Written on behalf of Peter McSherry

Court considers long-term disability claim even though the employee never applied for long-term disability benefits

The Ontario Superior Court of Justice recently heard a case involving a disability insurance claim, Smith v. Sun Life Assurance Company of Canada.

Mr. Smith is a gardener with the City of Kitchener. He had both short-term disability and long-term disability insurance coverage with Sun Life Assurance Company of Canada (“Sun Life”). The short-term disability coverage was for the first few months of any disability and the long-term disability coverage was for the time period after the short-term coverage up until age 65.

Mr. Smith stated he became totally disabled from working in mid-December of 2019 due to a primary diagnosis of depression (he also later provided medical records related to a secondary disability in his right knee).

While he stopped attending work in mid-December of 2019, he submitted his claim for short-term disability benefits in April of 2020. Additional documents supporting his claim were submitted in May of 2020, including his Attending Physician Statement. The insurer ordered two psychiatric reviews of Mr. Smith in June of 2020 and in July of 2020 Sun Life denied his claim for short-term disability insurance benefits.

While Mr. Smith was never supported for short-term disability benefits in relation to this claim, Sun Life’s policy required that he submit a separate application for long-term disability benefits, if he was pursuing a long-term disability insurance claim. The deadline for his long-term disability insurance application was September 10, 2020. Mr. Smith never submitted a long-term disability insurance claim formally, although he continued to provide the insurer with medical documentation supporting his claim.

In July of 2020, Mr. Smith retained counsel to assist him with his claims for disability insurance benefits. In October of 2020, his counsel filed a statement of claim to begin a legal proceeding against Sun Life for both short-term and long-term disability benefits. Shortly thereafter, Sun Life brought a motion to dismiss the claim for long-term disability benefits on the basis that Mr. Smith was not in compliance with the policy, as he never submitted an application for long-term disability benefits. He only ever submitted a claim for short-term disability benefits.

As part of Sun Life’s motion, the judge had to determine the following three issues:

1. As Mr. Smith is part of a unionized workplace, should this matter proceed in accordance with the relevant labour arbitration process instead of in court?
2. Was Mr. Smith’s failure to submit a formal long-term disability claim non-compliance or imperfect compliance?
3. Should Mr. Smith be granted relief from forfeiture – in other words, should the judge allow his claim to proceed even if he is found to be in imperfect compliance with the policy?

Employees may require workplace accommodations and disability insurance concurrently

When you become disabled from working, you may require accommodation from your employer in the form of a supported medical leave of absence. At the same time, you may require short-term or long-term disability insurance benefits through your insurance company to support yourself financially while you are unable to work.

Short-term disability benefits and long-term disability benefits are often associated with the workplace. These are usually policies that cover claims when an employee becomes totally or partially disabled from working (depending on the terms of the policy). Some large employers fund or even adjudicate these policies internally, but most employers outsource adjudication and benefits provided to insurance companies.

If your employer denies your accommodation request and they begin pressuring you to return to work before you are medically able to do so, you may have a wrongful dismissal or constructive dismissal claim. If your insurance company denies your claim for disability insurance benefits, you may have an insurance claim. These two issues may arise simultaneously; however, they are separate legal issues – particularly when the disability insurance policies are managed and funded by the disability insurer.

In Mr. Smith’s case, the court determined that his status as a unionized employee was irrelevant to the proceeding. There was no evidence of any workplace-related claims in this proceeding. This was purely a claim for disability benefits with the insurance company.

Court determines the failure to complete the form is “imperfect compliance”

The Court then needed to determine if the failure to complete the long-term disability application form was imperfect compliance with Sun Life’s policy or non-compliance. A determination of non-compliance would mean that Mr. Smith’s claim could not proceed whereas imperfect compliance would allow him to apply for relief.

In reviewing whether Mr. Smith was in non-compliance or in imperfect compliance. The court considered what information Mr. Smith had provided to the insurance company:

• A short-term disability application;
• Medical documentation covering the short-term and long-term disability benefit periods; and,
• One of the forms required as part of the long-term disability claim.

The court also considered that Sun Life had already denied the short-term disability claim. Sun Life provided no evidence that it would approve a long-term disability claim in a case where it had denied short-term disability benefits. The judge found this rendered Sun Life’s arguments to be “quite technical” and “crossing over into the world of ‘gotcha litigation’”.

Employee granted relief from forfeiture

The final issue the judge needed to consider was in light of Mr. Smith’s imperfect compliance with the policy, should he be provided with relief from forfeiting his long-term disability insurance benefits or should his claim be dismissed. In making a determination, the judge considered the employee’s conduct, the harm to the insurer in allowing the claim to proceed versus the harm to the employee should the claim be dismissed.

The judge determined it was reasonable to believe that the long-term disability claim would have been denied since the short-term disability claim had already been denied. Based on this, the court determined that Mr. Smith’s conduct was reasonable under the circumstances.

Long-term disability insurance policies often provide benefits until age 65 if the employee remains totally disabled from working. Although this was not a full review of the claim, so it is unclear if this employee would be eligible for benefits until age 65, this is a huge potential benefit to lose.

On the other hand, the judge considered the information that had been provided to Sun Life already and that would be provided to Sun Life in the course of the litigation. Based on this, the judge determined there would be little to no harm to Sun Life in allowing the claim to proceed despite the lack of a formal long-term disability benefits application.

Based on this analysis, the judge determined that Mr. Smith’s claim for long-term disability benefits could proceed and ordered Sun Life to pay Mr. Smith’s legal fees for the motion.

Contact Peter A. McSherry in Guelph for Advice on Disability Insurance Claim and Workplace Accommodation Issues

If you are an employee experiencing a disability that is preventing you from working and you are having difficulties with your employer and/or insurer, contact employment lawyer Peter A. McSherry. We advise employees on a range of legal matters related to disabilities, including workplace accommodations, wrongful dismissals and disability insurance claims. Contact us online or by phone at 519-821-5465 to schedule a consultation.