British Columbia Insurance Blog : Canada Insurance Lawyer & Attorney : Michael Thomas of Harper Grey Law Firm : British Columbia, Vancouver

The Plaintiff Insured appealed the dismissal of his action against the Defendant Insurer. The Insured held a long term disability policy with the Insurer. The Insured subsequently became disabled as a result of meningitis. He applied for long term disability benefits but his application was rejected by the Insurer who took the position that the Insured had materially misrepresented his medical history on the initial questionnaire.

The trial judge found that the policy was void ab initio because the Insured had not disclosed material facts. In particular, the Insured had not disclosed the identity of his attending physician or his consultation with that physician four or five months prior to the date of the insurance application regarding lumbar pain. The trial judge found that had the Insured not misrepresented his medical history, the coverage offered would have been subject to full exclusions for back and hip related ailments. The Insured's appeal, which was on the basis that the trial judge had committed errors of facts, was dismissed.

This case was originally summarized by Cameron B. Elder and originally edited by David W. Pilley.

The plaintiff, a dentist, was diagnosed with cataracts in both eyes, a condition which substantially undermined his ability to carry on with his practice.  In July of 1998, the plaintiff’s claim for disability benefits from the defendant, Sun Life, was approved. The defendant subsequently informed the plaintiff that his policy required him to undergo corrective eye surgery.  The plaintiff petitioned the Supreme Court for a declaration to the contrary.  On June 29, 2001, while the Supreme Court judgment was under reserve, the defendant wrote to the plaintiff reaffirming that he was required to have corrective surgery, indicating that it intended to cease benefits if he did not, and setting out a date for final payment. The Supreme Court and the Court of Appeal held for the defendant.  The Court of Appeal issued its ruling on January 29, 2003, and the plaintiff commenced corrective surgery shortly thereafter. Despite the surgeries, the plaintiff was unable to practice dentistry, and commenced an action against the defendant for disability benefits.  The defendant brought an application under Rule 18A claiming the action was statute barred as it was commenced outside the limitation period set out in s. 22 of the Insurance Act, R.S.B.C. 1996, c. 266.  The plaintiff argued that correspondence and discussions passing between the parties during the litigation meant that “clear and unequivocal notice” of the defendant’s intention to deny benefits was never given.  This submission was premised mainly on the fact that the defendant had indicated that it would not consider the plaintiff in fundamental breach of his policy if he postponed surgery during the litigation.  No formal standstill agreement was reached.

The plaintiff’s action was dismissed.  The Supreme Court ruled that the June 29, 2001 letter constituted “clear and unequivocal notice”.  In determining what constitutes “clear and unequivocal notice”, the Supreme Court referred to the Court of Appeal’s decision in Balzer v. Sun Life Assurance Company of Canada, 2003 BCCA 306, and the line of cases emerging from that judgment.  The Court interpreted Balzer to mean that when an insurer expresses its intention to cut off benefits and close its file, the s. 22 limitation period is triggered.  The correspondence and discussions passing between the parties did not undermine the notice contained in the June 29, 2001 letter as the communication was related to the appeal, and to the consideration of additional information concerning the plaintiff’s medical status.

This case was originally summarized by Kim Yee and edited by David W. Pilley of Harper Grey.

The Defendant Insurer applied for a dismissal of the Plaintiff Insured's claim.  The Insured was employed by the Royal Bank of Canada as a customer service representative.  The Insurer provided insurance coverage, including long term disability coverage for the bank's employees, including the Insured.

The Insured developed laryngitis and, as a result, was told to rest her voice.  She attempted to return to work but was unable to do so.  On the advice of her employer, she accepted short-term disability benefits for eight weeks.  After the Insured's short-term disability benefits were exhausted, she applied to the Insurer for long-term benefits based on her doctor's then diagnosis of "muscular tension dysphonia".  The Insurer approved her application for long-term disability benefits.  The Insured was advised that if her medical condition prevented her from performing the duties of her own occupation, she would, in approximately 18 months, be eligible for disability payments only if she was unable to work at any occupation for which she was qualified, or might reasonably become qualified by training, education or experience.

The Insured was eventually advised that her claim would be closed at the expiration of the 18 month period as she was no longer entitled to disability benefits.  Approximately six months after the Insured's benefits were cut off, she received a new diagnosis of conversion disorder and advised the Insurer. The Insurer rejected the Insured's claim for benefits based on the new diagnosis and the Insurer issued a Writ of Summons.

The Insurer brought this application to have the Insured's claim dismissed on the basis that section 22(1) of the Insurance Act of British Columbia requires that "every action on a contract must be commenced within one year after the furnishing of reasonably sufficient proof of a loss or claim under the contract and not after".

