Contracting Out of Limitation Periods: Boyce v. The Co-Operators General Insurance Company, 2013 ONCA 298

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 lawsuit. 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.

Facts

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 contractual limitation period.

Motion for Summary Judgment

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.

Appeal

The Co-Operators appealed and the Ontario Court of Appeal overruled the motion judge’s decision, deciding as follows:

  • The insurance policy provides for a one-year limitation on claims in clear and unambiguous language;

  • The four requirements set out by the motion judge as necessary to override the statutory limitation period do not apply for lack of sufficient legal foundation; and

  • The insurance contract was a “business agreement” for the purposes of the Act.

The Court concluded that regardless of whether an insurance contract is described as a “peace of mind” contract, what is 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.