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Decisions clarify trigger of limitation period for LTD actions

For an individual denied long-term disability benefits, the limitation period for commencing an action against an insurer can be unclear if the insured has been led to believe that the claim will remain open for consideration indefinitely, Ottawa personal injury lawyer Najma Rashid writes in Lawyers Weekly.

“Unless the disability entails a catastrophic illness, it is not unusual for a long-term disability (LTD) insurer to deny benefits to the claimant once, twice, three times or more. The Limitations Act, 2002 imposes a two-year limitation period for all claims in contract and tort,” says Rashid, a partner with Howard Yegendorf & Associates LLP.

In those circumstances, she explains, questions arise as to when the limitation period begins to run: from the date of first denial, the date of the last denial, or the date of submission of claim forms regardless of date of denial?

The Ontario Court of Appeal recently considered these very issues in two cases: Kassburg v. Sun Life Assurance Company [2014] ONCA 922, and Dube v. RBC Life Insurance Company [2015] ONCA 641.

“Kassburg imposed on insurers a duty to communicate ‘a clear and unequivocal denial’ of a claim in order to trigger the limitation period under the act. Dube permitted relief from forfeiture for a disabled employee, who failed to give proof of claim within the 90-day period under his employer’s group policy,” says Rashid.

In Kassburg, writes Rashid, the motion judge found, and the Court of Appeal affirmed, that the limitation period began to run from Sun Life’s letter of February 2011 advising the plaintiff that her claim was declined, rather than from an initial denial letter dated December 2008.

“The decision reinforces the principle that unambiguous language is needed to communicate a limitation period. In this regard, there had never been a clear and unequivocal denial by Sun Life in its communications with the plaintiff from December 2008 to February 2011. During that period, the language used by Sun Life in denying the plaintiff’s claim was not sufficient to allow her to have concluded that all appeal procedures had been exhausted,” Rashid writes in the article.

In Dube, the plaintiff was injured in an accident in May 2010, however, his employer advised him that he was ineligible for LTD benefits under their group policy.

He later applied for benefits through RBC, but was denied on the basis of late proof of claim, which was 90 days after the date of disability, says Rashid.

“While RBC argued that Dube had a copy of the policy booklet and was aware of the contractual deadlines for submitting his claim for LTD benefits, the motions judge and the Court of Appeal granted the plaintiff relief from forfeiture of his claim under s.98 of the Courts of Justice Act,” Rashid says in the article.

As she notes, the motion judge’s analysis of the three-part test looked at the employer’s role in the sequence of events that led to the denial of the claim.

“While not explicitly stated, the decision nonetheless underscores an employer’s obligation to deal with its disabled employees in good faith—the employer must inform a disabled employee of his/her rights under a group policy, and assist the employee in applying for those benefits,” says Rashid.