Update From The Trenches: The Court Of Appeal Denies The Availability Of The Doctrine Of Laches In Loss Transfer Disputes

First presented at MB's Transportation Law Seminar

As discussed at our last transportation seminar, the cases of Canada v. Lombard General Insurance Company of Canada1 and Zurich Insurance Company v. TD General Insurance Company2 had left the law unclear with respect to the doctrine of laches as applied to Ontario's loss transfer regime. While the law was clear that a first party insurer 'discovers' its claim for loss transfer on the day after it makes a request for indemnification3, it was unclear whether there are any limitation periods relating to when a first party insurer must deliver an indemnification request to be entitled to seek indemnification under the loss transfer provision of the Insurance Act4. This gap in the legislation was clarified in November when the Court of Appeal released its decision in the appeal of Intact Insurance Company of Canada v. Lombard General Insurance Company of Canada5 and found that the doctrine of laches is not available to second party insurers when defending a claim for loss transfer.

Underlying Conflicting Decisions

In Intact v. Lombard, Intact paid accident benefits to their insured following a motor vehicle accident that occurred on February 13, 2007. Intact submitted its first request for indemnification to Lombard on September 7, 2011 and Lombard refused to indemnify Intact based on the amount of time that had elapsed from the date of the accident to the date of Intact's first indemnification request. The matter was submitted to arbitration where the arbitrator agreed with Lombard that laches barred Intact from pursuing its loss transfer claim against Lombard.

On appeal to the Superior Court of Justice, Justice Chiappetta concluded that the doctrine of laches did not properly apply to loss transfer claims as loss transfer indemnity is purely statutory and Lombard's claim did not have a "distinctively equitable flavour" rendering it devoid of equitable relief.6 As such, Justice Chiappetta concluded that "only statutory limitation periods limit the statutory right to loss transfer indemnity."7 While this could prove contrary to the legislative purpose of the Insurance Act by providing an "expedient and summary method" of reimbursement and indemnification8, it was "nonetheless not appropriate to purposely re-characterize the equitable doctrine of laches in an effort to fill a perceived legislative omission, or to augment a statutory limitation period."9 Even if the doctrine could apply, Lombard...