Long-term disability coverage hinges on several important factors, two of them being (a) whether or not the claim originated while the claimant was employed and (b) whether or not the claimant applied for benefits on time. Coverage will understandably be denied if a claimant deliberately applies for benefits once it’s too late. Yet suppose the claimant’s application is late due to an unawareness of the injury’s severity, will coverage still be denied?
The plaintiff, Lenard MacIvor, suffered injuries to his back and brain during his employment with Pitney Bowes. He took about four months off before returning to work with reduced duties. Thinking he would fully recover in time, he did not apply for long-term disability benefits. Work, however, became increasingly difficult, even with reduced duties. The plaintiff struggled at his job at Pitney Bowes for several more years, then quit and took up a new position with Samsung.
Working at Samsung was also very difficult for the plaintiff. He faced the same challenges as he had in his previous job, and it was not long before Samsung terminated him. Around that time, the plaintiff also discovered the actual severity of his brain injury, realizing that its effects were in fact permanent. He inquired with Samsung about applying for long-term disability benefits, but was told to apply under his previous policy, as his injuries had occurred while working for Pitney Bowes.
Quite predictably, when the plaintiff applied for benefits under the Pitney Bowes policy (over two years after quitting his job there), he was denied coverage. In their understanding of the policy, coverage was terminated the day on which the plaintiff ceased being an employee of Pitney Bowes, even if the claim arose during his employment there. At trial, the court sided with this interpretation of the policy, and ruled that the plaintiff’s claim was too late.
ONTARIO COURT OF APPEAL’S DECISION
The Court of Appeal rejected the trial judge’s decision. It found that the policy’s language clearly indicated that coverage was only terminated for future claims, i.e. those originating subsequent to the employee’s cessation of work. However, claims that had originated during the course of employment but were reported only after resignation or retirement were still covered pursuant to the policy.
The court further supported this conclusion by looking to the case of Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., in which the Supreme Court of Canada ruled that interpretations of ambiguous policy clauses “should not give rise to results that are unrealistic or that parties would not have contemplated in the commercial atmosphere in which the insurance policy was contracted.” According to that case, exclusion clauses are also to be interpreted narrowly. In the case at hand, the plaintiff had been unaware of the extent of his disability during his employment with Pitney Bowes. As such, any interpretation of the policy leaving the plaintiff without coverage would be unsound and contrary “to the very purpose of disability insurance”. So even if there were any ambiguity in the policy with respect to undiscovered claims, it would be resolved in favour of the claimant, based on the Ledcor principles.
Another issue addressed by the Court of Appeal was whether proof of the plaintiff’s claim had been filed within the prescribed timeframe. The court estimated that the plaintiff was likely late in filing his proof of claim by about ten days, but ruled that his imperfect compliance with the rule ought to be overlooked in the interest of fairness. As noted, this was a very particular situation in which the plaintiff was unaware of the extent and severity of his injury. He could not have filed proof of his claim on time because he didn’t know that his disability was actually long-term.
The Ontario Court of Appeal’s decision signals that employees may be eligible to receive disability coverage and benefits a long time after their employment has ceased with a former employer. The Ontario Court of Appeal has taken notice of the fact that some conditions take time to discover, even if years later. Therefore, claimants will not be denied benefits that genuinely could not have been claimed on time.