Limitation periods continue to be a hot topic in the context of disability benefits. A recently released Divisional Court decision seems to have shed a little light on this matter. In Western Life Assurance Company v. Penttila, the insurer brought a summary judgment motion to dismiss the plaintiff’s claim due to being statute barred and out of time. The motion was denied. The insurer appealed the motion judge’s decision.
The relevant dates in this matter are as follows:
May 16, 2012 - the plaintiff was approved for long term disability benefits due to back problems.
February 19, 2013 – the insurer advised the plaintiff that her benefits would be denied as of March 7, 2013 due to a change in the definition of her disability. The insurer’s correspondence advised that she could appeal its decision by providing a written request for review along with supportive medical documentation.
April 8, 2013 – the plaintiff advised the insurer that she wished to appeal the denial, and provided further medical information.
November 13, 2013 - the insurer requested reports from two doctors from the plaintiff and advised: “upon receipt of all of the above requested information, we will complete our review of your appeal and advise you of the decision.”
The plaintiff provided the requested documentation. On October 21, 2014, the insurer advised that the file had been reviewed and that its position “remained unchanged.”
May 25, 2015 - the plaintiff requested a letter from the insurer that outlined its decision from its review of her file.
June 18, 2015 - the insurer sent a letter advising that it could not conclude on the basis of the information available that she was unable to perform her occupation and that benefits beyond March 6, 2013 remain declined.
June 6, 2016 - the plaintiff issued a Statement of Claim.
At the summary judgment motion, the insurer argued that the Statement of Claim was issued outside of the two year limitation period, which should have commenced as of either February 19, 2013 (the date of the denial letter) or March 7, 2013 (the initial termination date). The motion judge held that either October 21, 2014 (the date the insurer denied the plaintiff’s appeal) or June 18, 2015 (the date of the insurer’s final letter) were the applicable dates on which a reasonable person would have understood that a proceeding was a legally appropriate means to seek a remedy.
On appeal, the Divisional Court found that the motion judge was correct in holding that the triggering event for the commencement of the two-year limitation period was the date upon which it would be legally appropriate to commence legal proceedings to seek payment of disability benefits that the insurer refused to pay. Given that there was an agreed upon right to appeal the insurer’s denial directly to the insurer, it would be premature to commence legal proceedings until that process ran its course.
As a result, the Divisional Court upheld the Motion Judge’s decision, dismissed the summary judgment motion and awarded costs to the plaintiff.
This decision supports the idea that the limitation period for commencing a claim at Court in the disability context only begins to run once there is a final, clear, unequivocal denial of benefits. It also supports the idea that the limitation period only commences once it becomes “legally appropriate” to commence a Court proceeding. If there is another method of appeal that is either agreed upon or should reasonably be concluded prior to commencing a Court proceeding, the limitation period will likely commence only after that appeal process is completed.
This means that insurers should be very wary about providing open-ended rights to insureds to appeal the denial of disability benefits. The insurer should be able to demonstrate that a final decision was made and that the decision was communicated to the insured in a way that makes the denial clear and unequivocal.
Gabe Flatt has an insurance law practice that has focused exclusively on insurance defence for the past 8 years. He has developed an expertise in complex priority and loss transfer disputes as well as general coverage issues.
Long-term disability (“LTD”) coverage is often a key benefit employees derive from their employment. LTD benefits can provide significant security to employees in the form of income continuation when they are disabled due to an illness or injury. I previously talked about some misconceptions that employers may have regarding LTD benefits, here. Today we deal with some common misconceptions that employees may have with LTD benefits.
Misconception #1: An Employer is not entitled to know why I am off work
Generally speaking, if an employee is taking a sick day or two, an employer is not entitled to ask for specifics, such as a diagnosis. In fact, the recent amendments to the Employment Standards Act 2000 brought in by Bill 148 explicitly prohibit the requirement for a doctor’s note when making use of Personal Emergency Leave. However, when employees are off work for an extended period of time, their employers become entitled to obtain further information. Generally this may mean an employee has to provide a diagnosis and details of their general functional abilities for the purposes of determining proper accommodation. In the extreme cases, Ontario’s Divisional Court has ruled that under the Ontario Human Rights Code employers are entitled to request that an employee undergo an independent medical examination as part of the duty to accommodate, provided the medical information required by the employer cannot reasonably be obtained from the employee’s treating practitioner.
