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Tuesday Morning Case Bites for August 3, 2021

Last Week’s Court Rulings from the Alberta Court of Queen’s Bench, Court of Appeal and SCC.

Edited by Steven Graham

Statt v SGI Insurance Services Ltd, 2021 ABCA 268
Umpire | Limitation Period | Summary Judgment | Coverage

Salmon v Mama Panda Ltd, 2021 ABQB 569
Third Party Claim | Agent | Limitations Act

Statt v SGI Insurance Services Ltd, 2021 ABCA 268

The Plaintiffs owned a residential property damaged by a fire on November 12, 2014. The Plaintiffs immediately notified their insurer who sent an adjuster to inspect the property on November 13, 2014 and that day a claim was submitted for coverage of the loss, including property damage, lost rent and the costs of utilities.

A dispute arose over the amounts the Defendant agreed to pay for lost rent and utilities and some of the property damage claimed. The parties participated in two umpire processes pursuant to s.519 of the Insurance Act – one to address the rental issues and another to address the question of the disputed damages. The first umpire assessed $6,512.78 in damages for the kitchen repairs, and the second umpire awarded damages for lost rent beyond the November 2015 cut off the Defendant would not exceed. These decisions were rendered in January and February 2017, respectively.

On December 22, 2017, the Plaintffs brought an originating application for summary judgment, seeking compensation for the losses they alleged were covered under the policy, and an extension of the limitation period under s.5.3 of the Fair Practices Regulation. The Master granted the extension to the limitation period and awarded damages for remaining repairs. In an unreported decision on appeal, the chambers Justice affirmed the Master’s decision and awarded additional rent and utilities.

The first ground of appeal was whether or not the chambers Justice erred in extending the limitation period. Section 5.3 of the Regulation permits the Court to extend the limitation period if the insurer does not give proper written notice to a claimant of the applicable limitation period. The particular section at issue was 5.3(2):

(2) An insurer must give written notice to a claimant of the applicable limitation period

(a) if the claim has not been satisfactorily settled, within 60 days from the date the claimant notifies the insurer of the claim, in the case of a claimant referred to in subsection (1)(a)(i) or (ii),

The Master concluded that while the letter sent by the Defendant on November 14, 2014 set out a two year limitation period, it was not clear what had to be done within the two years, or what limitation period was specifically being referenced. The Chambers judge agreed:

[17]           The chambers judge dismissed the appeal. She agreed that the insurer had not sent the notice within the required timeline and that the content of the notice did not comply with the Regulation.  The chambers judge said:

Sending a notice two days after a loss is not sufficient, in my view, even if it is likely a good practice. On the facts here, this notice should have been sent out in mid 2016 when it was clear that “as set out in section 5.3(2)(a), the claim had not been satisfactorily settled.” The notice should have referred to the appropriate section of the Insurance Act with respect to the limitation period, and it should have specified the exact date that SGI was going to be relying on the terms of the limitation period, which, in this case, was November 12th, 2016. Of course, this was not done.

The Court of Appeal noted that the Fair Practices Regulation was intended as consumer protection legislation and created a duty on the insurer to give notice of the limitation period applicable to a claim under the policy. The Court of Appeal confirmed that section 5.3(2) must be considered within this context, and determined the proper interpretation is that an insurer’s obligation to notify the insured of the limitation period arises after the 60 days set out in the Regulation expires:

[28]           The provision is awkwardly drafted. However, the Regulation must be interpreted in accordance with its purpose, which is consumer protection. The objective is to give meaningful notice to an insured of the applicable limitation period in a timely way. Section 5.3(2) begins by imposing a duty: “An insurer must give written notice”. That duty, however, does not crystallize until the 61st day after the insurer became aware of the claim.  The legislature presumably ascertained that the vast majority of claims are settled within 60 days, and there would be no point in giving notice of a limitation applicable to a settled claim.  Accordingly, the failure to give notice within the 60-day period would not be a breach of the Regulation. The purpose of the Regulation is met whether the notice is given before the 61st day or after.

