Breach of duty of good faith or claim for bad faith against an insurer may be subject to 6-year limitation period in Ontario
Insured’s claims against insurer for breach of duty of good faith is governed by general six year limitation period and not s. 207 of the Insurance Act.
[2012] O.J. No. 1321, March 22, 2012, Ontario Court of Appeal, E.A. Cronk, R.A. Blair JJ.A and G.R. Strathy J. (ad hoc)
The plaintiff insured appealed the decision of a motions judge granting summary judgment to the defendant insurer on the basis that the claims brought by the plaintiff were barred by s. 207 of the Insurance Act, which prescribes a one year limitation period applicable to a claim against an automobile insurer.
On November 1, 1988, four people died in an automobile accident, including the driver who was insured by the co-defendant Zurich under a standard automobile policy providing $1 million in coverage. The families of the three deceased passengers sued the insured’s estate. The passengers’ families offered to settle their claims for an amount in excess of the policy limits, which amount was ultimately agreed to by the insured’s estate. However, it took some time before the settlement was finalized and because of interest and costs, the estate was exposed to a significantly larger judgment. Consequently, the estate brought an action against its insurer alleging breach of its duty of good faith, exposing the estate to claims in excess of the policy limits, failing to pay the policy limits on a timely basis, and failing to pay the limits into an interest bearing account.
Before the motions judge, the issue was whether the action was barred by the limitation period in the Insurance Act. At the Court of Appeal, the court considered whether the claim was in fact governed by this limitation period and ultimately concluded that it was governed by the general six-year limitation period that applied at the time. Accordingly, the appeal was allowed.
This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.
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