Practically speaking, it is in the employee’s best interest to keep the employer in the loop. The employer and the LTD carrier are entitled to updates on an employee’s condition and their ability to return to work, within reasonable limits. A failure to communicate with the employer about an employee’s medical status may lead to an eventual claim for frustration of contract, as we discussed in a previous blog, here.
Misconception #2: The Employer and LTD Carrier have the obligation to obtain updated information
While most employers and LTD carriers will take the initiative to check in with an injured employee, ultimately, it is the employee’s responsibility to ensure they are providing sufficient information to satisfy the policy definition for disability.
LTD carriers require information in order to appropriately adjudicate a file. That information comes from the employee and their treatment team. As a recipient of LTD benefits, an employee has an obligation to provide ongoing information to the LTD carrier. In fact, many disability definitions require that the employee be under the continuous care of a physician in order to qualify for benefits. If an employee fails to provide the required information, the carrier may be entitled to terminate entitlement to benefits on the basis that there is insufficient information to determine their ongoing disability.
Where a medical picture is particularly complex or prolonged, many LTD policies allow the LTD carrier to arrange their own independent medical examination to determine an employee’s ongoing eligibility.
Misconception #3: An employee cannot be terminated while on disability and does not have to return to work unless they are 100% recovered
Just like employers have a duty to accommodate, employees have a duty to participate in reasonable accommodation attempts. If employers can provide modified meaningful work to an injured employee, the employee may be required to attempt a return to work. Many LTD policies will have provisions regarding “rehabilitation programs” which allow for gradual returns. Employees who fail to comply with these provisions may find themselves in violation of the Policy.
Similarly, an employee can be terminated while receiving LTD benefits, so long as their disability did not form part of the basis for the termination. As an example, during a factory shut down. However, it is worth noting that employees in this situation may still be entitled to pay in lieu of notice rather than “working notice.” Additionally, in some cases employees can be terminated on the basis that their disability has made it impossible to complete their contract of employment, resulting in frustration of contract. While each case is unique, an employer who is capable of showing there was no reasonable likelihood of the employee returning to work within the foreseeable future may have a valid claim for frustration, as seen in Roskraft v. RONA Inc. In a valid frustration scenario, employers are entitled to consider the contract at an end and employees will only be entitled to the minimum statutory payments required under the Employment Standards Act, 2000.
Conclusion: Avoiding Disputes Through Collaboration
When dealing with an injured employee, benefit entitlement, accommodation, and potential termination of employment are areas of significant risk and concern for all parties involved. Early, often, and accurate information exchange can bust many of the myths in these complex multi-party disability situations. The overlap of contractual, statutory and common law obligations between the three parties make the management of long-term disability claims particularly complex. If an employee fails to take positive steps to advise their employer of their situation or cooperate with the LTD carrier, they may find themselves on the receiving end of a claim for frustration or abandonment.
Devan Marr’s practice has focused on bodily injury, long term disability, statutory accident benefits, and employment claims.
In Swampillai v. Royal & Sun Alliance Insurance Company of Canada, the Court dealt with the enforceability of a full and final release executed by the Plaintiff. A claim was commenced for long term disability (“LTD”) benefits. The action named the Plaintiff’s former employer, Royal and Sun Alliance Insurance Company of Canada (“RSA”), and Sun Life Assurance Company (“Sun Life”) which administered the LTD benefits that RSA provided employees.
In response, the Defendants argued that the Plaintiff had executed a full and final release which had included LTD benefits. The Plaintiff amended his claim to plead the doctrine of unconscionability and argued the release should be set aside. The Defendants brought summary judgment motions on the basis that the release was binding and enforceable. The summary judgment motions were dismissed. The Court found that the release signed by the Plaintiff was unconscionable and ought to be set aside.
The background facts were important. The Plaintiff had been employed as a distribution clerk. After several years of working in this physically demanding job, the Plaintiff went on disability. About three months before the two year mark (where entitlement to LTD changed to the “any occupation” test), Sun Life wrote to the Plaintiff and advised that (1) he did not meet the test for entitlement; (2) benefits would be terminated at the two year mark; (3) the Plaintiff could appeal the decision; and, (4) the appeal period expired three months after the benefits were terminated. The Plaintiff appealed the decision but Sun Life maintained its denial.
