Nuanced rules around appealing an LTD claim allow for some flexibility

By Paul Russell, LegalMatters Staff • Three Ontario Court of Appeal decisions show that the limitation period to appeal a denial for long-term disability (LTD) benefits does not necessarily begin as soon as the original claim is rejected says Barrie-area personal injury lawyer Steve Rastin.

“Recent case law supports the idea that these periods are not as firm a barrier as insurance companies like to believe,” says Rastin, managing partner with Rastin Law. “These judgments show arguments can be made concerning when a limitation period begins to run, in certain categories.”

He cites a 2012 Ontario Court of Appeal decision involving a man who was terminated without cause as a result of restructuring. He was able to find new employment within two weeks of his termination, though at a lower rate of compensation and with no disability benefits.

About 18 months later, he was diagnosed with cancer and underwent a series of intensive treatments, the judgment reads, so he sued his former employer for wrongful dismissal and short and long-term disability (LTD) benefits, saying he would have been entitled to them had he not been wrongfully terminated.

The trial judge found the company had only provided a “bare minimum” when it came to disability coverage before ruling the employer was required to pay the LTD benefits the man would have received under the policy until age 65, valued at about $200,000. The firm appealed the decision, but the Ontario Court of Appeal sided with the worker affirming that he was entitled to the benefits.

“This guy who was really ill with cancer was given what he would have received in disability benefits from the day he got sick to the day he turned 65,” Rastin tells LegalMattersCanada.ca. “This decision shows employees have recourse, even if a firm has taken away their disability coverage.”

One-year limitation period on business agreements

The second case involves a woman who suffered physical and psychological disabilities, resulting in her inability to work. After being denied LTD benefits through her workplace’s group policy, she continued to appeal the decision, until she was informed she has reached the final appeal level, with the company arguing that the insurance contract had a one-year limitation period for appeals since it was a “business agreement.”

At trial, a judge ruled the policy fit within the business agreement exception, but the ambiguity in the policy’s language meant that the defendant had not properly contracted out of the statutory limitation period, Rastin says.

“The court found that the limitation period only started running when the final avenue of appeal was exhausted, and therefore the plaintiff’s statement of claim was not out of time,” he says.

The court of appeal took a different approach regarding whether the business exemption to the limitation act applied, finding “the clear wording of s. 22(5) permits contracting out of the statutory limitation period, unless the parties to the contract include an individual and the contract was for ‘personal, family, or household purposes.’”

After considering the law about the scope of business agreements, the Ontario Court of Appeal concluded that for a business agreement to exist, the parties must not include individuals and it must not have been for personal, family or household purposes. In the cases of disability contracts, with some exceptions, the court determined that these were personal contracts and should be governed by the general two-year limitation period.

“The lesson here is that if an employee has been told they haven’t complied with all the terms of the agreement, or that they are out of time to file a claim, they really need to get some legal advice,” says Rastin.

Injured when with a former firm

The third case concerns a man injured on a business trip to Costa Rica in 2005. He returned to work and stayed with the company until 2008 when he started with a new firm, where he lasted until 2011.

“At that point, he realized that he was profoundly disabled as a result of the 2005 accident,” says Rastin, “so he brought an action for disability benefits against his old employer.”

The firm’s insurance company said there was no coverage available to him, and a lower court agreed. However, the Ontario Court of Appeal ruled that since the employee’s claim arose as a result of an event that took place during his earlier employment, that firm’s insurance policy should provide coverage.

“In this case, the court found that since this person has been disabled since the accident, even though he was being later paid by another company, he should be able to submit a proof of claim,” says Rastin.

“In my experience, the vast majority of people, when they are involved in a disability claim, will often hear from insurers or employers that they don’t meet the criteria for applying, since they may no longer be working,” he explains. “This ruling shows their claim may have real merit.”

The three cases show that courts are willing to look beyond the two-year limitation period if circumstances warrant it, Rastin says.

“The analysis for deciding on a disability claim is much more nuanced than simply complying by terms and limitation periods,” he says. “Many people who have suffered injury in their workplaces are probably entitled to some money, but they may not be pursuing it, after their initial denial.”