Sehic v National Home Warranty Group Inc, 2019 ABQB 955

Court of Queen’s Bench of Alberta Citation: Sehic v National Home Warranty Group Inc, 2019 ABQB 955 Date: 20191213 Docket: 1601 10641 Registry: Calgary Between: Mujo Sehic Plaintiff - and - National Home Warranty Group Inc Defendant - and - Beckmann Homes Ltd, Tekton Enterprises Ltd., A.L.E. Enterprises Ltd., 0860394 B.C. Ltd., Lanna Y. Leung, Alfredo Miguel Yong, Edward K. Leung and Thomas Kam Yee Third Parties _______________________________________________________ Decision

of the Honourable Justice April Grosse _______________________________________________________ I. Introduction [ 1 ] Mr. Sehic purchased a home covered by a Limited Construction Warranty Policy (the “Warranty”) issued by Aviva Insurance Company of Canada (“Aviva”), represented by its agent National Home Warranty Group Inc. (“NHWG”). When problems arose with the builder, Mr. Sehic made a claim. His claim was denied. Mr. Sehic commenced this litigation against NHWG. NHWG applied for

summary dismissal based on the Limitations Act, RSA 2000, c L-12 . [ 2 ] Mr. Sehic filed his Statement of Claim more than two years after he admits knowing he had a claim under the Warranty. The learned Master summarily dismissed the claim on that basis. However, neither party expressly drew the Master’s attention to the potential application of the Fair Practices Regulation, AR 128/2001 under the Insurance Act, RSA 2000, c I-3 . Effective July 1, 2012,

section 5.3 of the Fair Practices Regulation requires insurers to give claimants written notice of the applicable limitation period at various points in their dealings. If the insurer fails to give notice as required, the Court may extend the limitation period. [ 3 ] In this appeal from the Master’s decision, the arguments of the parties give rise to the following issues: (

a) At the applicable time, and in respect of the Warranty, was the Defendant an insurer required to comply with the Fair Practices Regulation ? (

b) Does

section 5.3 of the Fair Practices Regulation apply given that Mr. Sehic made his claim for coverage before it came into effect? [ 4 ] These issues must be addressed in the framework established by the Court of Appeal for

summary judgment applications in Weir Jones Technical Services Inc v Purolator Courier Ltd , 2019 ABCA 49 [“ Weir Jones ” ]. There is no dispute that the appeal before me is, in effect, de novo. II. Context [ 5 ] The following facts are not in dispute. [ 6 ] On or about April 30, 2011, Mr. Sehic and his wife entered into a Construction Agreement with the Third Party Beckmann Homes Ltd. (“Beckmann”) for the purchase and construction of a new home. [ 7 ] The Sehics were supposed to take possession of their home in or about November, 2011. Issues arose between the Sehics and Beckmann.

Beckmann was demanding further payment from the Sehics, who were taking issue with Beckmann’s work. Mr. Sehic advises that he was successful in separate litigation against Beckmann. I have not reviewed that file or any resulting judgment. The merits of the dispute between the Sehics and Beckmann are not at issue in this

summary judgment application. [ 8 ] On June 3, 2010 Beckmann had entered an Agreement with Aviva, by its agent NHWG [1] , to have Beckmann homes covered by the national home warranty program. On May 8, 2012, the Sehics made a written claim to “National Home Warranty”. In its Statement of Defence, NHWG denies, among other things, that it provided new home warranty protection for the Sehics’ home. However, in its application for

summary judgment, NHWG states that it provided a Limited Construction Warranty for the home by way of an agreement between NHWG and Beckmann. Accordingly, for the purposes of this application, there is no dispute that the Sehics’ home was covered by the Warranty. [ 9 ] Communication ensued between the Sehics and a Mr. Walsh, who variously describes himself on the record as Senior Claims Specialist with NHWG and Senior Head Office Claims Specialist for Aviva Canada. On March 17, 2014, Mr. Walsh sent a letter to the Sehics, stating that a condition in the policy prevented them from moving forward on the claim.

