The decision in Barry v. Halifax (Regional Municipality), 2017 NSSC 180 (NSSC) demonstrates the pitfalls that can be faced by a claimant injured in a motor vehicle collision who fails to commence an unidentified or uninsured motorist claim against an insurer as soon as possible.
This case is also important in its interpretation of the provisions of Section 12 of the Limitation of Actions Act dealing with the Court’s ability to set aside a limitation defence.
Section D Insurance Coverage, part of the standard Automobile policy provides protection when someone is injured by an uninsured or unidentified (hit and run) driver. The Uninsured Automobile and Unidentified Automobile Coverage Regulations, NS Reg 94/96 stipulate the required wording of the Section D coverage.
Section D coverage is available if you have your own vehicle insured under a standard automobile policy or if you are a passenger in such an insured vehicle.
In order to successfully claim against an insurer for Section D coverage, there are a number of notice requirements that must be met, as well as a time limit before which the Action must be commenced:
10 (2) Every action or other legal proceeding against an insurer for the recovery of an amount of damages shall be commenced within two years after the date on which the cause of action against the insurer arose and not afterward.”
That contractual two-year limitation period is clear, but the primary issue is when does a “cause of action against an insurer” arise? There are multiple possibilities – it might be the date of the collision; it might be when the potential Section D claim was “discovered”; it might be when the Section D insurer has denied a claim and would arguably be in breach of contract.
In Barry decision, the claimant was a passenger on an HRM bus when she was injured. She alleged the bus driver was negligent in suddenly applying the brakes, causing her to fall and be injured. She commenced an action against HRM, who defended on the basis that an unidentified vehicle had negligently caused the sudden stop. The claimant did not get legal advice for more than two years. Ultimately, three and a half years after the collision, the claimant gave notice to the Insurer of the bus of a Section D “unidentified” motorist claim and then applied to the Court to add the insurer as a defendant in the action. The claimant argued she had no knowledge of the Insurance coverage available and she was not advised by HRM as to availability of that coverage.
The Court determined that the limitation period commenced to run on the date of the loss. The Court considered the “Reasonable Discoverability Rule”, which is a common law principle that provides that “…a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence ” – Central & Eastern Trust Co v Rafuse,  2 SCR 147, 1986 CarswellNS 40 (SCC).
Caselaw dealing with uninsured motorist coverage has held that the material facts or the elements of the cause of action required include that (1) a person is insured, (2) that person is legally entitled to recover damages from the owner or driver of, (3) an uninsured or unidentified automobile. The cause of action “accrues” when that person discovers those material facts or objectively, ought to have discovered those facts by exercise of reasonable diligence. There is no requirement that the insurer have denied liability under the contract for the cause of action to arise – see Johnson v. Wunderlich, (1986), 57 O.R. (2d) 600 (C.A.) and Caruso v. Guarantee Co. of North America,  O.J. 339 (Ont. C.A.).
The Court in Barry found that the claimant had not exercised reasonable diligence, as she did not make inquiries of a lawyer to ascertain her legal rights until more than two years after the collision. Had she exercised due diligence, she would have been able to ascertain she had a potential claim against the insurer of the HRM bus. She was 50 years of age and had owned a motor vehicle for 30 years and dealt with insurance brokers for insurance on her vehicles. She knew the initial incident involved an unidentified vehicle but she made no effort to ascertain her rights. She ought to have inquired about the insurance coverage available. The Court held that the cause of action arose on the date of the incident and that the limitation period had expired and dismissed the claim against the insurer.
Given this outcome, it is important for any claimant to determine as quickly as possible following an accident or incident whether there was or may have been an unidentified or uninsured motorist involved in and responsible for the collision. The claimant has the onus of proof to show due diligence was exercised – this requires the claimant identify the steps taken to investigate the claim, obtain information from police or other witnesses, and steps taken to identify who might be liable. If there is some evidence that an unidentified or uninsured motorist may be liable for the damages caused, and that the claimant is insured under a Section D insurance policy, then it is probable that the cause of action accrues immediately and safe to assume the two-year limitation period starts to run at that time, even if the claimant did not actually know those material facts.
It is recommended that a lawyer always be consulted as quickly as possible, who can then make the necessary inquiries as potential defendants, determine whether insurance coverage is available to those defendants, and if not, to then determine what uninsured or unidentified insurance coverage might be available. In fact, the Court in Barry found that a claimant was expected to make inquiries with a lawyer or insurance broker in order to ascertain any rights they may have against persons arising out of the accident, and failure to do so could be fatal to a claim brought after the two-year limitation period expires.
Anyone who owns and insures their own motor vehicle will have Section D coverage available to claim against in the event of an uninsured or unidentified driver being involved. A passenger in someone else’s vehicle would also have coverage under the insurance policy of that vehicle. In such circumstances, as soon as it is known (or ought to have been known) that an uninsured or unidentified vehicle was involved in a collision, the two-year limitation period commences to run and in addition to the Section D insurer being notified, the action must be commenced.
The Court in Barry also addressed the issue of whether a limitation defence could be disallowed in a personal injury claim pursuant to Section 12 of the new Limitations of Actions Act (2015) in these circumstances. The Court noted that Section 12 defined “limitation period” as meaning one stipulated in Section 8(1)(a) of the Limitation of Actions Act or “any enactment other than this act”. The issue was whether the two-year limitation period contained in the standard auto policy for Section D claims came within that provision. It was noted that under the old Limitations of Actions Act (1989), a “time limitation” was defined as including “the provisions of an agreement or contract”. That wording was not included in the new Act. The Court concluded that the two-year limitation period prescribed within the Standard Automobile Policy was not established by the new or old Act, nor was it prescribed under another “enactment”. As such, Section 12 was not engaged and the limitation period could not be extended.
This decision would appear incorrect. The two-year limitation period is prescribed under the Uninsured Automobile and Unidentified Automobile Coverage Regulations, NS Reg 94/96, which was enacted pursuant to the provisions of the Insurance Act. A specific mandatory contractual provision pursuant to a Regulation is in effect an “enactment”. Section 7 of the Interpretation Act specifically defines “enactment” as meaning “…an Act or a regulation or any portion of an Act or regulation and, as applied to a territory of Canada, includes an ordinance of the territory”. I would suspect the Court’s decision on this will not be followed on this point and the decision may well be appealed and overturned on that basis.
The Court in Barry went on to find that if it was wrong and that Section 12 was engaged, that the limitation defence advanced by the insurer should be disallowed as there was no evidence of any prejudice put forward by the defendant insurer. It was up to the insurer to show that it was affected by “…the passage of time on (i) the ability of the defendant to defend the claim, and (ii) the cogency of any evidence adduced or likely to be adduced by the claimant of defendant.”
In summary, these types of issues are complicated and a mine field for those involved. The best bet for any claimant is to ensure that a Section D uninsured or unidentified claim against an insurer is commenced within two years of the accident. That may not always be possible and the exact circumstances will have to be carefully considered to determine whether a limitation defence could be disallowed under Section 12 of the Limitations of Actions Act.