By separate letter (about one month before the test for LTD benefits changed), RSA advised that the Plaintiff’s employment would be terminated at the same time as the LTD benefits were to be terminated. A severance package was offered which would require the Plaintiff to also execute a full and final release. The release provided that it related to “benefit coverage under the Company’s applicable plans and/or policies ... including short term or long term disability benefits ...” The Plaintiff’s evidence was that he did not believe the offer had anything to do with Sun Life or his LTD benefits.
In determining whether the release was unconscionable, reference was made to the Court of Appeal’s decision in Titus v. William F. Cooke Enterprises Inc., (2007 ONCA 573) which sets out the four elements that must be satisfied:
A grossly unfair and improvident transaction; and,
Victim’s lack of independent legal advice or other suitable advice; and,
Overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or other similar disability; and,
Other party knowingly taking advantage of this vulnerability.
With respect to the first element, the Court found that it was clear that in the period just before the Plaintiff was notified by RSA that his employment would be terminated, he was actively engaged with Sun Life in pursuing his claim for LTD benefits. He had provided medical evidence in support of his claim and retained Counsel because he did not agree with Sun Life’s decision. There was no dispute that this claim, if successful, would have substantial value which would have been known by both Defendants. Further, (1) Sun Life was not aware of the release until after the litigation commenced; and, (2) RSA acknowledged that its severance offer did not include any money with respect to the LTD claim. In these circumstances, the Court concluded that the settlement for the LTD claim as part of the severance settlement was grossly unfair and clearly improvident.
As to the second element, the Court found that the Plaintiff did not receive legal advice or any professional advice regarding the effect of the proposed settlement terms, including the release of his LTD claim. The Court concluded, particularly given that RSA knew the Plaintiff was appealing the denial of the LTD claim and RSA did not mention the impact on the LTD denial during the course of negotiations, that it was reasonable for the Plaintiff not to have obtained legal advice.
On the third element, the Court found that the Plaintiff was (1) in a vulnerable financial position; and (2) was suffering from health impairments that were sufficiently severe that he had qualified for LTD benefits. The Court concluded that the general vulnerability of the Plaintiff at the material time was not diminished by other circumstances. The Plaintiff did not know his options regarding the LTD claim. The Court concluded that there was an overwhelming imbalance in bargaining power.
Finally, the Court considered whether RSA knowingly took advantage of the Plaintiff’s vulnerability. The Court found that RSA offered the Plaintiff a severance package, but did not alert him to the fact that it required him to release his LTD claim. By failing to do so, RSA knowingly took advantage of the Plaintiff’s vulnerability.
The Court was satisfied that all four elements were established. The release was unconscionable and was set aside. This decision serves as a cautionary tale for parties negotiating a full and final settlement. Particularly where the Plaintiff is in a vulnerable position (which most people on long-term disability will be), it is imperative that the Plaintiff know what benefits they are resolving by signing a full and final release. Otherwise, there is a risk that the release will not be enforceable.
The recent decision of Roskaft v. RONA Inc., 2018 ONSC 2934, sheds some light on when an employer can successfully claim frustration of contract when an employee is in receipt of long-term disability benefits.
The facts of this case were fairly straight forward. The Plaintiff began working for RONA in 2002 in a clerical role. In 2012, he started a leave of absence due to a medical condition. The Plaintiff had access to short term and long-term disability benefits provided by Sun Life. Sun Life approved the Plaintiff’s claim for LTD benefits. RONA had no involvement with the Plaintiff’s LTD claim. In December, 2014, Sun Life allegedly advised RONA that the Plaintiff was “permanently” disabled from his own occupation and any occupation. In September, 2015, three years after the onset of his disability, RONA terminated the Plaintiff’s employment due to frustration of contract. RONA relied on Sun Life’s December, 2014 letter and the fact the Plaintiff continued to receive LTD benefits. He was paid his statutory minimum entitlements under the Employment Standards Act, 2000. The Plaintiff commenced an action for wrongful dismissal. He alleged that RONA failed to obtain information from the Plaintiff which would have indicated his condition was improving at the time of dismissal.
