An ultimate limitation period may not time bar a claim for benefits if the discovery of the potential claim was delayed.
The one year limitation period set out in clause 6(c) of the SEF 44 endorsement may start to run only when a judgment or binding settlement legally fixes the amount of those claims. This will often allow an injured person sue later than the ultimate "ten year" statutory section 3(1)(b) of the Limitations Act. Section 7(1) of the Limitations Act expressly allowes that extension. Alternatively, section 647 of the Insurance Act permits the contractual limitation period in the endorsement.
Shaver v. Co-operators General Insurance Co.,  A.J. No. 1411, December 15, 2011, Alberta Court of Appeal, C.A. Fraser C.J.A., J.E.L. Côté J.A. and D.C. Read J. (ad hoc)
This was an appeal by the insurer from the dismissal of its motion for summary judgment to dismiss the claim. The plaintiff was injured in a three car collision that occurred more than 10 years earlier. At the time of the accident, the plaintiff had his own insurance coverage for underinsured or uninsured motorist. The plaintiff came to believe that the compensation elsewhere might be inadequate. He then commenced the current action against his own insurer for coverage under the underinsured or uninsured motorist endorsement. His claim was commenced approximately six months after the plaintiff received a payout from the unsatisfied judgment fund at about ten years and two weeks after the accident occurred. The insurer brought a motion to have the claim dismissed on the basis that it was commenced after the expiry of the ultimate limitation period of ten years. The plaintiff argued that his claim was commenced within the time as the one year limitation period in the uninsured/underinsured motorist endorsement of his policy applied and that time limit only began to run on discovery, which occurred after he received his payout from the unsatisfied judgment fund.
The motions judge found that the limitation period in the uninsured/underinsured endorsement applied and that it did not begin to run until the plaintiff had received his payout from the unsatisfied judgment fund. This decision is an appeal of the motions judge's ruling.
The Alberta Court of Appeal held that the Insurance Act does not contain any direct freestanding limitation period. As such, there are three possible time limits for suing. The first is the two year general limitation period found in section 3(1)(a) of the Limitations Act. The second is the ten year limitation period in section 3(1)(b) of that Act. The third limitation period is the contractual one year period in clause 6(c) of the SEF 44 endorsement on the plaintiff's insurance policy.
The defendant insurer relied on the ten year period in section 3(1)(b). The defendant insurer stated that the ultimate ten year period did not depend on discoverability. The plaintiff relied on the contractual limitation period in clause 6(c).
The Court found that the contractual period expressly only begins to run on discovery. Clause 6(c) provides that time starts to run
"…from the date upon which the eligible claimant or his legal representatives knew or ought to have known that quantum of the claims with respect to an insured person exceeded the minimum limits for motor vehicle liability insurance in the jurisdiction in which the action occurred."
The court held that the time under clause 6(c) may start to run only when a judgment or binding settlement legally fixes the amount of those claims. The court went through a number of reasons why this would take a long period of time. Specifically, the court noted that the endorsement defines the claim payable to the insured as being net of a number of possible payments, including "an unsatisfied judgment fund". Thus, one would not only have to look at the quantum of the plaintiff's claims but also the funds available to pay it. It would also involve actions by and information from other entities, and from other injured claimants.
The court upheld the validity of the contractual time limit noting that section 647 of the Insurance Act states that a suit under such coverage "must be commenced within the limitation period specified in the contract…." The court further held that section 647 of the Insurance Act should prevail over section 7(a) of the Limitations Act as section 647 is narrower and more specific. The court then went on to consider the possibility that if section 7 of the Limitations Act did prevail, that the proper interpretation of section 7(1) and (2) of the Limitations Act was to determine what the last day the Act allowed the plaintiff to sue and whether the contract chose a date earlier or later than that. The court held that if the contract chose an earlier date, then the contract was invalid. However, if the contract chose a later date, the contract notation period would be valid.
The court held that a contractual clause 6(c) limitation period would often purport to let the injured person sue later than the ultimate "ten year" statutory section 3(1)(b) of the Limitations Act. The court held that sections 7(1) of the Limitations Act expressly allowed that. And, in any event, section 647 of the Insurance Act permits the contractual limitation period in the endorsement in issue here.
The court dismissed the appeal, the summary dismissal motion, and sent the suit to trial on its merits, free of any limitations defence.