Executive Summary: Key Legal and Evidentiary Issues

• Limitation period for SEF 44 claim was held to begin on the date of Discontinuance in the tort action, not earlier.

• Alberta’s Limitations Act renders invalid the 12-month contractual limitation period under the SEF 44 endorsement.

• The two-year statutory limitation period under the Insurance Act applies instead, preserving the claim’s timeliness.

• Discoverability of the claim amount exceeding policy limits required a binding settlement, not preliminary expert reports.

• Ambiguity in SEF 44 clause 6(c) was interpreted in favour of the insured, consistent with Alberta precedent.

• Appeal was dismissed; the action was found to be filed within the valid limitation period.

Facts of the Case

Orest Andrew Nebozuk was injured in a motor vehicle accident on July 31, 1998. He was insured under a standard automobile insurance policy that included a SEF 44 Family Protection Endorsement, which provides coverage when damages exceed the policy limits of an at-fault driver.

Mr. Nebozuk sued the at-fault drivers (the “Tort Defendants”) in 2000, initially seeking $51,000, which was later amended to $251,000, and eventually to $634,500 in 2009. Despite extensive medical reports, opinions about the nature and severity of his injuries were conflicting, and liability was admitted early, leaving quantum in dispute.

In December 2016, Mr. Nebozuk’s counsel was informed that the Tort Defendants’ policy limit was $200,000. On October 31, 2017, he filed a Discontinuance of Action, and on November 6, 2017, signed a settlement and release for $250,000, which included the policy limit plus costs and interest.

He subsequently commenced a claim against his own insurer, Northbridge, on December 20, 2018, under the SEF 44 Endorsement to recover amounts exceeding the $200,000 policy limit.

Key Legal Issues

Northbridge sought summary dismissal, arguing the claim was out of time under section 6(c) of the SEF 44 endorsement, which imposes a 12-month limitation period from the date the insured knew or ought to have known their claim exceeded minimum liability limits.

The Applications Judge disagreed, holding that:

• The trigger date for the limitation period was October 31, 2017, when the Discontinuance was filed, reflecting a final settlement.

• The 12-month contractual limitation in the SEF 44 was invalid, as section 7(2) of Alberta's Limitations Act prohibits shortening the statutory limitation period.

• A two-year limitation under the Insurance Act, specifically section 593, applied instead.

Northbridge appealed, arguing (1) the limitation should have started earlier, and (2) the 12-month SEF 44 limitation should apply.

Court of King’s Bench Decision

Justice Kraus dismissed the appeal, affirming the Application Judge’s decision on both key issues:

1. When did the limitation period start?

The Court found the date of final settlement—i.e., October 31, 2017, when the Discontinuance was filed—was when Mr. Nebozuk knew or ought to have known that his damages exceeded the minimum limits.

The Court emphasized that pre-settlement medical evidence was inconclusive and conflicting, and relied on the precedent from Shoemaker v Wawanesa and Shaver v Co-operators, which held that the limitation under SEF 44 generally runs from a binding judgment or settlement, not from when counsel begins to suspect that damages may be high.

2. What limitation period applies under the SEF 44 endorsement?

The Court found that the 12-month period in section 6(c) of the SEF 44 Endorsement was invalid, due to section 7(2) of the Limitations Act, which prohibits contractual shortening of statutory limitation periods.

Instead, the two-year limitation period under section 593 of the Insurance Act governs SEF 44 claims, ensuring consistency with Alberta law. The Court distinguished this case from Shaver, where the contractual limitation period extended—rather than shortened—the statutory period.

Since Mr. Nebozuk filed the SEF 44 action on December 20, 2018, it was within two years from both:

• October 31, 2017 – the correct trigger date per the Court’s reasoning, and

• Even December 22, 2016, when he first learned of the policy limits.

Thus, the action was timely under either potential trigger.

Policy Clause at Issue: SEF 44, Clause 6(c)

The SEF 44 clause required legal proceedings to be commenced “within 12 months from the date upon which the eligible claimant or his legal representative knew or ought to have known” that the damages exceeded the at-fault driver’s insurance limits. The Court ruled this clause unenforceable in Alberta, under s. 7(2) of the Limitations Act, because it attempted to shorten the statutory minimum of two years under the Insurance Act.

Conclusion

The appeal was dismissed. The court confirmed that:

• The two-year statutory limitation applies to SEF 44 claims.

• The limitation period began on the date of Discontinuance in the tort action, not before.

• Mr. Nebozuk’s SEF 44 claim was timely, and the 12-month contractual limit was invalid under Alberta law.

This decision reaffirms important protections for insured claimants under Alberta’s insurance and limitations framework, particularly regarding SEF 44 Endorsements.

No damages or compensation were awarded in this specific decision.