The insured was initially charged with DUI and dangerous driving
The Nova Scotia Supreme Court has recently applied the “discoverability” analysis in an insurance dispute that is allegedly statute-barred.
In Hart v. Allstate Insurance Company of Canada, 2023 NSSC 273, Shawn Hart was involved in a collision with a third-party motorist on August 15, 2019. Tragically, the third-party motorist succumbed to injuries sustained in the accident. Hart was charged at the scene with driving under the influence and dangerous driving, causing bodily harm or death. His vehicle also suffered damage in the collision.
Hart had automobile insurance with Allstate Insurance Company Canada. The insurance contract provides for indemnification against direct and accidental loss to the insured, such as property damage coverage.
Allstate initially denied Hart's coverage in a denial letter dated August 22, 2019, citing exclusions related to driving under the influence of alcohol. In this case, the dispute concerned when the limitation period began to run. Allstate argued that the two-year limitation period for filing a claim began on August 15, 2019, when Hart knew that his car had been damaged due to the accident. Allstate also argued that, at the latest, the limitation period began to run when Hart received the denial letter on September 13, 2019.
Allstate brought a motion for summary judgment, arguing that Hart's action was filed after the prescribed limitation period contained within the Standard Automobile Policy for Nova Scotia and the Automobile Insurance Contract Mandatory Conditions Regulations. Allstate likewise relied on the Limitations Actions Act (LAA). Each provided for a two-year limitation period for alleged breach of a contract of indemnity.
Hart opposed the motion, arguing that there were genuine issues at play which should be heard on their merits at trial. Hart also contended that the two-year limitation period only began to run when Allstate finished its "investigations" of his claim and denied him property damage coverage. Hart said the issue of "discoverability" applied in the circumstances and that he did not "discover" he had a claim until he received an explicit denial of coverage after January 2020.
The NS Supreme Court was guided by the LAA, which establishes a standard two-year limitation period for actions starting from the day the claim was discovered. However, the court noted that when there is a conflict between the LAA and other enactments, the other enactment prevails.
The court noted that the relevant limitation period outlined in the Standard Automobile Policy applies, which specifies a two-year limitation period for actions related to property damage or personal injury. Allstate argued that Hart's claim, which stemmed from damages sustained on August 15, 2019, became time-barred on August 16, 2021, as his action was filed on December 17, 2021.
Hart argued that the limitation period under the Automobile Insurance Contract Mandatory Condition Regulations begins on the date of "discoverability" rather than the date of the collision itself.
The court noted that the evidence shows the collision occurred on August 15, 2019, and Hart reported it to Allstate on August 22, 2019. The notice of action was filed on December 17, 2021, four months after the expiry of the limitation period, as per the policy and regulations.
As a result, the court found that Hart's claim was statute-barred. The court also assessed whether Hart's claim was barred under the LAA and discoverability principles.
The court explained that s. 8 of the LAA stipulates that a claim must be made within two years from its discovery date. The statutory test for discoverability requires that the claim was discovered on the day the claimant first knew or ought to reasonably have known the injury or loss occurred, that the defendant caused it, and that it is sufficiently serious to warrant legal action.
The court found that Hart "discovered," or should have discovered, that he had a claim for damage to his insured vehicle on August 19, 2019. He advised Allstate on August 22, 2019. The court said that Hart did not know that he would have a successful claim order to commence an action against Allstate, nor did he need to marshal all of the possible evidence he might have about why a policy exclusion did not apply. Hart received a denial letter from Allstate on September 13, 2019. This letter advised him that he, not Allstate, was responsible for damages to his vehicle.
Hart claimed that Allstate denied him coverage without merit and in a "malicious manner." He claimed damages for bad faith, arguing that Allstate denied coverage "without proper justification."
The court said that Hart's claim was essentially one for damages resulting from the denial of coverage or a claim for consequential damages that resulted from a failure to pay property damages concerning the vehicle. As such, it fell under the contractual limitation period of two years. The court said that Hart could not extend this period by characterizing it as a breach of the duty of good faith rather than a breach of the duty to pay benefits.
The court concluded that Hart's claim was indeed statute-barred, as it was commenced more than two years "from the time the loss or damage was sustained and not afterwards" under both the policy and the regulations, and even after applying a discoverability analysis. Consequently, the court granted summary judgment to Allstate.
