Release in human rights complaint also releases claim for disability benefits

An employee pursued a human rights complaint against her employer alleging discrimination with respect to disabilities which interfered with her ability to work.  The human rights complaint was settled and the employee executed a release of all claims, including claims for long term disability benefits.  At the same time the employee pursued a claim for long term disability benefits and the insurer eventually allowed her claim after two internal appeals.  The insurer later learned of the release and sought the return of the benefits paid to the employee.  The Court held the insurer was entitled to rely on the release.

Zelsman v. Meridian Credit Union Ltd. 2011 ONSC 1680, September 7, 2011, Ontario Superior Court of Justice, K.D. Coats J.

 

The plaintiff sought to enforce payment of long term disability benefits ("LTD benefits") under a group policy that was issued by the defendant, The Great-West Life Assurance Company ("Great-West Life"), to the plaintiff's former employer. The plaintiff had entered into a settlement with her employer and Great-West Life sought to rely on the minutes of settlement as providing a release of her claim for LTD benefits.

The plaintiff suffered a number of injuries which caused her to take some time off work, but she returned to work with her employer until she was terminated on April 22, 2008, which she claimed was as a result of her disability due to her injuries. On June 12, 2008, the plaintiff submitted a claim for LTD benefits to Great-West Life but the claim was denied. The plaintiff also submitted a complaint to the Ontario Human Rights Tribunal in June 2008 alleging discrimination by her employer. A mediation of the human rights complaint was held on August 12, 2009 and the plaintiff and her employer entered into a settlement pursuant to which the plaintiff agreed to release the employer and Great‑West Life from any and all claims including LTD benefits. At the mediation, hand written annotations were added to the minutes of settlement to add Great‑West Life as a releasee and to specify that the release did not affect any claims against Great‑West Life arising out of any policies purchased by the plaintiff after April 24, 2008. Following the settlement with her employer, the plaintiff twice appealed the denial of her LTD benefit claim to Great-West Life. Her claim for LTD benefits was granted on the second appeal on the basis of new medical information. Great‑West Life made a payment for retroactive benefits to the plaintiff and then later learned of the settlement between the plaintiff and her employer.

At issue on this motion was whether the doctrine of privity of contract prevented Great‑West Life from relying on the minutes of settlement or whether a principled exception to the doctrine of privity was warranted based on the plaintiff's clear intention reflected in the minutes of settlement to release the her claim against Great‑West Life. An exception to the doctrine of privity is warranted if it is shown that a) the parties to the contract intended to extend the benefit in question to the third party seeking to rely on the contractual provision, and b) the activities performed by the third party seeking to rely on the contractual provision are the very activities contemplated as coming within the scope of the provision. The motions judge found that the plaintiff and the employer did intend to extend the benefit of the release to Great West Life, as demonstrated by the fact that Great‑West Life was specifically mentioned in the release and the terms of release included any claims for LTD benefits. It was further found that the provision of disability benefits by Great‑West Life pursuant to the group policy was the activity contemplated as coming within the scope of the release. Having satisfied these two factors, it was held that Great‑West Life had established an exception to the doctrine of privity.

The remaining issue to be determined was whether there was a sound policy reason to relax the doctrine of privity. The judge noted that allowing the plaintiff to invoke privity principles would undermine the resolution of routine employment litigation by allowing an employee to enter into a settlement for wrongful dismissal and then pursue disability benefits, which would allow for the potential of double recovery if the settlement agreement were not enforceable by the disability insurer. In the result, it was held that the settlement minutes did have the effect of releasing the plaintiff's claim against Great‑West Life and the judge granted the declaration that Great‑West Life was entitled to enforce and rely on the terms of the minutes of settlement against the plaintiff.

This case was digested by Emily M. Williamson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at ewilliamson@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com

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California Overtime Law - January 18, 2012 1:31 AM

Good Information... Thanks for posting...

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