participate in the proceedings.”

On April 4, Lombard filed an application for leave to appeal with the Supreme Court of Canada. The highest court announced Aug. 14 it dismissed Lombard’s application, with costs.