s. 18 of the Limitation Act Affects a Claim that Indemnification Did not Arise

17. July 2014 0

The principle that a claim for indemnification does not arise, and therefore does not trigger the running of the limitation period, until a request for indemnification is made does not apply if s. 18 of the Limitation Act also applies.

Old Republic Insurance Co. of Canada v. Aviva Canada Inc., [2014] O.J. No. 2580, May 28, 2014, Ontario Superior Court of Justice, S.N. Lederman J.

The plaintiff insurer, Old Republic, applied for summary judgment against the defendant insurer, Aviva, for indemnification of an amount paid to its insured in settlement. The defendant insurer successfully defended the summary judgment application on the basis that the action was statute bared by the Limitation Act.

On May 28, 2009, Old Republic’s insured, Siena, was involved in a two car motor vehicle accident. Siena sought compensation from Old Republic for the vehicle’s content damaged in the accident. The accident was 100% the fault of a driver whose vehicle was insured by Aviva. Old Republic denied coverage to Siena for the content of the vehicle. On May 28, 2010, Siena claimed against Old Republic for a declaration that the loss was covered. The statement of claim was served on Old Republic on July 26, 2010. Although Old Republic was aware that Aviva insured the vehicle that was 100% at fault for the accident, it did not add Aviva or Aviva’s insured as third parties to the action. On September 10, 2012 the Court of Appeal found Siena had coverage under the Old Republic Policy. Old Republic then settled the claim with Siena. On January 8, 2013, Old Republic first gave notice to Aviva that it intended to claim indemnification for the settlement paid to Siena and relied on s. 263 of the Insurance Act and s. 8 of Reg. 664. On June 3, 2013 Old Republic served Aviva with a statement of claim seeking indemnification.

The court found the claim against Aviva was one for contribution and indemnity and so s. 18 of the Limitation Act applied. It held the limitation period began to run the day Old Republic was served with the claim from Siena. Old Republic argued s. 18 had no application as this was not a claim between two “wrongdoers”, rather it was a claim between two insurance companies. The court held Old Republic and Aviva could both be considered “wrongdoers” as Old Republic improperly denied coverage and Aviva’s insured caused the accident. Old Republic also argued that, under s. 5, it did not suffer any loss, and time did not start to run, until the omission to indemnify occurred, i.e. when the request for indemnification was made on January 8, 2013. The court distinguished cases supporting Old Republic’s argument on the bases that they did not involve consideration of s. 18 as neither involved a claim for contribution and indemnity.

This case was digested by Djuna M. Field and edited by David W. Pilley of Harper Grey LLP.

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