[29]           We see no policy reason why notice of the limitation period should be delayed.  Section 5.3(2)(a) should be interpreted as reading: “In the case of an insured, the insurer must give written notice to a claimant of the applicable limitation period, but that obligation does not arise until 60 days after the insurer becomes aware of the claim.” Read in this manner, the insurer is not prevented from giving effective notice before the actual “obligation” arises. As long as a satisfactory form of notice is given, the objectives of the Regulation are met.

The Court of Appeal rejected the Plaintiffs’ argument that the notice of the limitation period cannot come from an adjuster. The panel concluded that the legislation permits adjusters to give notice of a limitation period to an insured on behalf of the insurer.

The Court of Appeal did caution that the notice provided to the insured must properly identify the limitation period being referred to. The Court of Appeal offered the following suggested wording that would meet the requirement of the Regulation:

[38]           As consumer protection legislation the notice should be written in plain language in understandable terms. While other forms of notice may be legally sufficient, we suggest that wording along the following lines would meet the requirement of the Regulation:

Enforcing Your Rights under Your Insurance Policy.

We will commence processing your claim once we have received your Proof of Loss. This will include determining if you have coverage for the loss you claim, and how much you are entitled to recover. While we expect to reach a consensus with you on these issues, we are required to advise you that under the Insurance Act, if you wish to commence legal action to recover under your insurance policy, you must do so within two years of the date of the loss. If you have any questions about your legal rights, please consult your lawyer.

With respect to the decisions of the umpires, the insurer argued the chambers Justice and Master erred in law by upholding the umpires’ decisions even though they determined a disputed coverage issue. The Court of Appeal agreed that the legislation and statutory conditions, as well as existing case law, supported the insurer’s position that the dispute resolution process is limited to quantifying losses, not determining coverage issues:

[49]           The wording of the Statutory Condition supports the insurer’s argument. The provision is clear that decisions about value or quantum are to be decided by the dispute resolution process. The process is mandatory, and is to be invoked “whether or not the insured’s right to recover under the contract is disputed, and independently of all other questions.”

[51]           The appraisal process and its scope were recently described in Northbridge General Insurance Corp v Ashcroft Homes-Capital Hall Inc2021 ONSC 1684 at paras 22-24:

The appraisal process under the Insurance Act is a free-standing mandatory process that must proceed if either party requests it. A proof of loss as stipulated by Statutory Condition 6 is a pre-condition to resort to the appraisal process. In an insurance policy that provides that the loss is payable to all mortgagees as their interest may appear from time to time or that contains the standard mortgage clause, the mortgagee is an insured for the purposes of the mandatory appraisal process established by s. 128 of the Insurance Act.

The purpose of the appraisal process under the Insurance Act is to provide an expeditious and easy means for the settlement of claims for indemnity under insurance policies. The appraisal process may be demanded only where there is a dispute about the valuation of the loss. There is no time limit within which to request the appraisal process, and absent proof of prejudice, delay in invoking the appraisal process is not a factor in the right to an appraisal.

The appraisal process is intended to be a final and binding determination of the loss. The appraisal process is mandatory, and unless waived by both parties or unless impossible to perform, there must be an appraisal before there can be recovery under the policy. The appraisal process is intended to a [sic] facilitate a quick resolution of a dispute about the value of the property insured, the value of the salvage, or the quantification of the damage to the property, but it is not intended to be an arbitration or an alternative dispute resolution method that will resolve all the issues between the parties; all other non-valuation issues are outside the province of the appraisers and umpire to resolve.

[footnotes omitted]

[52]           Bulletin 06-2016 issued by the Superintendent of Insurance confirms that this quantification mechanism is mandatory, and it cannot be avoided by the insurer raising issues about coverage. The insurer’s interpretation and expectations about the scope of the process is therefore supported by the Insurance Act, the jurisprudence and the Bulletin.

Further, and in regard to the second umpire’s decision, the insurer specifically instructed the umpire to opine on quantum only, and not coverage or the end date of coverage. The umpire nonetheless did determine an end date of coverage for rent and utilities. The Court of Appeal determined that doing so was outside the umpire’s scope, and the Chambers Justice’s decision upholding the umpire’s determination was an error:

[57]           The mandate of an umpire cannot be expanded by usurping more authority than it is given, or by any misunderstanding of the process by the insureds. The Statutory Condition is clear that only quantum is involved. There was no reason for the insurer to anticipate an argument that the umpires had actually dealt with coverage when that was contrary to industry practice, the Insurance Act, the jurisprudence considering Statutory Condition 11, and the Superintendent’s Bulletin.

