Long Term Disability Benefits: Does Your Insurance Company Really Have the Last Word?

As an employment law firm, we get many questions surrounding disability benefits and entitlements to these benefits. One of the most common issues arises wherein a disabled employee has been denied benefits or the renewal of benefits on the basis that they are not “totally disabled” within the meaning of the applicable policy. The concept of “total disability” is the focal point of cases wherein an individual’s eligibility for long term disability and other benefits is challenged. The legal test for total disability was set out by the Supreme Court in Suchorov v. Paul Revere Life Insurance Co. [1983] S.C.J. No. 86, and is as follows:

“The test of total disability is satisfied when the circumstances are such that a reasonable man would recognize that he should not engage in certain activity even though he is not physically unable to do so… There is total disability if the insured’s injuries are such that common care and prudence require him to desist from his business or occupation in order to effectuate a cure.”

When your insurance provider makes a decision that you are not eligible for benefits or reinstatement of benefits, should you just accept it? If you have proof (medical reports, professional opinions, etc.), it may be worth contacting a lawyer to discuss your options.

The Law

Many claims have gone before the courts in which a claimant has been unjustly denied disability benefits, resulting in additional hardships and medical expenses.

In the recent case of Dodgson v. Great West Life Assurance Co. [2014] O.J. No. 431, the Plaintiff was denied short term disability benefits through her employer, the Bank of Nova Scotia. She suffered from numerous mental illnesses, including anxiety and depression, which resulted in her taking leaves of absence throughout her employment, a majority of which the Plaintiff was not fully compensated for.

When the Plaintiff applied for short-term disability benefits, the bank denied the application through its Plan Administrator, Great West Life. The Plaintiff appealed but this was also denied due to an alleged insufficiency of documentation. At trial, the Plaintiff was awarded over $69,000.00 in disability benefits recoverable with a monthly benefit continuation following judgment of $1,215.00 until the Plaintiff was no longer totally disabled.

The courts have also awarded punitive damages and damages for mental distress along with the recovery of benefits. In the case of Fernandes v. Penncorp Life Insurance Co. [2014] O.J. No. 4039, the Plaintiff, a brick layer, suffered a back injury resulting from two accidents which left him unable to perform his job duties. Before the accident, the Plaintiff had purchased a disability plan with the Defendant and began collecting benefits following the injury. However, after the Defendant had him surveyed, they determined that he was not totally disabled as the footage showed the Plaintiff performing yard work. At trial, he was awarded $236,773.00 for the Defendant’s failure to pay disability benefits, punitive damages of $200,000.00, and mental distress damages of $100,000.00. On appeal, the mental distress damages were lowered to $25,000.00 as this was the initial amount asked for at trial. The punitive damage award was upheld.

The court also found damages for mental distress appropriate in the case of McIsaac v. Sun Life Assurance Co. of Canada (c.o.b. Sun Life of Canada) [1997] B.C.J. No. 2164, wherein the Plaintiff, Helen McIsaac, was denied long term disability benefits, despite having lupus, a condition which made it impossible for her to work. When the case proceeded before the courts, it was held that Sunlife had incorrectly categorized the Plaintiff as “not totally disabled”, despite receiving reports from qualified medical professionals on multiple occasions indicating otherwise. At trial, McIsaac was awarded the recovery of LTD payments which would have been paid since her termination in 1992, and also awarded her $8,500.00 in damages for mental distress. When Sunlife appealed in 1999, the appeal was dismissed and the decision of the trial judge was upheld.

Advice for Employers

If you find yourself in a difficult situation involving an employee who is disabled but you receive evidence establishing that they are not totally disabled, it is best to act in good faith and to provide accommodation wherever possible. If you are unsure whether such a situation has been handled properly, consult with an Employment Lawyer in order to minimize liability going forward. Call Monkhouse Law today for a free consultation.

Advice for Employees

If you have been denied disability benefits either during or following the end of your employment, it is wise to consult with an Employment Lawyer to better evaluate the situation. Depending on the applicable evidence to your claim and the nature of your disability, you may have a legal remedy available to you. As the cases above demonstrate, disability benefit claims are not always as “cut and dry” as your insurance company or plan provider might have you believe and the law does recognize a specific threshold wherein an individual should not be denied such benefits.

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