The incorporation of language similar to the mandatory fire peril statutory condition in an all-risks policy does not mean the policy is “subject to a limitation provision in another enactment” for the purposes of determining whether an amendment to the pleadings is permissible under the Limitations Act, R.S.A. 2000, c. L-12

Fenrich v. Wawanesa Mutual Insurance Co., [2005] A.J. No. 788, Alberta Court of Appeal

On March 31, 2002, a broken water main damaged Fenrich’s property located in his parents’ garage. Fenrich was an adult child living with his parents and was included in the definition of “insured” in the contract. Fenrich disputed the amount paid out by Wawanesa Mutual Insurance Company (“Wawanesa”) under his parents’ homeowners policy. Fenrich commenced an action and Wawanesa applied to strike the statement of Claim relying on the doctrine of privity of contract and the clause in the policy that permits actions against Wawanesa to be taken only by Fenrich’s parents. Fenrich sought to amend his pleadings by substituting his father as the Plaintiff. Wawanesa then argued that Fenrich’s amendment was too late.

The chambers judge concluded that section 6 of the Limitations Act applied, allowing Fenrich to substitute his father as plaintiff, despite the expiration of the relevant limitation period. Wawanesa argued that the Limitations Act should not apply as the claim was subject to a limitation period in another enactment, namely condition 14 of section 549 of the Insurance Act which mandates the limitation period of one year for claims arising from fire. The chambers judge concluded that the one year limitation period in the statutory condition in the fire insurance section of the policy did not apply to an all-risks policy. Section 2(4)(b) of the Limitations Act would only apply to preclude an amendment where there was an “applicable limitation provision in any other enactment of the Province”. The chambers judge permitted Fenrich’s amendment. Wawanesa appealed this decision.

The Court of Appeal found that the appropriate standard of review for the question of whether the Limitations Act was applicable was correctness, citing Housen v. Nikolaisen, [2002] 2 S.C.R. 235.

The main thrust of Wawanesa’s argument was that the contract of insurance incorporated statutory condition 14 found in section 549 of the Insurance Act which requires that proceedings against the Insurer be taken within one year of the damage. This statutory condition is found in the fire section of the Insurance Act. However, Wawanesa, through the language of the insurance contract, incorporated this statutory condition to apply to all perils insured by the policy. The Court noted that since section 549 of the Insurance Act does not, by its own terms, apply to perils other than fire, the contracting parties had to take an additional step to make this limitation provision applicable to other risks. To accomplish this, they had contracted to accept a one-year limitation period. However, this incorporation of the language of the statutory condition did not result in Fenrich’s remedial order being “subject to” a limitation provision in another enactment. Instead, the Court found that the remedial order was subject to a limitation provision in the insurance contract. The fact that this contractual limitation provision contained language similar to the mandatory fire peril condition did not transform it into a “statutory limitation”.

In the result, the Court held that Fenrich was not precluded by section 2(4)(b) of the Limitations Act from amending his pleadings to substitute his father as Plaintiff.

To stay current with the new case law and emerging legal issues in this area, subscribe here.