Section 5(1)(a)(iv) of the Ontario Limitations Act: Not the Broad Provision We all Assumed it to Be

Section 5(1)(a)(iv) of the Ontario Limitations Act, 2002, S.O. 2002, c.24, Schedule B (the “Act”) postpones the running of the limitation period where the plaintiff is yet unaware that a legal proceeding would be an “appropriate means” to seek to remedy her loss. 

Since its 2016 decision, 407 ETR Concession Company v. Day, 2016 ONCA 709, the Ontario Court of Appeal has already identified two circumstances in which section 5(1)(a)(iv) acts to toll the limitation period:  (i)  where the plaintiff relies on the superior knowledge and expertise of the defendant and the defendant is seeking to remedy the plaintiff’s loss;  and (ii) where an alternative dispute resolution process has yet to fully run its course, rendering legal action premature.

In a recent 2018 decision, Nasr Hospitality Services v. Intact Insurance, 2018 ONCA 725, however, the Court has retreated from its expansive interpretation of section 5(1)(a)(iv).  

Nasr establishes than an insured plaintiff cannot rely on section 5(1)(a)(iv) to postpone the running of the limitation period where an insurer has no intention to forgo a limitations defence.

Facts

Nasr involved a claim by an insured under a commercial insurance policy following property damage caused by flooding.    

The water damage was initially discovered by the insured on January 31, 2013, at which point the insured notified the insurer about the flood.    Upon learning of the flood, the insurer assigned a company to attend and report on any damage.  

Over the next few months, the insurer engaged in settlement discussions with the insured and paid part of the claim.  

During the litigation which later ensued, the insured admitted that there was no act by the insurer which indicated that it would not be relying on a limitations defence.

Ultimately, the insurer denied the insured’s claim under the policy on July 22, 2013.   The plaintiff insured did not commence an action for indemnification under the policy until April 22, 2015.

The insurer argued that the insured’s action was statute-barred as it was clear that the insured knew that a loss had occurred on February 1, 2013, the day after the insured notified the insurer of the loss, and commenced an action against the insurer more than two (2) years from this date.

The insured argued that, despite its knowledge of the loss on February 1, 2013, the limitation period had been postponed under section 5(1)(a)(iv) of the Act.   The insured did not know a legal proceeding would be an “appropriate means” to remedy the loss until the insurer had clearly repudiated its obligation to indemnify under the policy, which did not take place until July, 2013.

On a motion for summary judgment brought by the insurer to dismiss the action as statute-barred, the motion judge agreed with the insured and declared that the limitation period did not begin to run until July, 2013.  The action was not statute-barred.

The majority of the Court of Appeal reversed the motion judge’s decision, with Justice Feldman dissenting.

Section 5(1)(a)(iv) Cannot Be Used to Overcome the Insurer’s Intention to Rely on a Limitations Defence

The Court of Appeal’s analysis in Nasr begins with an understanding of prior Superior Court of Canada jurisprudence which holds that in order for an insurer’s conduct to give rise to a promissory estoppel preventing the insurer from relying on a limitations defence, the insurer’s conduct must amount to a promise on which the insured acted to its detriment: see Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50 and Marchischuk v. Dominion Industrial Supplies Ltd., [1991] 2 S.C.R. 61.

In this case, the insured admitted that the insurer’s conduct following notice of the claim, in which the insurer engaged in settlement discussions with the insured and paid part of its claim, did not amount to the type of conduct contemplated in Maracle and Marchischuk.

Given the insured’s admission that promissory estoppel did not apply to preclude a limitation defence by the insurer, the Court of Appeal held that the motion judge erred in using the insurer’s conduct to conclude that it was not legally “appropriate” under section 5(1)(a)(iv) of the Act for the insured to commence an action until there was an unequivocal denial of the insured’s claim under the policy.  

In other words, to use section 5(1)(a)(iv) in this way would create a “watered-down promissory estoppel” preventing the insurer from raising a limitations defence, contrary to the reasoning of Maracle and Marchischuk.

The Court of Appeal held:

The motion judge did not find that [the insurer] had promised, expressly or impliedly, not to rely on the limitation period.   Accordingly, it was not open to the motion judge to recast, for the purposes of the appropriate means analysis [under section 5(1)(a)(iv)], the conduct by [the insurer] that [the insured] conceded could not support a finding of promissory estoppel that the insurer would not rely on the limitation period…

The Limits of Section 5(1)(a)(iv)

Despite the Court of Appeal’s recent trend toward giving section 5(1)(a)(iv) of the Act a broad interpretation, Nasr illustrates that this section has its limits. 

Where section 5(1)(a)(iv) would have the effect of overturning established case law, such as the law governing when an insurer’s conduct will estop it from relying on a limitations defence, the Court’s reading of section 5(1)(a)(iv) is restrictive.

The majority’s decision in Nasr affirms that Ontario Courts will not use section 5(1)(a)(iv) to circumvent the law of limitations.