An insured must commence an action for breach of a disability insurance contract within one year of an unequivocal denial of benefits.
An insured must commence an action for breach of a disability insurance contract against an insurer within a year of a clear and unequivocal denial of benefits, pursuant to British Columbia's Insurance Act. An insurer may be permitted to entertain the possibility that an insured might appeal its decision without rendering a denial equivocal or unclear.
Here is the case citation: Falk v. Manufacturers LIfe Insurance Co. [2008] B.C.J. No. 231. British Columbia Supreme Court. M.A. Humphries J. February 15, 2008.
Here is a link to the decision.
This case was originally summarized by Jay Havelaar and edited by David Pilley.
The Plaintiff commenced an action against the Defendant insurer for disability benefits under a group benefits policy issued by the Plaintiff's employer. The Defendant argued that the Plaintiff's claim was barred by a time limit imposed by British Columbia's Insurance Act. Under the Act, "every action on a contract must be commenced within one year after the furnishing of reasonable sufficient proof of loss or claim under the contract and not after."
The parties agreed that there must be a clear and unequivocal denial of further benefits in order to trigger the limitation period. However, they disagreed on whether such a denial had occurred. The Defendant submitted that a letter to the Plaintiff advising his benefits would terminate on December 4, 2004 constituted a clear and unequivocal denial of further benefits. The letter read:
"There is insufficient medical evidence to support the reported restrictions and limitations and to support a continued absence from work. Therefore your file has now been closed.
If you disagree with this decision, you have a right to appeal. You will need to send us a letter explaining the reasons you feel a review is necessary. This will need to be supported by further medical information not already on file."
The plaintiff relied on the continued communication between himself and the Defendant's representatives pursuing the various levels of appeals of the Defendant's decision to argue that there had not been a clear and unequivocal denial of further benefits.
The Court reviewed the case law in this area and concluded that the legal test for the commencement of the limitation period was clear: the clear and unequivocal denial of benefits test agreed to by the parties. The Court also determined that whether there had been such a denial was a question of fact. The Court found that on the facts of the case, the Defendant's letter advising the Plaintiff of the closure of the Plaintiff's file constituted a clear and unequivocal denial of benefits and that a mere willingness to entertain an appeal if the Plaintiff were to obtain new evidence did not render the denial equivocal.