[58]           The insurer is bound by the quantum of the claim as determined for the kitchen cabinets and by the amount of lost rent and utilities calculated according to the monthly rental and actual utility costs as submitted to the umpire. However, if the insurer has independent issues relating to coverage, it is entitled to advance that position.

[59]           The matter proceeded before the chambers judge as an appeal of a master’s decision which had been determined summarily by way of originating application. In Weir-Jones Technical Services Incorporated v Purolator Courier Ltd2019 ABCA 49 at para 47, this court confirmed that summary adjudication is inappropriate or potentially unfair when the record is unsuitable, the issues are not amenable to summary disposition, a summary disposition may not lead to a “just result”, or there is a genuine issue requiring a trial.

[60]           Here, there are genuine issues for trial and the chambers judge erred in granting summary judgment for the amounts awarded by the two umpires. There was contradictory evidence regarding what caused the damage to the kitchen cabinets. The loss of rental income and the cost of utilities was dependent upon a determination of the period for which these losses were covered under the policy and there was contradictory evidence on this issue.

The Court of Appeal also offered some comments on the rental coverage issue in terms of the evidence submitted. One of the insureds had sworn an affidavit containing a letter from their tenants which indicated they would have renewed their lease if not for the fire. The Master found that the letter was inadmissible as it was hearsay tendered in support of a final application. The Court of Appeal provided the following commentary meant to clear up questions of admissibility:

[67]           As there will be a new proceeding as to the length of time for which the insureds are entitled to coverage for their loss of rental income and utility costs, this ground of appeal is moot. Nevertheless, we offer the following comments. The lower court’s determination is a finding of fact to which this court accords deference absent palpable and overriding error. The insureds put in some evidence by way of Mr Statt’s affidavit. He was cross-examined. Even in the absence of the letter from the tenants, there was evidence on the record from which the master could arrive at the conclusion that he did.

[68]           There are other ways in which the fact of an ongoing tenancy could be proved. For example, the insured could tender an affidavit from the tenants or an expert report about the rental market in the area during the relevant time. In the end “[t]he presiding judge must be left with sufficient confidence in the state of the record such that he or she is prepared to exercise the judicial discretion to summarily resolve the dispute:” Weir-Jones at para 47.

As such, the insurer’s appeal with respect to the limitation period was dismissed, and the summary judgment for damages was upheld. The insurer’s appeal on the umpire’s jurisdiction was allowed.

Salmon v Mama Panda Ltd, 2021 ABQB 569

This claim arose out of a slip and fall in 2007 where the Plaintiff suffered injuries, and subsequently sued a number of physicians for allegedly negligent treatment leading to an aggravation of her ankle injury. The Defendant owners of the property where the slip and fall took place provided the claim to their insurer to handle the matter on their behalf.

An issue arose in the course of the action where it was discovered the original counsel acting on behalf of the Plaintiff failed to name to proper doctor who placed the allegedly negligent case on the Plaintiff. That lawyer withdrew as counsel and a separate action was commenced by the Plaintiff against him. The insurer of the property owners had no knowledge of these circumstances.

It was not until the physician defendants filed summary dismissal applications in 2016 that counsel for the land owners received notice that another physician, Dr. Page, was the physician who applied the allegedly negligent cast. The land owner defendants filed a third party claim against Dr. Page promptly at this point. Given the passage of time between the events giving rise to the claim and the filing of the third party claim, Dr. Page applied to strike the third party claim on the basis that it had been filed outside of the limitation period.

While the Court found that the adjuster appointed by the insurer for the Defendant land owners had no personal knowledge of the claim against Dr. Page until early 2016, the applicants argued that she ought to have known about the claim sooner, and as such the land owner Defendants had knowledge by virtue of their agent.

