In Bach v. McKellar, released this afternoon, Master Robert Beaudoin dealt with a situation that arises frequently in insurance litigation. The claim arose out of a motor vehicle accident. The original pleading, issued within the two-year limitation period, claimed damages of $1.4 million. This was comfortably within the defendant’s liability insurance coverage limits, which were $2 million. Sometime after the limitation period had expired, the plaintiff moved for leave to amend her claim to $6.1 million. Evidently, she wished to argue that the accident would prevent her from becoming a lawyer. The large increase in the amount of the claim represented her (perhaps optimistic) estimate of what she would have been able to earn in that field.
The defence resisted the amendment. The Master described the defence argument this way: “The Defendant takes the position that the amendment is being sought more than 2 years after the accident and is barred by the expiry of the relevant limitation period unless special circumstances can be shown….The Defendant has put forth a theory that there is in effect a new cause of action or, a new Defendant that is being added after the expiry of the limitation period since Ms. McKellar [the defendant] is now personally exposed to the claims of the Plaintiff in excess of her policy limits.” The Master rejected this submission. He ruled that only one limitation period applied to this claim and that the plaintiff had sued in time. The insurance issue did not alter that fact.
The Rules of Civil Procedure do permit the court to refuse an amendment where there is evidence of non-compensable prejudice. But in this case, the only evidence of prejudice came from the defendant herself. She had incurred about $17,000 in home improvement expenses and had bought a new car, neither of which she would have done, she said, if she had known that she was going to face an uninsured claim of over $4 million. However, the Master ruled that this was “not the prejudice that is contemplated by this rule”. This sort of issue arises more commonly where the insurer has admitted liability for a claim that is within the policy limits and is then confronted with a motion to amend the pleading, to increase the claim to a figure that exceeds the insurance coverage. All of a sudden, the insured is facing an often enormous personal liability, for which liability has already been admitted. This, in turn, can lead to issues between the insurer and its very unhappy insured.
In the present case, the insurer had not admitted liability. But even if it had, some prior caselaw suggests that it might still have had an uphill battle in opposing the amendment. (See, for example, Skellett v. Kline (1983), 42 C.P.C. 1 (H.C.), where Justice Coulter Osborne said: “There is no reason to Insurers are sometimes criticized for not admitting liability in circumstances where the issue seems clear-cut: see 2004 CarswellOnt 2386 (Ont. S.C.J.), (2003), 66 O.R. (3d) 284, 2003 CarswellOnt 2951 (Ont. S.C.J.). But the risk of claims being amended to amounts far in excess of policy limits may be at least a partial explanation for insurers’ unwillingness to concede anything too quickly.prejudice the plaintiff because the insurer instructed the solicitors to admit liability before the insurer had informed its insured of the excess limits claim. Whether that failure prejudices the defendant because of the defendant’s potential personal exposure is basically irrelevant to the issues that are before me.”)Russett v. Bujold Bakhtiari v. Axes Investments Inc.