How long do you have to sue an insurance company after they deny you long-term disability (“LTD”) benefits? According to a now-reversed decision from the Ontario Superior Court of Justice, if the benefits are provided as part of a group benefits plan, as most employee benefits are, it can be as little time as the insurance company says.
In a decision released in March of 2014, Kassburg v. Sun Life Assurance Company of Canada, 2014 ONSC 1523 (CanLII), the Honourable Justice M. Gregory Ellies of the Ontario Superior Court of Justice held that a group policy of insurance, issued by an insurance company to an employer, was a “business agreement” under the law and accordingly the usual limitation period governing such policies of insurance did might not apply.
However, on December 29, 2014, the Court of Appeal for Ontario reversed Justice Ellies' decision, finding that such policies of insurance are not "business agreements" and that the time limit applicable to such claims is two years from the date such claims are "discovered." For a summary of the Court of Appeal's decision see: Court of Appeal says Group LTD Policies not "Business Agreements".
As set out in the reasons for Justice Ellies’ decision, the plaintiff in the case worked as a Special Constable for the North Bay Police Services. As an employee, she was a member of the North Bay Police Association and insured under a group policy of insurance issued by the defendant, Sun Life, to the association. On or about May 1, 2008 the plaintiff submitted a claim for long-term disability (“LTD”) benefits in which she stated that she had been totally disabled since October 22, 2007.
The insurance policy provided for an “elimination period”, which was a period of time during which the plaintiff’s employer paid her short-term disability benefits. On May 15, 2008, Sun Life wrote to the plaintiff, advising that the elimination period would expire on September 11, 2008 and that LTD benefits would be payable under the policy starting on September 12, 2008. Therefore, the letter indicated, the plaintiff’s claim was still “pending”.
Sun Life next wrote to the plaintiff on December 4, 2008, advising that her claim had been “declined”. From that date to February 24, 2011, correspondence was exchanged between the plaintiff or her representatives and Sun Life, in which the plaintiff submitted further information as part of a process in which she passed through three “levels” of appeal. Her appeals were not successful. The final appeal ended on February 24, 2011 when Sun Life sent the plaintiff a letter advising that her claim remained declined. The letter also advised her that she might wish to seek legal advice as one of two options. The plaintiff followed that advice and retained a lawyer. Her lawyer commenced an action against Sun Life on behalf of the plaintiff on February 21, 2012.
Sun Life argued that the limitation period contained in the contract governed and that the contractual limitation period expired on December 10, 2009. Alternatively, it argued that the two-year statutory limitation period contained in the Limitations Act, 2002 expired on December 4, 2010. In either case, it submits that the plaintiff’s action was commenced out of time.
In deciding that the limitation period set out in the contract could govern the situation, Justice Ellies relied on a recent decision from the Court of Appeal for Ontario, Boyce v. The Co-Operators General Insurance Company, 2013 ONCA 298 (CanLII), which, coincidently, was successfully argued on behalf of the insurance company by Kelly Santini LLP’s Mitch Kitagawa. Citing that case for the proposition that an insurance contract may qualify as a business agreement, Justice Ellies wrote the following:
 The insurance contract at issue in this case was entered into between the Association and the defendant. As a result, it was not entered into by an individual acting for personal, family or household purposes. For that reason, if the contract is not valid because it was entered into before January 1, 2004, it qualifies as a business agreement under s. 22 of the [Limitations] Act because it was made after October 19, 2006. In either case, the contractual limitation period is not rendered invalid under the Act. However, that does not end the inquiry with respect to the validity of the contractual limitation period.
Fortunately for the plaintiff in this case, Sun Life’s policy was ambiguous in that it was unclear how long she actually had to apply. In his reasons for decision, Justice Ellies details some of the ambiguous and confusing language contained in Sun Life’s policy. More importantly, the Court of Appeal has since said that Justice Ellis' decision on this point was wrong. Again, for a summary of the Court of Appeal's decision see: Court of Appeal says Group LTD Policies not "Business Agreements".
In the result, the court decided that the plaintiff had actually started her lawsuit in time, because the limitation period did not begin until begin to run until February 24, 2011, the date of the letter in which the plaintiff was advised that her final appeal had failed. Justice Ellies further decided that she was entitled to her benefits.
While the plaintiff in this case was ultimately successful, I have to assume that one of the first things Sun Life, and other the insurance companies, will do after reading this decision is try to ensure that any ambiguity with respect to their deadlines for applications is removed. Provided that the insurance companies can remove all such ambiguity, then as this decision demonstrates, deadlines may be a lot shorter than anyone thought.
The important thing to note is that the decision only applies to contracts between two companies, i.e. between an insurance company and another business. If you have an individual contract that you have purchased yourself, then this case is irrelevant. However, if you receive your benefits as part of a group plan, as most employees do, then this case is especially important as it could mean that the time to start a lawsuit against your insurance company for the failure to provide LTD benefits could be very short.
Takeaways for those with Labour Pains
If you are an employee and you have been denied long-term disability benefits, whether as part of a group plan or through an individual plan, it is time to speak to a lawyer. The professional, experienced and cost-effective employment lawyers for employees at Ottawa's Kelly Santini LLP would be happy to be of service to you, as long as your insurance provider is not one of our clients. If they are, we would be happy to provide you with the name of another lawyer who should be able to assist you.
To reach the author of this blog, Sean Bawden, email email@example.com or call 613.238.6321 x260. You may also use the contact box at the top of this page.--
As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.
Sean P. Bawden is an Ottawa, Ontario employment lawyer and wrongful dismissal lawyer practicing with Kelly Santini LLP. He is also a part-time professor at Algonquin College teaching Trial Advocacy for Paralegals and Small Claims Court Practice.