Both parties have since treated this letter as a denial of the Sehics’ claim under the Warranty. The March 17, 2014 Letter [ 10 ] I note that Mr. Walsh’s letter of March 17 was marked “Without Prejudice”. Use of the term “without prejudice”, or lack of such use, is not determinative. It is the substance of the letter that matters: Hansraj v Ao , 2002 ABQB 385 , varied on other grounds 2004 ABCA 223 [ Hansraj ]. The substance of the March 17, 2014 letter is not in the nature of an offer or a compromise. It should not have been marked “without prejudice”. [ 11 ] Nothing turns on the use of “without prejudice” here.

Mr. Sehic has not challenged the use of the letter in these proceedings, and he has admitted in his pleadings and in evidence that his claim was denied in March 2014. However, I would repeat the caution set out in Hansraj at para 26 as to the risks of indiscriminate use of the term “without prejudice”, particularly in correspondence that the writer then wants to rely on to the prejudice of the opposing party. [ 12 ] I also note that the letter is not an express denial. However, Mr. Sehic treats it as such.

[ 13 ] On the current record and in light of the parties’ positions, I am prepared to treat March 17, 2014 as the date Mr. Sehic’s claim was denied for the purpose of this application. III. Preliminary Matters Aviva/NHWG [ 14 ] The party that signed the Warranty and is obliged to pay under it is Aviva. NHWG is referenced as Aviva’s agent throughout. Mr. Sehic has only sued NHWG. In its application for

summary judgment, NHWG has acknowledged that NHWG provided the Warranty. Neither party raised an issue before me as to the respective roles of Aviva and NHWG. Nothing in these reasons should be taken as making any decision in that regard. Application under

section 5.3(7) [ 15 ] If an insurer has failed to give notice of a limitation period, as required by

section 5.3(2) of the Fair Practices Regulation ,

section 5.3(7) permits the Court to grant a remedy, including an extension of the limitation period, “on application by the claimant.” Mr. Sehic has raised

section 5.3(2) in response to NHWG’s application for

summary judgment, but he has not brought an application for relief under

section 5.3(7). NHWG did not raise this issue before me, and argued the appeal on the basis that

section 5.3(2) did not apply. I have not considered whether Mr. Sehic would be entitled to any remedy under

section 5.3(7). Statutory References [ 16 ] This decision includes a number of references to statutes and regulations. Unless otherwise noted, the wording of the provisions in question has been the same at all material times. IV. Analysis A. The Limitations Act [ 17 ] Mr. Sehic was aware that his claim under the Warranty was denied in March, 2014. He did not file the Statement of Claim in this Action until August 12, 2016. The claim is prima facie statute-barred pursuant to

section 3 of the Limitations Act. [2] B. NHWG as Insurer [ 18 ] Mr. Sehic raises

section 5.3 of the Fair Practices Regulation , promulgated under the Insurance Act .

Section 5.3(2) was effective July 1, 2012. It requires an “insurer” to give written notice to a claimant of the applicable limitation period at various junctures, including within 60 days of being notified of the claim, and within 5 business days of denying the claim. [3] Neither Aviva nor NHWG gave any such notice to the Sehics. [ 19 ] NHWG argues that it was not an “insurer”. It says home warranty insurance did not fall within the Insurance Act and associated regulations until February 1, 2014, and then, only for homes for which the building permit was issued after February 1, 2014.

This was by way of the combined effect of the coming into force of the New Home Buyer Protection Act, SA 2012, c N-3.2 , amendments to the Insurance Act and updates to the Classes of Insurance Regulation, AR 144/2011 . [ 20 ] The New Home Buyer Protection Act makes home warranty insurance mandatory for all new homes and requires that certain coverage be in accordance with the Insurance Act . It expressly applies only to homes for which the building permit was issued after February 1, 2014.

