Court Decides that Long Term Disability Benefits can be Pursued Despite Failure to File a Formal Claim

When an illness or disability strikes which may render it difficult to continue working, employees often feel concerned and anxious about how they are going to make ends meet during such a strenuous time. While some public initiatives have been put in place (such as CPP Disability and WSIB Benefits) to provide assistance to workers, for the majority of cases, it is the employer’s Disability Benefits Policy (if any) which governs the employee’s rights moving forward.

There are generally two types of disability benefits programs some employers may provide:

  1. Short Term Disability (“STD”) is a benefits program which partially extends a disabled employee’s wages for a short-term period (typically up to six months), while they are unable to work as a result of their disability.
  2. Long Term Disability (“LTD”) is a more comprehensive plan, which may partially extend an employee’s wages for a period of up to two (2) years, if they can demonstrate they are unable to perform the specific duties and responsibilities of their own occupation during this time. At the end of this period, if the employee’s disability has rendered the employee unable to perform the duties and responsibilities of any occupation, then they may be eligible for extended LTD benefits coverage to the age of sixty five (65).

Naturally, employees and benefits providers/insurers find themselves at crossroads regarding whether the employee’s disability in question entitles them to benefits coverage, as per the terms and conditions of the disability policy. Unfortunately, disability providers far too often deny an initial disability benefits application, requiring an employee to pursue several appeals of the denial, ultimately necessitating litigation so that a judge can weigh in on the dispute.

Fortunately, the Ontario Superior Court in Smith v. Sun Life Assurance Company of Canada, 2021 ONSC 7109 (CanLII) recently issued a novel ruling on the difficult appeals process and LTD eligibility, which will substantially assist employees moving forward. Specifically, the Court held that a failure to exhaust an internal appeals mechanism and/or to apply for LTD outright may not disentitle the employee from eventually collecting LTD benefits.

In this case, the Plaintiff (“Mr. Smith”) did not submit a formal LTD application, however, he argued that his failure to do so should not disentitle him from seeking LTD benefits. This is due to the fact that he previously applied for STD and provided ample medical documentation in support of his application, which therefore put the Defendant on notice of his intention to seek LTD benefits. Once his STD application was denied, he commenced litigation in pursuance of LTD benefits. The Defendant (“Sun Life”) argued that the Plaintiff’s failure to submit a benefits application disentitled him from pursuing disability benefits he never applied for, and requested that his legal proceedings in pursuance of same be dismissed.

The Court ruled in favour of the Plaintiff, and stated that he was entitled to continue his legal proceedings in pursuance of LTD benefits, notwithstanding his failure to submit a formal application for same.

The Court reached this conclusion by reviewing the Plaintiff’s request for “relief from forfeiture.” This is an “equitable” remedy, whereby a party in a contractual dispute may request a court to permit them to seek the contractual right in question (i.e., LTD benefits), notwithstanding their inadvertent failure to follow a contractual term which is a key requirement regarding the matter in dispute (i.e., an LTD policy calling for employees to first submit an LTD benefits application, to then be considered for LTD benefits).

In order to be entitled to this unique remedy, courts will assess the following factors:

  1. The conduct of the insured party;
  2. The gravity of the insured party’s breach of the policy in question; and
  3. Weigh the balance between the harm that would result to the insured party if the remedy is not granted, and the harm that may result to the insurer if the remedy is granted.

On the first factor, the Court ruled that the Plaintiff put the Defendant on notice of his disability, as he formally submitted an STD application, provided extensive evidence in support of disability (including medical evidence from his treating physician) and documentation from his treating physician on the insurer’s forms which included a label/reference to LTD Benefits. Accordingly, the Court felt it was clear to the Defendant the Plaintiff was seeking disability coverage, and would be seeking LTD.

On the second factor, the Court ruled that as the Plaintiff clearly submitted a prior benefits application with extensive medical evidence in support of his disability, the Plaintiff was in “imperfect compliance” with the benefits policy (i.e., the Plaintiff still failed to submit an LTD application which was an essential contractual requirement to pursue LTD benefits, but otherwise he did put the Plaintiff on notice of his intention to seek LTD benefits). Further, the Defendant already reviewed the Plaintiff’s medical evidence pertaining his disability when it assessed his STD application, and was therefore aware of the supporting evidence which would likely be used in an LTD application. As such, there would be nominal harm (if any) to the Defendant by permitting the Plaintiff to continue his legal proceedings against the Defendant in pursuance of LTD benefits.

Finally, the Court ruled that the question of whether the Plaintiff was entitled to LTD benefits and his prospective damages was unknown, as the trial in that matter had yet to occur. Further, the Defendant had not demonstrated what (if any) harm it would suffer if the Plaintiff would be permitted to continue his proceedings, notwithstanding his failure to submit an LTD application. As such, the Court ruled that the Plaintiff would suffer substantial and greater harm if he was precluded from bringing these proceedings to trial on the issue of his eligibility for LTD benefits and the applicable damages which he may be entitled to, simply as a result of a failure to submit an application for a benefits claim the Defendant was clearly aware the Plaintiff was seeking.

Accordingly, the Court ruled in the Plaintiff’s favour and granted him relief from forfeiture, by permitting him to continue his proceedings for his outstanding LTD benefits.

This is a novel and excellent precedent in favour of employees, as it demonstrates that employees are not precluded from pursuing their disability benefits but for a misstep in the appeals process, and further, an appeal is not always necessary in seeking out the benefits in question. Accordingly, employees should rest assured that the law is on their side, and they have recourse to seek financial protection while they are unable to work due to a disability.

If you require legal assistance in pursuing disability benefits, or your disability benefits application has been denied, please do not hesitate to contact us, and we would more than happy to assist you regarding your disability matter.

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