April 14, 2015

SABS Update- We Made an Oopsie: Insurer Mistake Does Not Reset Clock for Limitation Period

Blake v. Dominion of Canada General Insurance Company, 2015 ONCA 165, Ontario Court of Appeal

This case is about when a refusal to pay a benefit triggers a limitation period.

Ms. Blake was injured in a car crash November 18, 2002. At the time of the crash Ms. Blake was caring for three young children. She applied for caregiver benefits on December 20, 2002. Dominion of Canada General Insurance Company (Dominion) denied the benefit on January 14, 2004 and told her they would stop payments as of January 31, 2004. She sued, went to trial and lost in part because the trial judge said that her action against Dominion was started too late, beyond the two year limitation period from the time she was denied benefits. The chronology of events is complicated, but the case comes down to this: Dominion, in error, paid her benefits after it said it was denying her the caregiver benefits. Ms. Blake argued that the payment made after the denial restarted the limitation period clock. Ms. Blake reapplied for benefits, was denied again and so she sued on May 30, 2007.

Arbitrators have agreed with her logic. The Court of Appeal disagreed.

ANALYSIS

Under the Insurance Act and the Statutory Accident Benefits Schedule a claimant must start a lawsuit within two years of the insurer’s refusal to pay the benefit or amount claimed. The question for Ms. Blake is when the insurer refused to pay.

The limitation period starts when the insurer gives a proper refusal. A proper refusal must be a clear and unequivocal refusal of benefits in a simple, straightforward fashion.

The trial judge held that that the refusal date was January 31, 2004. The action was started 3 years later so it was too late. Ms. Blake argued at the Court of Appeal that the payment made after the refusal, even if mistaken, re-set the limitation clock. The Court of Appeal noted that FSCO decisions have held that resumption of payment after an initial denial negates the denial previously issued. However, even if the payment re-set the limitation clock, Dominion was clear in its March 12, 2005 letter that payment had been made in error and that their that caregiver benefits ended January 31, 2004. At best the 2-year limitation would run from March 12, 2005. Even then Ms. Blake’s claim action was started too late.

The Court also dismissed Ms. Blake’s argument that the limitation period did not start to run until the August 2006 denial. Once an insurer has denied a benefit, re-applying for the same benefit does not restart the clock.

IMPLICATIONS

It may not always be clear when an insurer has refused a benefit claimed. To protect the interest of their clients, lawyers should act on the assumption that the first denial of a benefit is a proper denial and that the limitation period has started to run. Events after a denial must be examined closely and carefully and should not be assumed to re-set the limitation clock.

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