Limitation period in SEF Family Protection Endorsement does not commence until final judgment or settlement of underlying claim

Insurance law – Automobile insurance – Limitation of actions – Running of limitation period – Statutory provisions – Duties and liabilities of insurer – Duties and liabilities of insured

Nebozuk v. Northbridge General Insurance Corp., [2022] A.J. No. 375, 2022 ABQB 212, Alberta Court of Queen’s Bench, March 17, 2022, B. Summers J.

The insured was involved in a motor vehicle accident.  He settled his claim for more than $200,000, which is the minimum limit for motor vehicle liability insurance in Alberta.  He brought an action against his insurer under the SEF 44 Family Protection Endorsement.  The insurer applied for summary dismissal of the action on the basis that the action was commenced outside the applicable limitation period in the SEF 44 Endorsement, which stated that every action or proceeding against the insurer for recovery under the endorsement shall be commenced within 12 months from the date upon which the eligible claimant or his legal representative knew or ought to have known that the quantum of claims exceeded the minimum limits for motor vehicle liability insurance.

The insured initially filed a statement of claim seeking damages less than $200,000 and then amended his statement of claim twice seeking damages over the $200,000 threshold with each amendment.  The insured settled the tort claim and filed a notice of discontinuance and then brought the action against his insurer (the “Section 44 action”) more than one year after the notice of discontinuance was filed.  The court posed two questions to be resolved on the insurer’s summary dismissal application:  first, when did the limitation period with respect to the Section 44 action commence and second, was the limitation period for the Section 44 action one year (pursuant to the limitation provision in the SEF 44 Endorsement) or two years (pursuant to the Limitations Act).

With respect to commencement of the limitation period, the court referred to earlier case law that variously described the limitation provision in the SEF 44 Endorsement as “pregnant with uncertainties” and “fraught with ambiguity”, but that ultimately held that the proper interpretation of the phrase “quantum of the claims” was the amount of damages assessed following trial in the action against the tortfeasor.  The court held, therefore, that it was not prepared to make a finding that the limitation period for the Section 44 Endorsement commenced when the insured filed his amended claims and that, consequently, time starting running on the limitation period for the SEF 44 action when the underlying tort action was discontinued.  However, the court acknowledged that the jurisprudence leaves open the possibility that, in certain circumstances, a plaintiff may know or ought to know that the quantum of a claim exceeds the minimum limit before the final judgment.

With respect to the applicable limitation period, the court relied on an earlier Court of Appeal decision that held that s. 647 of the Insurance Act (now s. 593) ratified and permitted the contractual limitation period in the SEF 44 Endorsement.  The court then found that the proper interpretation to be given to s. 7(1) and (2) of the Limitations Act was that, if a contract resulted in an earlier date as the last date to sue, then the limitation in the contract is invalid.  The court applied that principle, and held that, in the circumstances of this case, because the limitation provision in the SEF 44 Endorsement resulted in the last day for filing being one year earlier than under the Limitations Act, the provision was not valid and the insured was entitled to rely on the two year limitation period set out in the Limitations Act.  The court found that the insured had filed the Section 44 action within two years from the discontinuance of the tort action; therefore the insurer’s application was dismissed.

This case was digested by Tricia M. Milne, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Tricia M. Milne at [email protected].

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