In this case, the policy provisions that applied to the Insured's claim, on a literal rating, permitted the Insured to commence legal action two years after the last day on which a proof of claim would be accepted under the terms of the policy.  Thus, the issue before the Court was which limitation period applied.  If section 22(1) of the Insurance Act applied, the Insured had not brought her claim within time whereas, if the limitation period in the policy applied, the Insured had brought her claim within time.

The Court found that while section 3 of the Insurance Act prevents an Insurer from contracting for a limitation period shorter than that provided for in the Insurance Act, there is nothing in section 3 that prevents an insurer from contracting for a period greater than that in the Act.  The Court also granted the Insured relief from forfeiture as she had failed to formally file a proof of loss, which the Court viewed as imperfect compliance given the circumstances of the case.  In the result, the Insurer's application was dismissed.

This case was digested by Cameron B. Elder and edited by David W. Pilley.

The Appellants are totally disabled and receive long term disability (“LTD”) benefits from SunLife under group insurance policies. The Appellants have minor children and receive disability benefits from the Canada Pension Plan (“CPP”). The CPP benefits are payable to the dependant children, although they are received by the parents in trust.

SunLife had deducted the CPP benefits from the LTD benefits. The Appellants commenced an action and argued that SunLife was not entitled to do so. The trial judge held that, pursuant to the terms of the policies, the CPP benefits were deductible. Both of the group insurances policies contained clauses about the coordination or integration of benefits from other sources.

The Court of Appeal upheld the trial judge’s decision. Even though the CPP benefits are not “disability income to which the disabled member is entitled”, the payments are made to the disabled parent in trust.  This is sufficient to trigger the portions of the policy which speak to the integration or deduction of benefits from other sources.

The Court of Appeal also held that the off-setting of CPP benefits was not a violation of Canada Pension Plan. The Act contemplates a scheme whereby CPP and disability benefits are to be integrated.

This case was originally summarized by Kim Yee and originally edited by David Pilley.

Lumsden had been working as a physiotherapy aide for Manitoba since 1985. Lumsden ceased working in 2002 due to various medical conditions, including Raynaud's phenomenon, back pain, and depression. Manitoba refused to pay disability benefits under its long term disability income plan. At trial, the Judge found that Lumsden suffered from a continuing decline and deterioration in health from 1995. The Trial Judge accepted the evidence of Lumsden's family physician and from various specialists consulted by the physician and found that Lumsden was not able to work when he left his employment in 2002. The Trial Judge found that by 2003, Lumsden was unable to perform his own occupation and by 2004, was totally disabled. The Trial Judge awarded Lumsden damages of $45,000 for mental distress due to Manitoba's failure to pay him disability benefits to which he was entitled. Manitoba appealed this decision, arguing that the Trial Judge erred in finding that Lumsden was totally disabled and in awarding damages for mental distress.

The Manitoba Court of Appeal allowed the appeal in part. The Court of Appeal held that the Trial Judge did not commit a reversible error in finding that Lumsden and his family physician were credible. There was no evidence after December 2003 from any source that Lumsden might be capable of working. The Court found that the test for disability in relation to employment was an individualized one, combining elements of both the objective and subjective. The Reasons of the Trial Judge were sufficient to support the findings. The Trial Judge did not solely rely upon Lumsden's subjective perception, but extensively reviewed the medical evidence and found it to be reliable and supportive of the claim for total disability.

With respect to the appeal concerning the damages for mental distress, both Parties agreed that the Trial Judge correctly relied upon the leading decision of the Supreme Court of Canada in Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30. There was no suggestion that the Trial Judge was not entitled, as a matter of law, to award damages for mental distress when dealing with "peace of mind" contracts, such as disability insurance, where the parties reasonably contemplated at the time of the contract that a breach in certain circumstances would cause a plaintiff mental distress. However, the Court applied a practical "sensible and realistic" approach in determining the appropriate award under this heading. The Court found that using the award in Fidler as a benchmark, the award of damages of $45,000 was neither "sensible" nor "realistic". Instead, a more appropriate award was $25,000.

In the result, Manitoba's appeal was dismissed except for the reduction in damages awarded for mental distress from $45,000 to $25,000.

This case was originally summarized by Jonathan D. Meadows and originally edited by David W. Pilley.