At the same time that the New Home Buyer Protection Act came into force, “home warranty insurance” was added as a specific class of insurance in the Classes of Insurance Regulation . [4] [ 21 ] I disagree with NHWG that the express inclusion of home warranty insurance as a class of insurance effective 2014 means definitively that home warranty insurance was not insurance under the Insurance Act previously and by extension, that a party offering home warranties was not required to comply with the Insurance Act or regulations promulgated under that Act prior to February 1, 2014.

Definitions [ 22 ]

Section 5.3(2) of the Fair Practices Regulation requires “an insurer” to give written notice to “a claimant”. “Claimant” expressly includes a person insured by a contract of insurance, whether named in the contract or not. [ 23 ] At all material times, an “insurer” was defined in the Insurance Act as “any person that undertakes or effects, or agrees or offers for valuable consideration to undertake or effect, a contract of insurance....”: Insurance Act,

section 1 (ff). A “contract of insurance” includes “any policy, certificate, interim receipt, renewal receipt or writing evidencing the contract, whether sealed or not, and a binding oral agreement”: Insurance Act ,

section 1 (j). “Insurance” is defined as “the undertaking by one person to indemnify another person against loss or liability for loss in respect of certain risk or peril to which the object of the insurance might be exposed or to pay a sum of money or other thing of value on the happening of a certain event and, without limiting the generality of the foregoing, includes life insurance”: Insurance Act ,

section 1 (aa).

[ 24 ] On its face, the Warranty, either on its own, or coupled with the Agreement between Aviva and Beckmann, is a “contract of insurance”. It is stated to be a “Policy”, pursuant to which Aviva, by its agent NHWG, undertakes to indemnify the “Purchaser” (in this case, the Sehics) against loss in respect of certain risk (in this case, the failure of the builder to perform) or to pay a sum of money or other thing of value on the happening of a certain event (i.e. the builder’s failure to perform). In particular,

section 3 of the Warranty includes the following: “The Program shall indemnify the Purchaser, subject to the exclusions, limitations and conditions set out in this Limited Construction Warranty Policy where a claim for direct loss is made within the Contractual Completion Warranty Period, Defect Warranty Period or Structural Defect Warranty Period.

Subject to the exclusions, limitations and conditions set out in this Limited Construction Warranty Policy, the Program shall only be liable for the limit specified below in respect of all claims made by the Purchaser under each coverage listed.” “The Program may determine the reasonable costs associated with the repair or replacement of a Defect or Structural Defect, and, in its sole discretion, pay monetary compensation to the Purchaser rather than remedying or replacing the Defect or Structural Defect.” “The Program will provide protection to the Purchaser for Construction Damages as defined herein....” (“Construction Damages” is defined in

section 1 as “only those costs, in excess of the cost attributable to the construction portion of the contract, incurred by the Purchaser, in completing the construction of the Residential Unit in accordance with the plans and specifications set out in the Contract, after the bankruptcy, insolvency, liquidation or winding up of the Builder....”) “The Program will:

i) Fulfill the one (1) year warranty of the Builder....if the Builder fails to do so; ii) Repair Structural Defects which occur during the nine (9) year period following the expiration of the Builder’s Warranty.” “If the Residential Unit becomes uninhabitable due to a Defect or Structural Defect, for such period as is reasonably required to repair the Defect or Structural Defect, pay compensation for additional living and moving expenses in an amount not to exceed....” (The “Program” is defined as Aviva.) Classes of Insurance [ 25 ] The definition of “insurer”, and by reference, those of “contract of insurance” and “insurance”, do not refer at all to the classes of insurance set out in the Classes of Insurance Regulation .

There is nothing expressly stating “insurance in this Act is limited to the classes established by the Classes of Insurance Regulation ” or words to that effect.

Section 17 of the Insurance Act , which confirms when an insurer is undertaking insurance in Alberta, and carrying on business in Alberta, does not refer to classes of insurance. On the other hand,

section 18 of the Insurance Act requires that an insurer be licensed to carry on business in Alberta, and prohibits an insurer from insuring a risk in Alberta unless the insurer holds a licence for a class of insurance that covers that risk.

