Expiry of limitation period makes demand for appraisal of no force and effect

Superior Court finds that invocation of appraisal process pursuant to section 128 of the Insurance Act does not suspend the one year limitation period in the insurance contract between the parties and thus the insured’s claim is statute barred.

Insurance law – Property insurance – Mandatory appraisal – Policies and insurance contracts – Limitation of actions – Statutory provisions – Insured – Rights, duties and liabilities

Aviva Insurance Co. of Canada v. 3 Kings Shawarma Inc. (c.o.b. Sahara Restaurant), [2024] O.J. No. 1038, Ontario Superior Court of Justice, March 8, 2024, M.C. Wilkinson J.

A water pipe in a sprinkler burst in the insured’s restaurant resulting in damage to the insured’s property and contents. The insured had a Hospitality Insurance Policy (the “Policy”), which included coverage for the building and restaurant contents. The Policy set out a one year limitation period to commence an action. The insured reported the loss to the insurers the same day as the loss.  The insurers paid out some of the insured’s claims and rejected others they determined were not covered by the Policy. Just over one year after the date of loss the insured demanded that an appraisal be conducted regarding the rejected claims, and the insurers refused to participate in the appraisal process on the basis that the limitation period had expired.

The insurers brought an applicaton seeking a declaration that the limitation period for the insured to pursue a claim for loss under the Policy had expired. The insurers took the position that although the insured notified the insurers of the loss in a timely fashion, it did not file a Statement of Claim against the insurers prior to the expiry of the limitation period. The insured submitted that the actions of the insurers delayed the commencment of the limitation period. The insured brought an application for a declaration that the insurers be compelled to participate in an appraisal of the losses suffered by the insured pursuant to section 128 of the Insurance Act. The insurers took the position that the invocation of the demand for an appraisal occurred after the limitation period had already expired and that the application should be dismissed in its entirety.

The court held that the limitation period for the insured to file a claim against the insurers expired one year after the date of loss and therefore had already expired when the insured sent its notice demanding an appraisal and issued a Statement of Claim against the insurers. The insured’s application was dismissed and the court found it was statute-barred from making any further claims against the insurers related to the loss.

This case was digested by Alicia Catalano and edited by Steven W. Abramson of Harper Grey LLP and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please feel free to contact them directly at [email protected] or [email protected].