Laches Barred an Insurer’s Loss Transfer Claim

17. July 2014 0

An insurer was time barred from bringing a loss transfer claim against a second insurer by operation of the doctrine of laches.

Zurich Insurance Co. v. TD General Insurance Co., [2014] O.J. No. 2550, May 27, 2014, Ontario Superior Court of Justice, S.N. Lederman J.

The appellant insurer appealed a decision of an arbitrator in a loss transfer proceeding arising from a multi-vehicle collision that occurred on July 14, 1999. The accident involved a vehicle insured by the appellant insurer and a vehicle insured by the respondent insurer. The respondent insurer paid accident benefits to the driver of its insured vehicle from 1999 to 2009. In 2010, the respondent insurer gave notice to the appellant insurer that it was transferring the loss of the disability benefits to the appellant insurer. The respondent insurer made two loss transfer requests for indemnification from the appellant insurer for medical benefits paid between February 2004 and February 2010. The two insurers participated in loss transfer arbitration to decide the preliminary issue of whether the respondent’s loss transfer was barred by the equitable doctrine of laches and by operation of the Limitation Act. On December 24, 2013, the arbitrator dismissed the appellant’s motion that the loss transfer request was out of time.

On appeal, the court agreed with the arbitrator on the first issue; that the limitation period in loss transfer claims begins to run from the time after the request for indemnity is made. Therefore, the two year limitation period set out under s. 5 of the Limitation Act did not begin to run until 2010. Contrary to the arbitrator’s decision, the court found the doctrine of laches did apply in this situation where a first party insurer delayed requesting a loss transfer from a second party insurer for 11 years. The court held that, although usually the doctrine of laches only applies to equitable, and not legal, claims, courts have been more flexible in applying the doctrine. The court held that in the circumstances, this was a legal claim with a “distinctly equitable flavour” and so it was subject to equitable principles. The court went on to disagree with the arbitrator’s decision that the doctrine of laches requires prejudices in order to apply. The arbitrator had failed to consider the other branch of laches, being acquiescence, which does not require a finding of prejudice. The court concluded that the delay in making a loss transfer claim in this matter amounted to acquiescence. As a result, the court overturned the arbitrator’s decision and found that the respondent insurer was precluded from pursuing indemnity from the appellant insurer.

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

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