Section 34 requires that a license set out the classes of insurance that the licensee is authorized to undertake. Sections 18 and 34 give rise to an argument that the legislature intended that all insurance offered in Alberta would fall within one of the established classes. However, the structure of the

definitions and sections 17, 18 and 34 leave open the potential for a party to offer a product that otherwise falls within the definition of a “contract of insurance” in breach of the licensing requirement in

section 18. The Quebec Court of Appeal recognized a similar potential under the Quebec statutory regime in Association pour la protection des automobilistes inc c Toyota Canada inc , 2008 QCCA 761 at para 28 . [ 26 ] In any event, even if “insurance” is limited to insurance falling within one of the classes of insurance, there is a live issue as to whether the Warranty fell within a class that existed prior to the changes made in association with the coming into force of the New Home Buyer Protection Act .

Section 34(2) of the Insurance Act confirms that there may be questions from time to time as to the class in which a particular contract of insurance falls. In other words, the fact that the Warranty does not have a title that exactly matches the name of one of the pre-existing classes does not mean it was not “insurance” for the purpose of the Insurance Act . [ 27 ] For example, there is an issue as to whether some or all of the coverage contemplated by the Warranty fell within the class of “surety insurance”, which existed in the Classes of Insurance Regulation long before the 2014 amendments.

Surety insurance is “insurance under which an insurer undertakes to guarantee the due performance of a contract or undertaking or the payment of a penalty or indemnity for any default.” [5] We most commonly think of surety in the context of major construction projects where the owner requires a performance bond or similar instrument. I also appreciate that surety insurance is a highly specialized area. In its supplemental submissions, NHWG pointed out some features that it says distinguish the Warranty from surety insurance.

However, the similarity in concept between the coverage under the Warranty, particularly as it relates to Construction Damages, and the insurance described as “surety insurance” in the Classes of Insurance Regulation , is apparent. Brick Protection Corp v Alberta [ 28 ] In considering whether a particular contract amounts to a “contract of insurance”, and by extension, whether the party offering such contract is an “insurer”, I am mindful of the guidance provided by the Court of Appeal in Brick Protection Corp v Alberta (Provincial Treasurer) , 2011 ABCA 214 [ Brick Protection ].

The Court found that the definition of “insurance” in the Insurance Act is “vague and abstract” and if read literally, “would cover a host of things which no one in Canada would ever consider when using the word ‘insurance’”: Brick Protection at para 23 . [ 29 ] There are a number of analogies that can be drawn between the extended product warranty at issue in Brick Protection and the Warranty at bar. However, there are also a number of distinctions.

For example: the product here is not offered by a sister company of the builder, and Aviva/NHWG have contracts with a number of different builders; the coverage is not simply in the nature of a warranty of one’s own product but rather, at least a partial backstop by Aviva if the builder fails to complete or to honour its warranty; the Construction Damages coverage goes beyond mere defects in the home itself; and Aviva is an insurance company in other respects, unlike Brick Protection Corp. [ 30 ] One of the factors on which the Court placed emphasis in Brick Protection was how the insurance industry actually worked and whether the warranty in question fell within “traditional” insurance: Brick Protection at paras 20, 35 and 46 .

Features of the

Warranty that at least resemble traditional insurance include: It is expressly called a “Policy”; The Warranty speaks to “exclusions” in a number of places; It includes a “subrogation” clause; The last page of the document refers to National Home Warranty as the “broker”; The Warranty bears a signature line that says “Authorized signature of Insurer.” [ 31 ] Some evidence that was available to the Court in Brick Protection is not available on the record now before me, such as: the licensing status of Aviva and NHWG at the relevant times (for example, whether Aviva was licensed to offer “surety insurance” at the relevant time); the position of the Superintendent of Insurance as to whether the home warranty product offered by Aviva/NHWG was “insurance” under the Insurance Act prior to the addition of “home warranty insurance” as a class of insurance; and how Aviva/NHWG established the enrollment fees for builders (analogous to premiums). [ 32 ] In his supplemental submissions, counsel for NHWG, as an officer of the Court, drew my attention to

section 5.4(1) of the Miscellaneous Insurance Provisions Regulation under the Insurance Act : AR 120/2001 . That provision expressly exempted “contracts of insurance” issued by the Alberta New Home Warranty Program, a different home warranty program from NHWG, from the application if the Insurance Act . NHWG concedes that this offers some support to the contention that home warranties were “contracts of insurance” prior to the 2014 legislative amendments.