On a summary judgment motion, Pollak J., found that the contract of employment between RONA and its employee of 13 years was frustrated by the employee’s 3 year absence.
Interestingly, Pollack J., concluded that the December, 2014 letter from Sun life, on its own, was insufficient to conclude that the Plaintiff was “permanently” disabled. Notably, there was apparently no reference to “permanent” disability in the correspondence. However, due to the following points, he found that it was reasonable to conclude that there was “no reasonable likelihood” that the plaintiff would return to work within a reasonable period of time:
Sun Life’s determination that the plaintiff was sufficiently disabled to receive long term disability benefits;
The Plaintiff’s post termination representations to Sun Life that his medical condition had not improved; and
The Plaintiff’s continued receipt of LTD benefits.
While employers are usually unable to rely on post termination medical documentation to support their claim for frustration, Pollack J., allowed the representations to Sun Life in as evidence. It is likely this post termination evidence that carried the day for the employer. Pollack J., specifically indicated it directly contradicted the plaintiff’s assertion that he would have provided further evidence had RONA asked and have been able to return to work in a reasonable period of time.
It is apparent that Pollack J., was unwilling to let the Plaintiff have his cake and eat it too. On the one hand, the Plaintiff was reporting to Sun Life that his condition remained stable and unchanged. On the other hand, he alleged that had RONA asked for additional medical information, he would have advised that he was improving. Both were unlikely to be accurate.
It is unfortunate that Pollack J. sidestepped the issue of which party had the obligation it is to submit or request medical information. Notably, the Plaintiff dropped his claim under the Human Rights Code, and so Pollack J., did not have to address the issue of accommodation by RONA. While there is case law that suggests an employer may suffer repercussions if they request information too frequently, many employment lawyers will vehemently argue that simply relying on the conclusion of the LTD insurer is insufficient to justify a claim of frustration without more. This decision would suggest that that a determination by the LTD carrier of ongoing disability, coupled with the continued receipt of LTD benefits may be a sufficient basis for employers to allege frustration of contract.
The Plaintiff’s receipt of long-term disability benefits for three years suggests his disability was severe enough that he was unable to engage in any employment for which he was reasonably suited. Those in the long-term disability industry recognize that this is a stringent test to meet and would be compelling evidence for employers to consider a frustration argument. However, as best practices, employers should request additional information from time to time from their employee and seek legal advice prior to making a final determination. While RONA was ultimately successful, their decision to dismiss the employee resulted in costly litigation.
On April 19, 2018 the Ontario Court of Appeal reversed the trial decision in MacIvor v Pitney Bowes, finding that the LTD policy in question covers claims that arise during the course of an employee’s employment, even if, as occurred in this case, the employee did not discover the claim for many years and had quit and started employment elsewhere in the meantime.
Mr. MacIvor suffered a severe back injury and a traumatic brain injury while participating in a company event while employed with Pitney Bowes. He was off work for four months post-accident and upon returning to work he struggled to perform at the same level he had pre-accident. Pitney Bowes reduced his work responsibilities overtime but the plaintiff continued to struggle and eventually quit.
Mr. MacIvor subsequently obtained employment with Samsung but, after less than a year there, he was terminated as his work was sub-par due his ongoing disabilities as a result of the accident.
The Court found that Mr. MacIvor only discovered the ongoing and permanent nature of his disabilities after Samsung terminated him. At that point, he made a claim under Pitney Bowes’ LTD policy.
An agreed statement of facts was submitted at the initial trial, with the parties agreeing that Mr. MacIvor was totally disabled from the time of the initial injury.
In rejecting the lower court’s decision that coverage ends when the employee ceased to be actively employed (ie when he resigned), the Court of Appeal held that the termination provisions did not exclude coverage for undiscovered disability claims that originated during the employee’s employment stating:
To so conclude would leave former employees in an untenable position of having no disability coverage from either their former or new employer. Such a result would be contrary to the very purpose of the disability insurance and the plain meaning of the coverage provision.
However, this alone did not resolve the issues between the parties in this case. Entitlement was still subject to the policy requirements to provide timely proof of claim and commencement of the action within the relevant limitation period.
