A Primer On Long Term Disability Claims'Three Important Considerations

• Published date: 08 March 2021
• Subject Matter: Employment and HR, Insurance, Litigation, Mediation & Arbitration, Discrimination, Disability & Sexual Harassment, Insurance Laws and Products, Personal Injury
• Law Firm: McLeish Orlando LLP
• Author: Ms Lindsay Charles and Ryan Marinacci

Denials of long-term disability benefits are an important area of personal injury law. When reading an LTD insurance policy, it is not always clear that civil actions may be initiated against an insurance company that refuses to pay benefits. Rather than being a tort claim, this is a contract claim where the plaintiff sues the insurer in order to have the policy enforced. Here are three important considerations.

Am I entitled to LTD benefits?

LTD benefits typically are payable after an insured suffers a "total disability." A majority of the Supreme Court of Canada held in Paul Revere Life Insurance Co v Sucharov, 1983 CanLII 168 that this test is met when an individual is unable to substantially perform all the duties of his or her employment. Total physical disability is not required.

Many LTD policies have a temporal element that modifies the definition of total disability depending on the date of the disability. Policies will often for the first 24 months define total disability by referring to the inability to perform the essential duties of the insured's "own occupation." After the first 24 months, the language might change and require an inability to perform the essential duties of "any occupation." This more stringent test is not as easily met because the individual must be unable to substantially perform all the duties of any employment, not just their actual employment.

How long do I have to start a lawsuit?

In most cases, you will have two years to start a civil action based on an LTD denial. This is because limitation periods in Ontario are governed by the Limitations Act, 2002, which under s. 4 states that a proceeding shall not be commenced after the second anniversary of the day on which the claim is discovered.

In the LTD context, the claim is "discovered" when the insurer refuses to pay the benefits according to the Divisional Court decision in Western Life Assurance Company v Penttila, 2019 ONSC 14. In that case, the Court upheld the motion judge's decision that the claim was not statute-barred because it had not been discovered for the purposes of the Limitations Act until the insurer's internal appeal mechanism had been exhausted. The insurer had attempted unsuccessfully to argue that the limitation began to run on the date of the 2013 initial...