Canada: Developments In Loss Transfer: Does The Doctrine Of Laches Apply To Bar Delayed Claims?

Canada v. Lombard General Insurance Company of Canada1 and Zurich Insurance Company v. TD General Insurance Company2, have left the law unclear with respect to the doctrine of laches as applied to Ontario's loss transfer regime. We do however, expect to hear from the Ontario Court of Appeal in the near future as Intact v. Lombard's leave to appeal was granted and was heard earlier this spring (Court File No. C58290). Unfortunately, until the Court of Appeal passes judgment, we are left with conflicting rulings with respect to the doctrine of laches as it applies to loss transfer.

Below is a summary of both cases.

I. Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada

Intact v. Lombard is significant as Justice Chiappetta made two important conclusions: (1) the right to loss transfer indemnity is purely statutory and thus, only statutory limitation periods limit the statutory right to loss transfer indemnity; and (2) as the doctrine of laches is an equitable relief, it could not be applied to loss transfer claims as claims of this sort do not have a "distinctively equitable flavour".

A. Background

In Intact v. Lombard, Intact Insurance Company of Canada ("Intact") paid accident benefits to their insured as a result of a motor vehicle accident that occurred on February 13, 2007.

On September 7, 2011, Intact made its first indemnification request to Lombard General Insurance Company of Canada ("Lombard"). Lombard refused to indemnify Intact based on the amount of time that had elapsed from the date of the accident to the date of Intact's first indemnification request. The matter was submitted to arbitration where the arbitrator agreed with Lombard that laches applied to the circumstances of the case. He barred Intact from pursuing its loss transfer claim against Lombard due to the delayed notice under s. 275 of the Insurance Act.

B. On Appeal to the Superior Court of Justice

On appeal to the Superior Court of Justice, Justice Chiappetta concluded that the doctrine of laches did not properly apply to loss transfer claims. Justice Chiappetta stated that the right to loss transfer indemnity is purely statutory. Lombard's claim did not have a "distinctively equitable flavour" and was therefore, devoid of equitable relief.3 As such, Justice Chiappetta concluded that "only statutory limitation periods limit the statutory right to loss transfer indemnity."4

Since the Ontario Court of Appeal had recently confirmed that the two-year limitation period to initiate arbitration for a loss transfer claim begins to run the day after the first party insurer sends an indemnification request to a second party insurer,5 a first loss insurer retains full control and can unilaterally determine when to trigger the limitation period. This could, according to Justice Chiappetta, prove contrary to the legislative purpose of the Insurance Act to provide an "expedient and summary method" of reimbursement and indemnification.6 However, it was "nonetheless not appropriate to purposely re-characterize the equitable doctrine of laches in an effort to fill a perceived legislative omission, or to augment a statutory limitation period."7

Further, Justice Chiappetta concluded that even if the doctrine could apply, Lombard could not establish the necessary elements of the defence.8 Mere delay is insufficient to apply the laches defence. A defendant relying on the laches defence must show a combination of delay and either (a) the plaintiff's acquiescence or (b) prejudice to the defendant.9 She concluded that the arbitrator's finding of both acquiescence and prejudice was unreasonable.

With respect to the plaintiff's acquiescence, Justice Chiappetta stated that Intact chose not to start the limitation period on its rights for four years and eight months. The delay reserved, rather than waived, Intact's loss transfer rights.10 With respect to prejudice to the defendant, Lombard had to establish both delay and prejudice under the second branch of the laches defense. The arbitrator found that mere delay was sufficient to presume prejudice and thereby presume that laches applied. However, this presumption effectively rejected the Supreme Court's statement that "mere delay is insufficient" to establish that laches applies.11 Justice Chiappetta concluded that Lombard did not submit any facts demonstrating prejudice or that Intact's delayed indemnification request affected Lombard's investigation of the accident. Therefore, delay was present however, acquiescence and/or prejudice was not. Even if the doctrine could apply, it was not reasonable for the arbitrator to conclude that Lombard established the necessary elements of the defence.

The appeal was allowed and Lombard was ordered to indemnify Intact.

