The usual rule is that once an event occurs which triggers a possible legal action, the limitation period in which to do so commences and runs from that occurrence. A rolling limitation period is one that resets as a result of a recurring obligation by the defendant. The issue is not whether the plaintiff has continued to suffer losses but rather whether the defendant has committed another breach by failing to perform an ongoing obligation. Where there are continuing (multiple) breaches of such an obligation, it is equitable to impose a rolling limitation period.
If the limitation period is one year in length, then under the usual rule the plaintiff must bring their action within the year following. Under a rolling limitation scenario, the plaintiff must bring its action within one year of any breach. This provides more time in which to sue but also limits any previous claims barred by the limitation period.
The question then becomes when is a rolling limitation an available option for a plaintiff?
The Usual Limitation Period in Contract
The question of whether or not there is a rolling limitation period regularly arises in the context of claims under insurance policies and commercial contracts, such as a claim for rent payments under a commercial lease. The usual contractual limitation clause is similiar to the one reproduced below.
ACTION: Every action or proceeding against the insurer for the recovery of any claim under or by virtue of this contract is absolutely barred unless commenced within one year next after the loss or damage occurs.
The Law in Ontario
The Ontario Court of Appeal (ONCA) in Marvelous Mario’s Inc. v. St. Paul and Fire and Marine Insurance Co. (2019) quoted with approval the following passage from the Ontario Superior Court of Justice (ONSC) decision in Richards v. Sun Life Assurance Company of Canada (2016):
A rolling limitation period may apply to claims for periodic payments, in cases where the issue is whether certain payments to which the plaintiff is entitled have been made (e.g. payments of rent), as opposed to cases where the issue is whether the plaintiff was entitled to the periodic payments in the first place. In the former type of case, the material facts will have arisen on a periodic basis, and it will not be unfair to require a defendant to litigate those facts during the applicable limitation period following the date upon which an individual payment became due. However, in the latter type of case, the material facts will have arisen at the time that the plaintiff alleges he or she first became entitled to periodic payments, and it would be unfair to require the defendant to litigate those facts, for a potentially unlimited period of time.
In Marvelous Mario’s, the plaintiff’s insurance policy contained a one-year limitation period, but their action had not been commenced until just before the two year mark. The plaintiffs’ claims at trial were dismissed except for the claim for business interuption. The judge’s reasoning was that this specific claim was on-going and thus subject to a rolling limitation period. This meant that the plaintiffs’ losses which occurred within the one-year period prior to the commencement of the second action were not barred by the limitation clause contained in the policy.
The ONCA was not impressed by the authorities provided by the plaintiff. They felt they were obiter and conatined little analysis. As a result, the court went back to first principles. In order for a rolling limitation period to apply, the defendant must have a recurring contractual obligation that it has breached in addition to the initial breach.
The jurisprudence suggests that a rolling limitation period may apply in a breach-of-contract case in circumstances where the defendant has a recurring contractual obligation. The question is not whether the plaintiff is continuing to suffer a loss or damage, but whether the defendant has engaged in another breach of contract beyond the original breach by failing to comply with an ongoing obligation. In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period.
The trial judge’s error was her focus on the ongoing losses instead of whether there was a recurring contractual obligation. Here there was only one obligation – to indemnify for all business interuption losses. The plaintiff was therefore too late to bring its claim. The fact that a plaintiff may not know their precise loss is immaterial as this fact does not stop the running of the limitation period.
In summary, to determine whether a rolling limitation period applies, it is important to focus on a defendant’s contractual obligations rather than the plaintiff’s losses. A rolling limitation period will be found only where a defendant has a recurring contractual obligation that gives rise to separate breaches of contract.
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