The Ontario insurance regime currently requires insurers to notify injured policy holders of applicable limitation periods in a number of specific scenarios. In accident benefits claims, insurers are required under the Statutory Accident Benefits Schedule (SABS) to notify insureds of “the relevant time limits that govern the entire process” (see Smith v. Co-operators General Insurance Co, 2002 SCC 30 at para 14 [Smith]), and accordingly all OCF-9s provide that insureds “have two years from the date of your insurer’s refusal to pay” to arbitrate or commence a lawsuit in court. Similarly, 2016 amendments made to the Insurance Act require life, disability and creditor insurers to include blanket statements in their insurance policies and certificates which provide that actions against the insurer are “absolutely barred unless commenced within the time set out in the Limitations Act, 2002”.
While the presence of these consumer protections would appear to suggest that insurers generally have a duty of good faith to inform all insureds of statutory limitation periods applicable to their case upon a denial, the Ontario Court of Appeal has found that this is not the case.
In Usanovic v. Penncorp Life Insurance Company the insured plaintiff was an eavestrough installer who was seriously injured in September 2007 when he fell from a roof in the course of his employment. The plaintiff received disability benefits from January 2008 until November 2011, when the insurer terminated the benefits because he no longer met the definition for “total disability” under the policy.
In January 2012, the insurer’s lawyer wrote to the plaintiff explaining that since benefits had been paid for 24 months, he was not entitled to receive further benefits unless he met the definition for total disability. The lawyer’s letter added that “if you disagree with this decision, please submit, within sixty days of receipt of this letter, medical records in support of your claim for total disability”. Otherwise, the letter did not advise the insured of the two-year limitation period to commence a claim following the termination of his benefits. The insured did not contact a lawyer until early 2015, and did not commence a claim until April 2015.
The insurer brought a motion for summary judgment to dismiss the plaintiff’s claim on the basis that it was statute barred under the Limitations Act, 2002. The motion judge allowed the insurer’s motion and dismissed the insured’s claim, which the plaintiff appealed to the Court of Appeal. On appeal, the plaintiff relied on the Supreme Court’s decision in Smith, supra, to argue that the insurer had a duty to advise the plaintiff of the limitation period when a claim was denied.
In Smith, the SABS at that time required the insurer to inform the insured, in writing, at the time a claim was denied, of the statutory procedure for the resolution of disputes. The Supreme Court held that the effect of the SABS was to require the insurer to inform the insured “of the most important points of the process such as the right to seek mediation, the right to arbitrate or litigate if mediation fails, that mediation must be attempted before resorting to arbitration or litigation and the relevant time limits that govern the entire process”. Without providing that information to the insured, the Supreme Court found that the insurer had not given a valid refusal to the insured and that the time limit had not begun to run.
Justice Strathy in Usanovic observed however that there was no statutory provision that applied to the plaintiff’s disability benefits that was similar to the insured’s obligation provided for in the SABS. It was further noted that a number of other provinces, such as Alberta and BC, had in fact legislated such limitation period notice requirements on insurers for all insurance policies, while Ontario had not. Given that the Ontario legislature had chosen not to do so, Justice Strathy held that the courts should not impose consumer protection measures on insurers that the legislature had not itself required.
Usanovic underscores the importance of punctually commencing proceedings when an injured plaintiff is denied for disability benefits, as the insured will not be able to rely upon a lack of notice by the insurer that a limitation period applies to their claim. This case also reinforces the importance of plaintiff’s counsel to engage in their due diligence by utilizing adequate tickler systems and the delivery of no-action letters to phantom clients. More broadly speaking, the Usanovic decision speaks to the need for the Ontario legislature to protect injured plaintiffs by requiring insurers to indicate to insureds the applicable limitation periods when such disability claims are denied.