Discovery of Loss, Injury or Damage in the Context of Rectification Claims

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In Alguire v. The Manufacturers Life Insurance Company (Manulife Financial), 2018 ONCA 202, the Ontario Court of Appeal considered when the limitation period in relation to claims for rectification begins to run.

The appellant Mr. Alguire sought a declaration that his $5,000,000 key man insurance policy (the “Policy”) with Manulife Financial, included inflation protection. Mr. Alguire’s position at trial was that he had asked that the Policy be specifically designed to ensure that the value of the death benefit grew over the course of his life. He submitted that the Policy provided him with immediate $5,000,000 coverage together with inflation protection over the long term.Manulife argued that the Policy did not include inflation protection, and that any indication that it did had been made in error and did not accord with the actual agreement between the parties. Manulife argued that, in such circumstances, rectification was the proper remedy. In response, Mr. Alguire argued that rectification was statute-barred because an actuary at Manulife had discovered the mistake in 2007, but Manulife did not seek to rectify the Policy until 2012 when Mr. Alguire filed his application. 

The case turned on when the “injury, loss or damage” warranting rectification was discovered. The Court reiterated that rectification is an equitable doctrine that is available when it is clear that the parties’ written agreement does not accord with their actual agreement. In such circumstances, a court may rectify the agreement so that it gives effect to the parties’ true intentions. The Court determined that, pursuant to s. 5(1) of the Limitations Act, discovery of the “loss, injury or damage” did not occur until Mr. Alguire filed his claim. Before then, Manulife “did not know, and could not reasonably ought to have known, that Mr. Alguire would seek to resile from the parties’ intended agreement.” In other words, a party that is aware that rectification is appropriate to remedy a common mistake cannot reasonably know that an injury, loss or damage has occurred until the other party seeks to change what the parties had actually agreed to.Therefore, discovery did not occur, and the limitation period did not begin to run, until Mr. Alguire sought to enforce the erroneous agreement.