The Appellant was a lawyer who had purchased an “own occupation” disability policy of insurance (“the policy) from the Respondent in 1993. In 2000 she left practice after she became seriously depressed. She filed a claim for benefits under the policy in October 2000. In July 2001 she was advised that her disability had been substantiated and her benefits were approved. However, nearly a year later, in May 2002, she was advised that based on an April 2002 medical report she no longer qualified for benefits. Pursuant to the wording of the policy she was required to be under the regular care of a physician to be entitled to benefits. In May 2004 she was seen by a psychiatrist who found that she had been free of depressive symptoms for a prolonged period.  As a result, he established a regime to wean her off of her antidepressants. In February of 2005 the policy expired for want of payment of premiums. She subsequently saw a physician with respect to depression again in 2006.

The Appellant claimed for benefits, damages due to mental distress, and a return of her premiums. She asserted that she was suffering from an undiagnosed anxiety disorder during the period at issue and therefore was entitled to benefits even though she was not under the care of a physician.  It was also argued that she was at risk for becoming depressed if she returned to work.  At trial, the Court considered whether she was entitled to benefits and whether she failed to mitigate her loss. Her claim for benefits was ultimately denied as well as her claim for mental distress and for the return of her premiums.

On appeal, the Court affirmed the trial judge’s conclusion that she was not under the care of a physician during the period that she was claiming for.  Furthermore, the Court supported the trial judge’s application of the B.C. Court of Appeal decision in Rose v. Paul Revere Life Insurance Co. (1991), 85 D.L.R. (4th) 433. In that case the Plaintiff had recovered from her depression and anxiety and visits to a physician were no longer required. The Court in Rose held that benefits are to continue only as long as medical treatment continues and the fact that a Claimant’s condition may reappear upon return to work does not entitle the claimant to continued benefits.

The Court rejected the reasoning in American authorities which involved a policy provision that clearly required the care of a physician, but concluded that the insured is not required to comply with it. The Court also held that the wording of the subject policy was not ambiguous so the contra proferentum was inapplicable.

This case was originally summarized by kyee@harpergrey.com and originally edited by dpilley@harpergrey.com

The Appellant insurance company had issued a critical illness policy to the Respondent.  When the Respondent developed Parkinson's disease, the Appellant denied coverage, relying on an exclusion clause which stated: "if the insured person had a covered critical illness or any symptoms associated with a covered critical illness before the date the Policy came into effect".  The Appellant argued that although the Respondent was unaware of having Parkinson's disease and had not had a diagnosis of the disease at the time the policy came into effect, the progressive nature of Parkinson's disease meant that the Respondent had symptoms of the disease at the time the policy came into effect, thus triggering the exclusion clause.

At trial the court held that the exclusion clause was ambiguous and should be interpreted, contra preferentem, against the insurance company.  On appeal the court upheld this interpretation and concluded that the Respondent was entitled to receive critical illness benefits.  Martin, J.A., writing for the unanimous court, held, at para. 19, that:

“The appellant submits that the clause was intended to exclude coverage to those individuals already suffering from a listed critical illness.  That may be so, but the chosen words do not make that intention clear and the policy specifically uses the phrase “associated with”.  Indeed, the intent of the clause would be more clear if those words had not been used at all.”

The Appellant further argued that the Respondent should not be entitled to critical illness benefits because the symptoms of his illness were not sufficiently disabling.  The Court of Appeal dismissed this argument, holding at para. 27 that: “Herculean efforts by an insured to avoid the assistance of attendants for reasons of pride or privacy should not disentitle him to the benefit he contracted for.”

The Appellant insurance company had issued a critical illness policy to the Respondent.  When the Respondent developed Parkinson's disease, the Appellant denied coverage, relying on an exclusion clause which stated: "if the insured person had a covered critical illness or any symptoms associated with a covered critical illness before the date the Policy came into effect".  The Appellant argued that although the Respondent was unaware of having Parkinson's disease and had not had a diagnosis of the disease at the time the policy came into effect, the progressive nature of Parkinson's disease meant that the Respondent had symptoms of the disease at the time the policy came into effect, thus triggering the exclusion clause.

At trial the court held that the exclusion clause was ambiguous and should be interpreted, contra preferentem, against the insurance company.  On appeal the court upheld this interpretation and concluded that the Respondent was entitled to receive critical illness benefits.  Martin, J.A., writing for the unanimous court, held, at para. 19, that:

“The appellant submits that the clause was intended to exclude coverage to those individuals already suffering from a listed critical illness.  That may be so, but the chosen words do not make that intention clear and the policy specifically uses the phrase “associated with”.  Indeed, the intent of the clause would be more clear if those words had not been used at all.”

