Court of Appeal Adopts the "Plausible Inference" Approach to Discoverability
Is a plaintiff's understanding of the law, and how it might apply to their claim, relevant to an assessment of when a limitation period expires? In Lafferty v Co-operators General Insurance Co, 2021 ABCA 359, the Alberta Court of Appeal relied on the Supreme Court's decision in Grant Thornton LLP v New Brunswick, 2021 SCC 31, and concluded it is not.
Under Alberta's Limitations Act, the two-year limitation period for commencing an action begins to run when the claimant first knew, or in the circumstances ought to have known, that the injury for which the claimant seeks a remedial order had occurred, the injury was attributable to conduct of the defendant, and the injury, assuming liability on the part of the defendant, warrants bringing a proceeding.1
Lafferty reinforces that the degree of knowledge encompassed by "knew or ought to have known" is not certainty of liability nor a complete understanding of the law. Neither is required to trigger the two-year limitation. So long as a plausible inference of liability can be drawn based on the plaintiff's actual or constructive knowledge of the material facts, the clock will start to run.
In December of 2010, Alberta Health Services deemed the Lafferty's property unsuitable for habitation and issued an order to that effect. Tenants had set up a cannabis grow operation at the property, and it required significant repairs and remediation. The Laffertys advised their insurer (Co-operators) of the loss shortly after.
Co-operators investigated the claim, and on February 11, 2011, they sent a letter to the Laffertys formally denying their claim on the basis that the grow operation fell within the illegal drug operations exclusion clause, as well as an exclusion for loss and damage caused by vandalism. The letter advised the Laffertys of the applicable limitations period (two years after the loss or damage occurred). They did not pursue a claim and let the home fall into foreclosure.
Years later, the Lafferty's son, Justin, attended law school. He learned about a statutory provision (s. 545(1) of the Insurance Act) that came into effect in July of 2012 and that "…may be relied upon by an innocent insured to avoid the consequences of an exclusion for loss or damage to property ‘caused by a criminal or intentional act or omission of an insured or any other person’."2 In reliance on that provision, on February 7, 2017, the Laffertys commenced a claim against the Co-operators, six years after receiving Co-operators' denial of coverage.
Dan Downe, QC, of Field Law’s Calgary office represented the Co-operators. His application on behalf of Co-operators to summarily dismiss the action based on the limitation period was successful before a Court of Queen’s Bench Master and on appeal to a Court of Queen’s Bench justice. On further appeal by the Laffertys the Court of Appeal affirmed those decisions.
The Court of Appeal's Reasoning
Even though the Laffertys did not understand the law and "how it might apply to affect their rights in the circumstances"3, the Court of Appeal concluded that their claim was limitation-barred. In doing so, the Court of Appeal adopted the "plausible inference" approach outlined by the Supreme Court in Grant Thornton.
In Grant Thornton, Justice Moldaver concluded that a plaintiff "does not need knowledge of all the constituent elements of a claim to discover that claim."4 In his view, a "claim is discovered when the plaintiff has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant's part can be drawn."5 The Court in Lafferty affirmed this approach to discoverability:
The knowledge required for the purposes of determining the limitation period under s 3(1) of the Limitations Act does not have to be perfect knowledge. (citations omitted) Rather, plaintiffs will have sufficient knowledge when they have some support for a suspicion that their injury is attributable to the conduct of the defendant, and assuming the defendant's liability, that an action is warranted.
Put another way, the requisite knowledge exists when a plaintiff "has knowledge, actual or constructive, of the material facts upon which a plausible inference of liability on the defendant's part can be drawn."6 (citations omitted)
In the case of the Laffertys, the Court of Appeal concluded that by February of 2011, they were aware of their injuries addressed in the Statement of Claim and "had all the facts required…to draw a plausible inference of liability on Co-operators' part."7
Field Law’s litigation team is experienced in assessing when limitation periods will expire. If you have a question about how the Court’s adoption of the plausible inference approach could impact your claim, please contact, Dan Downe, QC, Jonathon Austin, or any member of our Litigation Group.
1 Limitations Act, RSA 2000, c L-12, section 3(1)
2 Lafferty v Co-operators General Insurance Co, 2021 ABCA 359 at para 9, citing s. 541(1) of the Insurance Act, RSA 2000, c I-3
3 Lafferty v Co-operators General Insurance Co, 2021 ABCA 359, at para 31
4 Grant Thornton LLP v. New Brunswick, 2021 SCC 31, at para 3
6 Lafferty v Co-operators General Insurance Co, 2021 ABCA 359, at paras 27 and 28
7 Lafferty v Co-operators General Insurance Co, 2021 ABCA 359, at para 30