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Insurance - Auto - Denial of Claim. Landa v. The Dominion of Canada General Insurance Company
In Landa v. The Dominion of Canada General Insurance Company (Div Court, 2024) the Divisional Court extensively considers the law of insurance claim denial (here, auto SABS denials), which determine when a limitation period starts to run:[9] The Vice Chair considered whether Dominion issued valid denials to trigger the limitation period. The limitation period begins when an insurer gives a clear and unequivocal denial of a benefit that is accompanied by notice of the two-year period for commencing the dispute resolution process. Ms. Landa argued that the notice was deficient because it did not issue a final denial of some of the benefits she claimed. The Vice Chair found that Dominion issued a clear denial of Ms. Landa’s claims for income replacement benefits, prescription medications, physiotherapy, psychological services, housekeeping services, an in-home assessment, and a neurological assessment.
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Issue 1 - Was there an error of law or was it unreasonable for the LAT to find that Ms. Landa’s claims were statute barred?
[26] Ms. Landa makes the following submissions. She is in agreement that the test in Smith v. Co-operators General Insurance, 2002 SCC 30; [2002] 2 S.C.R. 129 should be applied in determining whether Dominion gave a clear and unequivocal denial of a benefit to start the two year limitation period but argues that Smith was misapplied having asked for more information, or an insurer’s examination, Dominion’s denial was ambiguous and it did not deny the benefit in plain, clear and unequivocal language. A denial of benefits that was not compliant with other provisions of the SABS cannot be a valid denial. She relies on the Supreme Court of Canada’s decision in Yatar v. TD Insurance Meloche Monnex, 2024 SCC 8 in support of her argument that the LAT misapplied the test in Smith.
[27] Ms. Landa further submits that the LAT did not examine the documents to determine if there was a clear and unequivocal denial of a benefit but instead, relied only on Dominion’s submissions.
[28] The issue raises a question of mixed fact and law. As such, the applicable standard of review is reasonableness.
[29] In the October 9, 2023 Preliminary Issue Decision the LAT found:[9] The parties agree that a denial meeting the criteria set out by the Supreme Court of Canada in Smith v. Co-operators General Insurance Co. will trigger the commencement of the limitation period under the Schedule. The limitation period starts when an insurer gives a clear and unequivocal denial of a benefit that is accompanied by notice of the two-year period for commencing the dispute resolution process. The insurer must communicate the denial in clear and straightforward language directed to the unsophisticated person.
[10] A limitation period is triggered with the first valid refusal: see R.R. vs. State Farm Insurance Company 2019 CanLII 119769 (ON LAT) at para. 13; K.K. vs. Coseco Insurance Company [“K.K.”], 2020 CanLII 12713 (ON LAT) at para. 21. Subsequent denials, insurer requests for more information, and notices of Insurer’s Examinations (IEs) do not detract from a valid denial or restart the limitation period: see K.K. at para. 18.
[11] As the Ontario Court of Appeal held in Sietzema v. Economical Mutual Insurance Company (2005),2014 ONCA 111 (CanLII), even legally incorrect reasons for a denial will not prevent the commencement of the limitation period. Citing its earlier decision in Turner v. State Farm Mutual Automobile Insurance Co. (2005) the court in Sietzema noted at para. 13,The purpose of the requirement to give reasons is to permit the insured to decide whether or not to challenge the cancellation. If the reasons given are legally wrong the insured will succeed in that challenge. Requiring that the reasons be legally correct goes beyond both the requirement in the relevant regulation, and the purpose of such a notice. [12] A denial need not contain specific wording. It must simply communicate that the benefit is not payable: see G.P. and Aviva Insurance Company of Canada, 2017 CanLII 77379 (ON LAT) at para.27. [30] The LAT found for each benefit in dispute that Dominion issued a clear and unequivocal denial of payment communicated in straightforward language directed to an unsophisticated (to use the language in the jurisprudence) or lay person. Each denial was accompanied by notice of the two-year period for commencing the dispute resolution process. The denials were found to be Smith-compliant and triggered the two-year limitation period under the Schedule.
[31] The Vice Chair set out in the Preliminary Issue Decision the words used by Dominion in denying each of the claims. For some of the claims, the words used in the letters were indisputably a clear denial. For example, with respect to the claim for the income replacement benefit, Dominion denied the benefit by way of a letter and Explanation of Benefits dated July 21, 2008. The letter stated:Based on [the IE assessor’s] opinion we have determined your entitlement to receive Income Replacement Benefits has ceased as you no longer meet the criteria to qualify for this benefit. No consideration will be given towards the payment of an Income Replacement Benefit on or after August 11, 2008. [32] With respect to other benefits claimed, the letters advised Ms. Landa that “a treatment plan is required and upon receipt thereof, the request for funding will be reviewed”, or “we will not fund the Treatment Plan as submitted” or “we will not fund this Treatment and Assessment plan pending the result of the Insurer’s Examination”. Ms. Landa submits that these denials are not clear and unequivocal.
[33] However, the LAT found that these letters were accompanied by a notice of the two year period for commencing the dispute resolution process which was part of a Explanation of Benefits form which clearly set out that the item was not payable. The LAT also relied on its previous jurisprudence that insurer’s requests for more information or a reference to an Insurer’s Examination do not detract from a valid denial or re-start the limitation period.
[34] The rationale given in the caselaw for the limitation period beginning at the first valid refusal to pay a benefit (as opposed to a subsequent refusal) is that otherwise, an insured could continuously extend the limitation period on a specified benefit in perpetuity. (R.R. v. State Farm Insurance Company, supra at para.13; K.K., supra.)
[35] Ms. Landa’s argument would extend a claimant's entitlement to benefits for an indeterminate period of time which has been found to be and is "inconsistent with the Supreme Court of Canada's rationale [set out in M.(K.) v. M.(H.),1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6] and which underlined the common sense of, and the need for limitation periods." (Haldenby v. Dominion of Canada General Insurance Co. (2001) 2001 CanLII 16603 (ON CA), 55 O.R. (3d) 470 (C.A.), at para. 36).
[36] The Vice Chair found that Ms. Landa commenced proceedings from six months to almost 10 years outside of the limitation period which highlights the rationale for the rule that the limitation period begins at the first valid refusal to pay a benefit. No conflicting jurisprudence was referred to us which has held that because the insurer asked for additional information, a treatment plan or an insurer’s examination, the limitation period did not start to run.
[37] There is no merit to Ms. Landa’s submissions that the LAT misapplied Smith and that where the insurer asked for more information, its denial was therefore ambiguous and that it did not deny the benefit in plain, clear and unequivocal language.
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