The Limitation Period for Underinsured Policy Coverage

Case example

The Court of Appeal for Ontario rendered a recent decision, in Schimitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88, on the issue of when the limitation begins to run for an indemnity claim under the underinsured motorist coverage provided by the OPCF 44R, an optional endorsement to the standard form automobile insurance policy in Ontario. Most standard form policies in Ontario range from between $200,000 to $1 million. 

In some unfortunate cases, compensation for severe injuries that result from a motor vehicle accident may amount to more than what a standard form policy would cover. As a result, there are optional endorsements available that provide greater coverage and it is important to be informed as to whether these apply under the circumstances.

John Read, a partner at our law firm, represented the Plaintiff, Mr. Schmitz, in an action for personal injury before the Ontario Superior Court of Justice. 

Mr. Schmitz was in a motor vehicle accident on July 19, 2006, when he was hit by a car driven by Ervin Bakonyi. At the time, Mr. Schmitz had an automobile insurance policy with Lombard Canada, which included the optional OPCF 44R endorsement. This endorsement provided underinsured motorist coverage to a maximum of $2 million against the risk that the limits of the defendant's automobile insurance may not be sufficient to indemnify the plaintiff for losses arising out of the accident.

In June of 2007, Mr. Schmitz and members of his family sued Mr. Bakonyi for damages in excess of $1 million. Mr. Bakonyi's automobile insurance coverage, however, was limited to $1 million at the time.

Mr. Schmitz and his family members, therefore, brought an action against Lombard Canada for indemnity under the OPCR 44R endorsement to provide coverage for any amounts found owing to them that were in excess of $1 million. Lombard Canada defended on the basis that the action was commenced after the expiry of the limitation period.

A motion for a determination of the limitation issue was brought under Rule 21. The motion judge concluded that, according to s. 4 and 5 of the Limitations Act, 2002, S.O. 2002, c. 24, the applicable limitation period is two-years and commences to run when a request for compensation is made under the OPCF 44R endorsement.

The Court of Appeal upheld the motion judge's finding with one minor amendment stating that, in respect of a claim under the OPCF 44R, the two-year limitation period starts to run the day after the demand for indemnification is made because the plaintiff suffers a loss caused by the underinsured coverage insurer's failure to satisfy the claim.

The Court of Appeal's decision is significant in that it establishes the limitation period for a claim for underinsured coverage pursuant to the OPCF 44R endorsement.

It also provides clarity on the point that a plaintiff who is unsure as to whether compensation for the injuries sustained will exceed policy limits or not has two-years after the date on which a demand for underinsured coverage is made before the limitation period runs out.