The Court maintained that principals are bound by the knowledge or subjective knowledge of their agents:

[14]           Where a principal has turned over the entire defence to an insurer, who then assumes full responsibility for the defence of the claim, with no or little involvement of the principal, the principal should be bound by the knowledge or subjective knowledge of the agent. This includes situations such as lawyers for parties or insurers, to name a few examples that illustrate the relationship.

[15]           Thus, although it cannot be said that the Panda defendants ought to have known of the claim, they would be bound should the insurer running their defence be found to ought to have known.

The critical principles from the case law cited by the Court were that a party must be in possession of sufficient facts to support an allegation of negligence; however a Plaintiff still bears a responsibility to conduct due diligent to acquire such facts:

[18]           A suspicion is not sufficient, yet all details are not necessary, just the facts sufficient to support an allegation of negligence: Kydd v Abolarin2011 ABQB 690 at para 36. Likewise, a plaintiff is required to exercise reasonable diligence to acquire the facts necessary to determine whether to commence an action: Kydd at para 39. In some instances, the requirement of due diligence means that having a suspicion will be enough to put the plaintiff on notice, or trigger a need for further investigation or inquiry: Longo v MacLaren Art Centre Inc.2014 ONCA 526 at para 42. Where there is something that gives rise to a need for further inquiry, the plaintiff must act reasonably in investigating the matter to determine whether a claim has arisen. A limitation period will not be tolled while a plaintiff sits idle and takes no steps to investigate. Again, the nature and extent of the required action will depend on all the circumstances of the case. One must look to: the nature of the acts leading to the claim; the circumstances under which it occurred; the nature of the loss or injury; the nature of the relationship between the parties; the sophistication of the parties; was there a business relationship, if so, standard practices of the parties in that type of relationship; and what steps were actually required to gather the information to ascertain material facts giving rise to the claim: Fibabanka A.S. v Arslan2019 SKQB 94.

If a party does not have actual knowledge, the Court will then consider what a reasonable person would have known or could have discovered with the exercise of due diligence. In this case, the Court determined that there was nothing whatsoever in the documents provided to the land owner’s insurance adjuster that would have suggested to her the actual offending physician had not been property identified and sued by the Plaintiff. While the Plaintiff argued that she could have done many things that would have potentially notified her of this issue (such as ordering a procedure card to obtain the pleadings filed by the other doctors, or hiring an expert to review the medical evidence submitted by the Plaintiff), the Court found no evidence that a reasonable person acting in the position of the land owner’s adjuster would have or should have known about Dr. Page being actually responsible for the medical negligence portion of the claim. As such, the Court declined to strike the third party claim under s.3(1.1) of the Limitations Act.

Given the decision the Court did not have to consider whether s.6(4) of the Limitations Act saved the third party claim, though obiter reasons were given. The Court considered the fact that Dr. Page’s agent, the CMPA, did have knowledge of the defence of Dr. Brussow as well as the affidavit of Dr. Brussow filed in support of his summary dismissal application, which pointed to Dr. Page as the responsible party. Dr. Page also admitted that he had no independent recollection of treating the Plaintiff and his only memory came from his notes, so he had not been prejudiced at all by the passage of time. The Court concluded that the CMPA had sufficient knowledge such that the claim against Dr. Page should proceed:

[37]           In my view, section 6(4)(b) of the Act is primarily concerned with avoiding prejudice to parties who are added to an action long after the initial claim is filed. The words “sufficient knowledge of the added claim that the defendant will not be prejudiced” seem to indicate that knowledge is a means of removing prejudice. Where there is prejudice due to a lack of knowledge, the amendment should be barred: that is logical. However, it is a different proposition altogether to say that where there is no prejudice, insufficient knowledge in itself should negate the operation of section 6(4)(b).

[38]           Dr. Page properly concedes that he is not prejudiced by lateness of the claim against him, as he has no independent recollection of treating Ms. Salmon on April 13, 2007. He relies wholly on his notes from that day to refresh his memory, and these notes will be available to him if he is to testify. Given his concession, I see no issue with allowing the claim against him to proceed where his agent, CMPA had full knowledge of the claim well within the limitation period.

Accordingly, the application to dismiss the third party claim was dismissed.