However, NHWG also notes, correctly, that just because the Alberta New Home Warranty Program was offering contracts that would otherwise be “contracts of insurance” does not necessarily mean that the Warranty was a contract of insurance. NHWG also asserts that it would be unfair for one program to have an exemption, but not another. Conclusion on NHWG as Insurer [ 33 ] In the end, applying the balance of probabilities standard, I am not satisfied that Mr. Sehic’s claim can be summarily dismissed on the basis that the Warranty was not “insurance” subject to the Insurance Act and the Fair Practices Regulation . C.

Temporal application of

section 5.3 of the Fair Practices Regulation [ 34 ] In the alternative, NHWG argues that even if the Warranty was “insurance” and subject to the Fair Practices Regulation ,

section 5.3 only applies to claims made after July 1, 2012. If NHWG is correct, Mr. Sehic’s position that he was entitled to written notice of the limitation period under

section 5.3 would be without merit. [ 35 ] The Fair Practices Regulation was promulgated in 2001. However,

section 5.3(2) was added later and did not come into force until July 1, 2012. According to the record, warranty coverage for the Sehic home commenced on January 7, 2012, and Mr. Sehic reported his claim to NHWG on May 14, 2012. Since both of these dates pre-date the coming into force of the provision in question, NHWG argues that

section 5.3 does not apply to any of NHWG’s dealings with Mr. Sehic on his claim, even where such dealings took place after July 1, 2012. To apply

section 5.3 to these facts would offend the presumption against retrospective application of legislation. [ 36 ] Determining whether a contemplated application of legislation to a particular set of facts is retroactive, retrospective or prospective can be difficult. The Supreme Court of Canada has distinguished between the three scenarios as follows: The principles of retroactivity, immediate application and retrospectivity of new legislation must not be confused with each other.

New legislation does not operate retroactively when it is applied to a situation made up of a series of events that occurred before and after it came into force or with respect to legal effects straddling the date it came into force (Côté, supra, at p. 175). If events are under way when it comes into force, the new legislation will apply in accordance with the principle of immediate application, that is, it governs the future development of the legal situation (Côté, supra, at pp. 152 et seq.).

If the legal effects of the situation are already occurring when the new legislation comes into force, the principle of retrospective effect applies. According to this principle, the new legislation governs the future consequences of events that happened before it came into force but does not modify effects that occurred before that date (Côté, supra, at pp. 133 et seq. and pp. 194 et seq.). When new legislation modifies those prior effects, its effect is retroactive (Côté, supra, at pp. 133 et seq.).

Professor Driedger gave a good explanation of this distinction between retroactive and retrospective effect: A retroactive statute is one that operates as of a time prior to its enactment. A retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. A retroactive statute operates backwards. A retrospective statute operates forwards, but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted.

A retroactive statute changes the law from what it was; a retrospective statute changes the law from what it otherwise would be with respect to a prior event. [Emphasis in original.] (E. A. Driedger, "Statutes: Retroactive Retrospective Reflections" (1978), 56 Can. Bar Rev. 264, at pp. 268-69) Épiciers Unis Métro-Richelieu Inc, division Éconogros v Collin , 2004 SCC 59 at para 46 . [ 37 ] There is a strong presumption against retroactive application of statutes and also a presumption against retrospective application, though there are more exceptions to the latter.

