In Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), 2017 ONCA 395, the Court of Appeal for Ontario concluded that an insurer has no obligation to advise the insured about the running of a limitation period. While provinces such as British Columbia and Alberta have imposed a statutory obligation to that effect, there is no such requirement in Ontario. The Court of Appeal has made it clear that whether there should be such a requirement in Ontario is a matter for the legislature.

Background

In September 2007, the appellant suffered serious injuries. He received disability benefits until November 2011, when the respondent’s insurance company terminated payments. On January 12, 2012, the respondent’s lawyer wrote to the insured denying further benefits under the terms of the policy. On cross-examination, the insured admitted he knew, upon receiving this letter, that his benefits had been terminated. In April 2015, more than two years after the termination of his benefits, the insured launched the action claiming that he would have brought the action earlier had the insurer told him about the limitation period.

The motion judge granted summary judgment dismissing the insured’s action on the ground that it was time barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (Limitations Act). The motion judge rejected the insured’s allegation that the insurer breached its duty of good faith by failing to inform him of the limitation period at the time of termination of his benefits.

Decision

The Court of Appeal agreed with the judge below that the insurer’s duty of good faith and fair dealing does not include an obligation to advise an insured of the applicable limitation period on a decision to deny or discontinue benefits. The Court of Appeal affirmed that the two-year limitation period runs from the date of receipt of an unequivocal denial of benefits.

The Court of Appeal explained that the duty of good faith owed by the insurer is not the same as a fiduciary duty. The duty of good faith requires an insurer to act promptly and fairly when investigating, assessing and attempting to resolve claims made by an insured. The insurer is not obligated to treat the insured’s interest as paramount.

The duty of good faith and fair dealing also imposes on the insured a positive obligation to inform the insured of the nature of the benefits available under the policy. The Court held, however, that there is a difference between this positive obligation and “the obligation to advise on the application of law external to the policy such as the Limitations Act” (which the appellant was suggesting). The Court noted that while it may be prudent for the insurer to advise the insured of the limitation period, the Court will not impose such a duty to do so.

The Court also pointed to the fact that various provinces, such as Alberta and British Columbia, have enacted legislation requiring the insurer to inform the insured of the limitation period, which provides that the limitation period does not start to run until this notice is given. The Court expressed that a properly crafted legislative regime would not only specify the requirement to give notice, but also the consequences of failing to do so.

Conclusion

As noted by the Court of Appeal, the Ontario legislature has provided in the Insurance Act, R.S.O. 1990, c. I.8 that life, disability and creditors’ insurers must notify the insured of the Limitations Act more generally by mandating the inclusion of the following statement in the insurance policy and certificate:

Every action or proceeding against an insurer for the recovery of insurance money payable under the contract is absolutely barred unless commenced within the time set out in the Limitations Act, 2002.

However, until the legislature states otherwise, in Ontario, the limitation period for a claim relating to denial of benefits runs from the date that an unequivocal denial of benefits is received by the insured.

As of the date of publication, no application for leave to appeal has been filed with the Supreme Court.