Pursuant to the policy, proof of claim was required “within 90 days of the date benefits would begin”. Despite the passage of more than four years since the accident, and the finding that Mr. MacIvor had discovered his claim in August 2009, the Court held that the “the date benefits would begin” was after Mr. McIvor’s termination package from Samsung ended plus a month, since LTD benefits are paid in arrears. Despite what appears to be a very generous interpretation of when benefits would begin, Mr. MacIvor still did not file proof of claim within 90 days of this date, but did so about 100 days later instead. Although relief from forfeiture was not raised at trial, the Court of Appeal found it was in the interests of justice to grant relief here, citing a long list of factors, including the fact that Mr. MacIvor was injured during his employment, while covered by an LTD policy; that he did not appreciate the significance of his injury; the Insurer conceded his total disability as of the accident, and; that all of these facts had been known to the parties for years.
The Insurer also argued that the policy had a one-year limitation period to commence legal actions. However, the Court found that the provision also prevented any legal actions until 60 days had lapsed from the written proof of loss. In any event the Court concluded it was unlikely that the one-year limitation period would be upheld, referencing obiter from their 2014 decision of Kassberg v Sun Life Assuantce Company of Canada, 2014 ONCA 922 (CanLii), 124 O.R. (3d) 171.
All in all a very interesting decision, in circumstances that are unlikely to occur too often. However, Insurers, it may be time to revisit your policies to ensure they don’t provide for unintended exposure. Please feel free to contact me at firstname.lastname@example.org or 416-679-2781 x 210.
Lisa has an insurance law practice that has focused exclusively on insurance defence for 15 years. Her practice focuses on complex insurance-related litigation, including accident benefits and bodily injury. Read more ...
In a recent decision, of Wilken v. Sunlife, the Ontario Court of Appeal has confirmed that a long-term disability insurer is entitled to enforce the wording of the policy where a participant’s action or inaction would adversely vary an insurer’s interest.
The decision, Wilkens v. Sun Life Assurance Company, addressed the situation of Mr. Wilkens, an individual who was injured resulting from a motor vehicle accident while in the course of his employment. He elected to forgo Workplace Safety and Insurance Board (“WSIB”) benefits in order to pursue a tort claim. The appellant’s long-term disability insurer was considered a second payor under the policy and was entitled to an “offset” for any WSIB benefits the appellant was “eligible” for. The insurer took the position that despite electing to pursue a tort claim, at the time of the onset of disability, the appellant was “eligible” for WSIB benefits. Accordingly, it should be entitled to a credit despite the appellant retroactively electing to pursue a tort claim.
The motion judge, and subsequently the Court of Appeal, agreed.
The Court of Appeal adopted the motion judge’s reasoning that the plaintiff's voluntary decision to make a retroactive election, foregoing WSIB benefits to pursue a tort action, effectively would deny the insurer its contemplated and permitted offset, thereby elevating the insurer's relevant coverage obligation to a "first payor" status that obviously was not intended.
The Court found that the LTD carrier was entitled to deduct or offset the amount of WSIB benefits the appellant could have received had he exercised his entitlement to them, and not the amount of WSIB benefits actually received and retained in the wake of the plaintiff's retroactive election to proceed with his tort claim.
This decision continues to build on the Court’s decision in Richer v. Manulife Financial, 2007 ONCA 214. In the long-term disability context, courts will pay particular attention to the policy to give it its intend effect. This decision is also notable, as it has already been referenced in the recent FSCO decision of Pan v. Allstate, discussed further in our blog post here. In that case we raised the Court of Appeal’s rationale in Wilkins andArbitrator Smith relied on the decision in support of his finding that the Accident Benefits Insurer was entitled to deduct CPP disability benefits that may have been “available” but not yet applied for by the claimant.
These cases suggest that decision makers are treating the order of payment contemplated by the contract paramount to the individual claimant’s choice to selectively pursue benefits.
The full decision of Wilkens v. Sun Life Assurance Company, 2017 ONCA 975,can be found here.
Lisa has an insurance law practice that has focused exclusively on insurance defence for 15 years. Her practice focuses on complex insurance-related litigation, including accident benefits and bodily injury. Read more ...