Here, the issue of retroactive application does not arise. [ 38 ] In this case, one can characterize the “situation” or “event” to which the provision (

section 5.3 ) is being applied as the Sehic claim or the Sehic Warranty. Under that characterization, requiring NHWG to comply with

section 5.3 after July 1, 2012 would attach new legal effects or consequences to a past event or situation. It could be retrospective. [ 39 ] However, in Ruth Sullivan’s test on statutory

interpretation, she recommends a methodology for resolving issues involving temporal application of legislation: R. Sullivan, Statutory

Interpretation , 3 rd ed (Irwin Law, 2016) at 350-352. Step 2 suggests that

identifying the “situation” involves “analyzing the legislative provision to determine what facts must be established to trigger the legal effect.” Under this view, the “situations” or the “events” at issue with respect to

section 5.3 are the four situations enumerated in paragraphs (

a) through (

d) of subsection 5.3(2). In Mr. Sehic’s case, the particularly pertinent ones are (a), the passage of 60 days without settlement, and (d), the denial of the claim. Both took place after July 1, 2012. Under that view, requiring compliance with

section 5.3 involves neither retroactive nor retrospective application of the provision. Rather, it is simply giving the provision immediate effect on a prospective basis. This is particularly the case with respect to the requirement to give notice within 5 days of denial of a claim, as denial took place entirely after July 1, 2012. [ 40 ] Sullivan goes on in Step 4 to say that if the relevant facts are ongoing, as opposed to complete, the application of the provision is immediate and not problematic unless it interferes with vested rights.

While the existence of a limitations defence may amount to a vested right, there is no suggestion that NHWG had a vested limitations defence as at July 1, 2012. [ 41 ] Even if the application of

section 5.3 of the Fair Practices Regulation in these circumstances amounts to retrospective application, it is generally accepted that the presumption against retrospective application does not apply where the new prejudicial consequences raised by the provision are intended to protect the public and where they are purely procedural: Sullivan at 359. Both of those exceptions are potentially at play here. The Fair Practices Regulation is in the nature of consumer protection legislation. And

section 5.3 has no bearing on the

interpretation of the Warranty, the rights of any party under the Warranty or even on the limitation period itself. Rather, it merely establishes one step that an insurer is required to take as part of the claimant’s process of enforcing his rights under the Warranty or as part of the insurer’s process of enforcing its rights under the applicable limitations provision. [ 42 ] It is also noteworthy that the remedial provision in

section 5.3(7) of the Fair Practices Regulation grants the Court a discretion on application by the claimant. There is no definitive consequence in terms of the limitation period. [ 43 ] NHWG relies on Dhillon v Anderson , 2014 ABQB 609 , a decision of Master Robertson. The facts are distinguishable in that Master Robertson found that the time for giving notice in that case had passed prior to the coming into force of

section 5.3. In other words, applying the provision to the facts in Dhillon would have amounted to retroactive application. V. Conclusion [ 44 ] The facts in this application, as far as they go, are not seriously in issue. To a significant extent, the issues raised involve applying the law to undisputed facts. In those circumstances, the Court is often able to make a fair and just

summary determination.

Summary determination of some sort is particularly attractive in a case like this, which involves a good number of factual and legal issues, the resolution of which could be disproportionate to the value of the claim, currently quantified at $116,000. However, for the reasons set out above, NHWG has not met the burden to show that there is no merit to Mr. Sehic’s claim on the basis of the limitations issue raised in the

summary judgment application: Weir-Jones at para 47, point b). [ 45 ] In these circumstances, I must allow the appeal and dismiss the

summary judgment application. This does not mean that a trial is necessarily in the parties’ best interest. I encourage them to look at the options available to them to streamline issues, or resolve the matter short of a full trial. Heard on the 17 th day of April, 2019 with supplemental written submissions on the 6 th and 9 th of December, 2019. Dated at the City of Calgary, Alberta this 13 th day of December, 2019. April Grosse J.C.Q.B.A. Appearances: Mujo Sehic Self-Represented Litigant Jarin K.P. Myskiw

Duncan Craig LLP for the Defendant Kylan Kidd Burnet, Duckworth & Palmer LLP for the Third Parties A.L.E. Enterprises Ltd., Lanna Y. Yeung, Edward K. Leung, Tekton Enterprises Ltd. and Thomas Kam Lee