May 30, 2017, Kitchener, Ontario
Posted by: Robert Deutschmann, Personal Injury Lawyer
Usanovic v. Penncorp 2017 ONCA 395
Insurer has no obligation to advise insured of limitation period
Date of Decision: May 18, 2017
Heard Before: Chief Justice Strathy
On appeal from the judgment of Justice David A. Broad of the Superior Court of Justice
The motion judge granted summary judgment dismissing Mr. Usanovic’s action against his disability insurer because it was time-barred. He rejected Mr. Usanovic’s allegation that the insurer breached its duty of good faith by failing to inform him of the limitation period when it terminated his benefits. Mr. Usanovic re-iterates this submission on appeal.
Justice Strathy dismissed the appeal. Under the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, the limitation period began to run when the claim was “discovered”, as determined by s. 5. The insurer’s duty of good faith did not require it to give notice of the limitation period to its insured. While the legislatures of some provinces have imposed a statutory obligation to that effect, there is no such requirement in Ontario. Whether there should be is a matter is left to the legislature.
Mr. Usanovic was a self-employed eavestrough installer. In 1999, he bought an insurance policy from Penncorp. The policy insured him against disability arising from accidents. In 2004, he purchased additional coverage for disability arising from sickness.
In September 2007, Mr. Usanovic fell from a roof and suffered serious injuries. He received disability benefits until November 2011, when Penncorp terminated its payments because he no longer had a “total disability”, as defined by the policy.
On January 12, 2012, Penncorp’s lawyer wrote to Mr. Usanovic explaining that since benefits had been paid for 24 months, he was not entitled to receive further benefits unless he was unable to engage in any and every occupation for which he was reasonably fit by reason of his education, training and experience. A review of the medical information on his file did not support the conclusion that he had a total disability. Moreover, surveillance undertaken by the insurer was inconsistent with the limitations Mr. Usanovic claimed to be suffering. The lawyer’s letter added, “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 from any occupation for which you are reasonably trained and educated”.
Mr. Usanovic did not provide new medical records in response to the letter. He claimed in an affidavit that he had sent a letter to the insurer, dated February 3, 2011, protesting the termination of his benefits. Penncorp denied having received that letter. In cross-examination, Mr. Usanovic admitted that he knew his benefits had been terminated, had received the lawyer’s letter, had read the policy over, had discussed the matter with his wife many times and had considered hiring a lawyer, but could not afford to do so.
In early 2015, Mr. Usanovic consulted counsel, who told him that there was a two-year limitation period on his claim. Mr. Usanovic alleges that, had the insurance company told him about the limitation period when it denied his claim, he would have brought an action earlier. He commenced this action in April 2015, more than two years after the termination of his benefits and receipt of the letter from Penncorp’s lawyer.
The disability policy issued by Penncorp to Mr. Usanovic covers “total disability” arising from accident or sickness. For the first 24 months, the insured is entitled to benefits if he or she is “unable to perform any of the important daily duties pertaining to his occupation or profession” and is not otherwise employed. After 24 months, as noted above, the definition changes to cover only the complete inability to engage in any occupation for which the insured is reasonably fitted.
The policy has “Statutory Conditions” attached. These include the following:
LIMITATION OF ACTIONS: An action or proceeding against the Insurer for the recovery of a claim under this Contract shall not be commenced more than one year after the date insurance money became payable or would have been payable if it had been a valid claim.
Penncorp concedes that this provision is inapplicable as a result of s. 22(1) of the Limitations Act, 2002.
DECISION IN THE COURT BELOW
Before the motion judge, Mr. Usanovic argued that Penncorp’s denial was not sufficiently clear and unequivocal to trigger the limitation period. The motion judge found against him, holding that the limitation period began to run when Mr. Usanovic received the lawyer’s letter on January 12, 2012. Mr. Usanovic did not pursue that argument on appeal.
Mr. Usanovic’s alternative submission in the court below, and the one advanced in this court, was that the insurer’s duty of good faith and fair dealing obliged it to advise its insured of the applicable limitation period on denying or discontinuing insurance benefits and that the two-year limitation period did not begin to run until the insurer gave this notice.
The motion judge rejected this argument. He observed that, “in my view, the extension of the law proposed by the plaintiff would represent a substantial shift in the boundaries of the obligation of good faith and fair dealing on insurers as they are presently understood”
His core conclusions, at paras. 40-42, were as follows:
It would appear that, at its highest, the obligation of good faith and fair dealing arguably carries with it a positive obligation on an insurer to inform its insured of the nature of the benefits available under the policy. There is a marked difference, however, between imposing on an insurer a positive obligation to advise with respect to rights and benefits internal to the policy and the imposition of an obligation to advise with respect to the application of law external to the policy, such as pursuant to the Limitations Act.
In Justice Strathy’s view the court should be circumspect in extending the common law to impose positive obligations of general application on parties, particularly where the implications of so doing are unknown. Justice Strathy noted the law of insurance is broadly occupied by legislation and it should be left to the legislature to regulate, if it deems it necessary and appropriate, the nature and extent of information which must be given by insurers to their insureds upon denial of benefits, including the existence and details of applicable limitation periods. Justice Strathy found there was no obligation in law on the Penncorp to advise the plaintiff of the applicable limitation period in the Limitations Act.