II. Zurich Insurance Company v. TD General Insurance Company

Zurich v. TD, a case tried 7 months after Intact v. Lombard distinguished Justice Chiappetta's conclusions in the following three ways: (1) Ontario's loss transfer regime possesses an "equitable flavor"; (2) in "unique circumstances" (such as delaying 11 years to bring a loss transfer claim) the doctrine of laches may apply to a loss transfer claim; and (3) acquiescence and prejudice are separate branches of laches and in some circumstances, acquiescence can justify the application of laches in the absence of prejudice.

Though Zurich v. TD distinguished Intact v. Lombard in those ways, Justice Lederman followed Markel and stated that the limitation period to initiate arbitration for a loss transfer claim begins to run the day after the first party insurer requests loss transfer from the second party insurer.

A. Background

In Zurich v. TD, Zurich appealed a loss transfer arbitration proceeding arising from a multi-vehicle collision that occurred on July 14, 1999. The accident involved an automobile insured by TD and a heavy commercial vehicle insured by Zurich. The driver of the automobile applied for accident benefits in August 1999. Over the next decade, TD paid benefits to its insured. In February 2010, approximately 11 years after the accident, TD sent Zurich a Notice of Loss Transfer alleging that Zurich's insured was 100 percent at fault and made two loss transfer requests for indemnification. In August 2011, TD brought an application for an order requiring Zurich to participate in a loss transfer arbitration. TD and Zurich agreed to proceed with a preliminary issue of a motion brought by Zurich to dismiss TD's application for loss transfer. Zurich argued that TD's loss transfer was barred by the equitable doctrine of laches and by operation of the Limitations Act 2002.13

Prior to the appeal, the arbitrator acknowledged that he was bound by Justice Chiappetta's decision in Intact v. Lombard but stated that he disagreed with her finding that laches could not be applied to a statutory claim for loss transfer. The arbitrator held that in any event, Zurich had failed to establish "the necessary components of laches... one of them being presumed prejudice or actual prejudice."14

With respect to the Limitations Act, the arbitrator agreed with the analysis and finding of the Ontario Court of Appeal in Markel whereby the limitation period runs the day after the first party insurer requests loss transfer from the second party insurer. As TD's application for an order requiring Zurich to participate in arbitration was brought within two years of requesting indemnity, TD had satisfied its requirements under the Limitations Act.15

B. On Appeal to the Superior Court of Justice

Upon appeal to the Superior Court, Justice Lederman agreed that Markel was still binding law in Ontario. Even though the delay in the case at hand was more egregious than in Markel, the Markel decision applied to the facts of the case and as in Intact v. Lombard, Zurich's argument that TD's claim was statute barred by virtue of the Limitations Act was rejected.16

However, Justice Lederman's analysis of the doctrine of laches is where this case differs from Intact v. Lombard. He concluded that in the unique circumstances of the case at hand, the doctrine of laches applied where a "first party insurer delays for approximately 11 years in requesting loss transfer from a second party insurer."17

Traditionally, the doctrine of laches had only been applied to equitable, and not legal, claims. However following the fusion of law and equity, courts had been more flexible in applying the doctrine to legal claims under "certain circumstances."18 Justice Lederman stated that Ontario's loss transfer regime possessed an "equitable flavor" as it was designed to address unfairness between participants in the province's insurance industry, and this is a sufficient basis to permit the application of the doctrine of laches.19 He pointed to Bulletin A-11/94, where the former Ontario Insurance Commission (now the Financial Services Commission of Ontario ("FSCO")) stated that "loss transfer was introduced in order to balance the cost of providing accident benefits between specified classes of vehicle."

Additionally, Justice Lederman concluded that there is currently no limitation period governing when a first party insurer ought to make a loss transfer claim to a second party insurer. In the case at hand, this had resulted in a loss transfer claim being made almost 11 years after the accident giving rise to the loss. "Applying laches in these circumstances is ...consistent with the principle that the fusion of law and equity has evolved in order to achieve just results."20

In furtherance of this, Justice Lederman also stated that applying the doctrine of laches to loss transfer claims was consistent with the purposes of the Limitations Act, which was for the "promotion of certainty and clarity in the law of limitation period." 21 Applying laches in the current situation where a first party insurer had waited approximately 11 years to request indemnification met this objective.22