The Appellant further argued that the Respondent should not be entitled to critical illness benefits because the symptoms of his illness were not sufficiently disabling.  The Court of Appeal dismissed this argument, holding at para. 27 that: “Herculean efforts by an insured to avoid the assistance of attendants for reasons of pride or privacy should not disentitle him to the benefit he contracted for.”

This case was originally summarized by jhavelaar@harpergrey.com and originally edited by dpilley@harpergrey.com

The Insured was injured in a highway accident and began receiving monthly disability benefits under a policy issued to her employer.  The Insured obtained judgment against the driver of the motorcycle on which she was riding at the time of the accident, including an award of damages for past and future loss of income.  The Insured repaid all the disability benefits she had received under the disability policy, but contested the Insurer’s entitlement to any part of the award for future loss of income on the basis that the Insurer had no rights of subrogation under the policy after the entry of the judgment.  The Insurer eventually ceased paying disability benefits to the Insured, giving rise to her application for judicial confirmation of her entitlement to past and future disability benefits. The Application Judge found that the Insurer had breached the policy in stopping payment of disability benefits to the Insured.

The only issue before the Court of Appeal was whether the policy was a contract of indemnity.  If it was a contract of indemnity, the parties agreed that the appeal must be allowed and the Insured's application for benefits dismissed.  The Insured argued that the policy was not a contract of indemnity because it only provided partial indemnity for any loss of income (60% of her basic monthly rate of earnings) and also that a policy identical to the one at issue in this case was found to be a non-indemnity contract in Mutual Life Assurance Co. v. Tucker(1993), 119 N.S.R. (2s) 417 (C.A.), [1993] N.S.J. No. 56 (QL).

The Court of Appeal considered the distinction between non-indemnity and indemnity policies, noting that if the policy is one of indemnity, equity steps in and vests in the Insurer a right of subrogation, which in insurance cases is regulated by the broad underlying principle of securing full indemnity for the Insured on the one hand, and, on the other, of holding him accountable as trustee for any advantage he may obtain over and above compensation for his loss.  The Court of Appeal found that the Application Judge had erred in stating that "a policy providing LTD benefits is [not] an indemnity policy" and that the correct view is that a policy providing LTD benefits may be a contract of indemnity, depending on its terms.  The Court of Appeal reviewed case authorities which indicate that long-term disability insurance policies are presumptively ones of indemnity, unless the terms of the policy conclusively indicate a contrary intention. The Court of Appeal commented that there was nothing in the terms of the policy in question to displace this presumption and conclusively establish an intention to create a non-indemnity contract.  

The upshot of the provisions in the Insurer's policy was that it did not provide coverage unless the employee was both totally disabled, from a medical standpoint, and without employment income.  If the disability benefits were payable under the policy, the basic amount would be calculated as a fraction at the Insured employee's rate of earnings and then reduced by specific income benefits.  Therefore, what the policy provided was, at a minimum, partial indemnity for the employee's disability-related loss of income and the Court concluded that it therefore met the essential requirements of a contract of indemnity.

The Court of Appeal allowed the Insurer’s appeal and set aside the decision of the Application Judge's finding that the group disability policy was not a contract of indemnity.  The Insured was thefore not entitled to continue receiving disability benefits from the Insurer.

This case was originally summarized by sdavies@harpergrey.com and originally edited by dpilley@harpergrey.com

The plaintiff’s application for disability insurance was accepted by the defendant insurer, and subsequently he became “totally disabled” so as to qualify for benefits under the policy.  The defendant insurer denied the plaintiff’s application for long-term disability benefits on the grounds that the plaintiff had misrepresented his medical condition on the initial application questionnaire.  The defendant relied on the plaintiff’s medical records that indicated the plaintiff had minor back pain and hip pain problems prior to filling out the questionnaire.  The defendant argued that the plaintiff had failed to disclose these problems despite being specifically asked in the questionnaire about back and hip problems.  The plaintiff argued that his back and hip problems were not serious enough to warrant disclosure on the questionnaire.

The court found that the plaintiff had misrepresented his state of health on the questionnaire, and that “it is the applicant’s knowledge of his own health that is relevant, not what the applicant believes may be important to the insurer.”  The court found the questions on the questionnaire to be “clearly worded and unambiguous.”  Further, the court accepted the defendant’s evidence that it would not have written the policy had the plaintiff’s medical history been disclosed, agreeing that the plaintiff’s complaints may not have been medically significant, but were significant from an underwriting perspective.  The court concluded that the plaintiff’s misrepresentations were material to the risk assumed by the defendant under its policy and that the defendant would have declined to write the policy had the plaintiff’s medical history been properly disclosed.

This case was originally summarized by jhavelaar@harpergrey.com and originally edited by dpilley@harpergrey.com