In May 2013, the Ontario Court of Appeal handed down a decision in Boyce v. The Co-Operators General Insurance Company, 2013 ONCA 298,which clarifies when a party can contract out of the limitation periods set by law.
Generally, in civil litigation, a litigant has two years from when the claim was discovered within which to start a law suit. However, section 22(5) of the Limitations Act, 2002, permits parties to shorten the limitation period when the contract is a “business agreement” as defined in the Act.
In Boyce, the plaintiffs owned and operated a women’s fashion boutique, which was insured by the Co-operators. One day, Ms. Boyce noticed a foul smell coming from the entrance to her store, believing it to be vandalism. She contacted the Co-Operators and filed a proof of loss claim.
The Co-Operators took the position that the damage was caused by a skunk not vandalism, and denied her claim.
The Boyces sued the Co-Operators within the two year statutory limitation period, but after the one year limitation period contained in their insurance contract. The Co-Operators moved for summary judgment claiming that the action was time barred by the one year limitation period.
At first instance, the motion judge decided that the contractual limitation period did not override the two year limitation period set out in the Act because the provision in the policy lacked the specific language required. Moreover, the judge concluded the insurance contract was not a “business agreement” for the purposes of varying or excluding the statutory limitation period as required under the Act.
The Co-Operators appealed and the Ontario Court of Appeal overruled the motion judge’s decision, deciding as follows:
The Court concluded that regardless of whether an insurance contract is described as a “peace of mind” contract, what’s relevant to the question of shortening the statutory limitation period is whether it qualifies as a “business agreement” within the meaning of the Act as opposed to a consumer agreement, which is restricted to insurance for personal, family or household purposes. The Court confirmed that consumers cannot contract out of the statutory limitation period, but businesses can.