Important to note, Justice Lederman concluded that prejudice is not a necessary requirement for a finding of laches and rather acquiescence is sufficient on its own to apply the doctrine of laches to preclude TD from pursuing indemnity.23 Justice Lederman stated that the leading case on laches, M. (K.) v. M. (H.)24 suggested that acquiescence and prejudice are separate branches of laches and in some circumstances, acquiescence can justify the application of laches in the absence of prejudice.25

With this in mind, Justice Lederman reviewed how the courts had previously described acquiescence. He noted that the Supreme Court of Canada stated that acquiescence depended on "knowledge, capacity and freedom" and at least implied that in some cases, delay might also be interpreted as a clear act by the plaintiff that amounts to acquiescence.26 Looking at the facts of the case, Justice Lederman pointed out that Bulletin A-11/94 stated that a first party insurer should notify a second party insurer of a loss transfer "promptly".

Justice Lederman concluded that given this direction, the fact that TD was a sophisticated insurer that had knowledge, capacity and freedom with respect to its rights, and perhaps most importantly, the almost 11-year delay, Justice Lederman ultimately concluded that "TD's delay in requesting loss transfer gave rise to an inference that it had abandoned or waived its rights to the claim."27

Therefore, under the unique circumstances of the case, TD acquiesced, and therefore its loss transfer claim against Zurich was barred by the doctrine of laches. The appeal was allowed, the arbitrator's decision was set aside and TD's loss transfer application was dismissed.

III. Conclusion

As these two cases illustrate, the Ontario Superior Court of Justice has written conflicting decisions on whether the doctrine of laches applies to loss transfer claims. Unfortunately, no other cases are available to aid us in understanding what direction the Ontario Superior Court is leaning to over this issue. However, as the Ontario Court of Appeal is set to review Justice Chiappetta's decision shortly, we will be better able to assess the merit of this defence in the context of the current claim once they release their decision. Until then, the law is in a state of flux with regards to the applicability of the doctrine of laches with regards to Ontario's loss transfer regime.

Footnotes

1. 2013 ONSC 5878 [Intact v. Lombard].

2. 2014 ONSC 3191 [Zurich v.TD].

3. Ibid, at para. 7.

4. Ibid.

5. See Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218 (CanLII), 109 O.R. (3d) 652, at para. 27 [Markel].

6. See Jevco Insurance Co. v. Canadian General Insurance Co. (1993), 1993 CanLII 8451 (ON CA), 14 O.R. (3d) 545 (C.A.), at para. 547.

7. Intact v. Lombard, at para. 10.

8. Intact v. Lombard, at para. 27.

9. Ibid at para, 15.,

10. Ibid, at para, 20.

11. M. (K.) v. M. (H.), [1992] 3 S.C.R. 6, 1992, at pp.77-78, CanLII 31 (SCC).

12. Intact v. Lombard, at para. 25.

13. S.O. 2002, c. 24.

14. Zurich v. TD, at para. 6.

15. Ibid, at para. 7.

16. Ibid, at para. 13.

17. Ibid, at para. 17.

18. Ibid, at para. 18. See generally Canson Enterprises Ltd. v. Boughton & Co., 1991 CanLII 52 (SCC), [1991] 3 S.C.R. 534 at pp. 585-586 (where La Forest J. stated that the "maxims of equity can be flexibly adapted to serve the ends of justice...)

19. Zurich v. TD, at para. 22.

20. Ibid, at para. 25.

21. Dilollo Estate (Trustee of) v. I.F. Propco Holdings (Ontario) 36 Ltd., 2013 ONCA 550, 117 O.R. (ed) 81, at para. 61..

22. Zurich v. TD, at para. 26.

23. Ibid, at para. 32.

24. See pp.77-78. This is also supported by R.P. Meagher, W.M.C Gummow and J.R.F. Lehane. Equity Doctrines & Remedies (Sydney, Butterworths, 2002). ("…if [a defendant] can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant's conduct or (b) caused the defendant to alter his position....")

25. Zurich v. TD, at para. 37.

26. See Manitoba Métis Federation, at para. 147

27. Zurich v. TD, at para. 47.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think youve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.coms content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltds services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with no disclosure in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a users hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friends name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a users personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that users personal data provided to us. This can usually be done at the Your Profile page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.