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You may recall that in September of 2013, Justice Chiappetta released the decision of Intact Insurance Company of Canada v. Lombard General Insurance Co. of Canada, which held that the equitable doctrine of laches does not apply to loss transfer claims. Laches is an equitable doctrine which, in certain circumstances, prevents the enforcement of a right after a period of delay.

On May 27, 2014, Justice Lederman released the decision in Zurich Insurance Company v. TD General Insurance Company, which reached the opposite conclusion.

In Zurich, TD paid benefits to its insured for ten years following a collision between the insured’s vehicle and a heavy commercial vehicle.; It was not until February 2010, approximately eleven years after the accident, that TD delivered a Notice of Loss Transfer alleging that Zurich was 100% at fault. In August 2011, TD brought an application for an order requiring Zurich to proceed to arbitration. TD and Zurich agreed to first address the preliminary issue of whether TD’s application was barred by the equitable doctrine of laches and/or the provisions of the Limitations Act, 2002.

The arbitrator found that he was bound by the decision of Justice Chiappetta, but noted that he disagreed with her finding with respect to the applicability of the doctrine of laches. The arbitrator went on to find that in any event, Zurich had failed to establish ‘the necessary components of laches…one of them being presumed prejudice or actual prejudice.’

On appeal, Justice Lederman agreed with the arbitrator that the existing loss transfer legislation does not indicate any time limit for making a request for indemnification. As such, TD’s claim for indemnity was not statute barred as the limitation period for loss transfer cases begins to run from the day after the first party insurer requests loss transfer from the second party insurer.

Justice Lederman noted that the doctrine of laches had traditionally only been applied to equitable as opposed to legal claims. His Honour went on to observe that following the fusion of law and equity, courts have been more flexible in applying the doctrine of laches under certain circumstances.

Justice Lederman found that Ontario’s loss transfer regime possesses an equitable flavour, as it was designed to address unfairness between participants in the province’s insurance industry. As such, there was a sufficient basis to permit the application of the doctrine of laches.

Justice Lederman then went on to apply the doctrine of laches to the facts in question. His Honour found that acquiesce is a stand-alone branch of laches that does not require a finding of prejudice. In considering whether TD had acquiesced, Justice Lederman acknowledged that delay itself does not amount to acquiescence.

Justice Lederman then turned to FSCO Bulletin A-11/94, which refers to the need to notify a second party insurer of a loss transfer claim ‘promptly.’Justice Lederman found that because TD was a sophisticated insurer, and failed to make its request for nearly 11 years, this gave rise to an inference that TD abandoned or waived its rights.

At the end of the day, we are left with two Ontario Superior Court decisions with conflicting results. Leave to appeal has been granted by the Ontario Court of Appeal with respect to the decision of Intact v. Lombard.

We anticipate that the Ontario Court of Appeal will soon provide guidance on three issues: 1. whether the limitation period for loss transfer cases begins to run from the day after the first party insurer requests loss transfer from the second party insurer; 2. whether the doctrine of laches applies to statutory claims for loss transfer; and 3. if the doctrine of laches does apply, in what type of factual circumstances might it be applicable.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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