Canada: Ontario Judge Allows Insured To Amend Claim To Include Additional Policies And New Heads Of Damages After Expiry Of Limitation Period

Last Updated: March 20 2018
Article by Dylan J. Cox

An Ontario judge recently permitted an insured to amend its claim after the limitation period had expired, to plead additional insurance policies that applied to the same claim and new heads of damages.1 The judge's decision is a sensible one. It protects insureds from having to claim aggravated and punitive damages or a breach of the insurer's duty of good faith before the evidence underlying those claims is typically available.

The facts

Peter Sbaraglia held three different long-term disability (LTD) policies issued by Canada Life Assurance Company. In 2011, he made a claim with Canada Life under each policy. In 2012, Canada Life denied his claim. The following year, Mr. Sbaraglia sued Canada Life for breach of contract. Mr. Sbaraglia's Statement of Claim only identified one of his three LTD policies. His failure to list the other two policies was inadvertent. Mr. Sbaraglia later asked for Canada Life's consent to add the two policies to the Statement of Claim by way of amendment. Canada Life refused to give its consent, so Mr. Sbaraglia issued a second Statement of Claim in November 2016, which referenced all three policies.

The motion to amend

To avoid the need for multiple proceedings, in August 2017, Mr. Sbaraglia moved to add the missing two policies to his first Statement of Claim by way of amendment. Mr. Sbaraglia also sought to add a claim for punitive and aggravated damages.

The court granted Mr. Sbaraglia's motion, finding that there was a history of the three policies being treated as a single unit. When Mr. Sbaraglia made his 2011 claim, he did so under all three policies. Communications in Canada Life's file, including its 2012 denial letter, referred to the three policies as a single unit. When it received the first Statement of Claim, Canada Life knew that Mr. Sbaraglia was contesting its denial of disability benefits. Although the first Statement of Claim only referred to one policy, Canada Life ought to have known the claim was being made under all three policies.

The court also accepted the proposed amendment because it did not allege any new and distinct claims unrelated to those made in the first Statement of Claim. Adding allegations of aggravated and punitive damages did not amount to adding a new and distinct claim. A claim for a particular type of damages is a remedy, not a separate claim. Mr. Sbaraglia was also not advancing a new theory of liability. Instead, he simply sought to rely on additional facts (i.e., the existence of the two missing policies) to support an existing breach of contract claim. All of Mr. Sbaraglia's claims were based on a theory of liability advanced in the first Statement of Claim.

The final reason for granting Mr. Sbaraglia's motion was that his proposed amendment would eliminate the need for multiple proceedings.

Guidance regarding the drafting of coverage claims

Sbaraglia is a well-reasoned decision that provides guidance to insureds. The court sensibly found that allegations of aggravated and punitive damages are not new and distinct claims. A contrary finding would have imposed a strict deadline for bringing such claims. In Ontario, this deadline would usually be two years after the date of the insurer's denial, although under certain property policies, the deadline is one year after the loss or damage of the insured property.

The imposition of such a deadline would have an unwanted effect on the preparation of coverage claims. Claims for aggravated and punitive damages do not arise from every policy denial. However, the evidence required to determine whether these claims are warranted is typically not available to an insured until later in the litigation process, potentially after the limitations deadline would have passed.

Ruling that allegations of aggravated and punitive damages are new and distinct claims would have placed insureds in a difficult position. On the one hand, the court in Sbaraglia notes that claims for aggravated and punitive damages should not be made lightly. However, faced with an early deadline for alleging these damages, insureds would have to include such allegations in every coverage claim, as a matter of course. Insureds would then have to subsequently abandon whatever allegations are not borne out by the evidence, a practice that would waste resources. This would be the only way to protect those claims for aggravated and punitive damages that would be eventually borne out by the evidence.

Fortunately, Sbaraglia shows that allegations of aggravated and punitive damages are not new and distinct claims. Insureds can rest assured that if they fail to demand aggravated and punitive damages but later discover supporting evidence, they will still be able to make a claim.

Finally, the court in Sbaraglia noted that when advanced alongside a claim for wrongful denial of policy benefits, a claim for breach of the insurer's duty of good faith is not a new and distinct claim.2 The comments regarding aggravated and punitive damages also apply here. If an insured sues for wrongful denial of policy benefits, he/she can add a claim for breach of the duty of good faith if he/she subsequently discovers evidence supporting that claim.

Footnotes

1. See Sbaraglia v. Canada Life Assurance, 2018 ONSC 8.

2. For further discussion, see Britton v. Manitoba, 2011 MBCA 77 at paras 15, 46, a case cited in Sbaraglia.

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.

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