Released December 29, 2014 | Decision
Kassburg imposes on insurers a duty to communicate a clear and unequivocal denial of a claim in order to trigger the limitation period under the Limitations Act 2002. It also ruled that LTD contracts are not “business agreements.”
Ms. Kassburg stopped working due to disability in October 2007, submitted her LTD claim in April 2008 and was denied benefits on December 4, 2008. For two years thereafter, she submitted further medical records. Each time, Sun Life denied her claim, advising Ms. Kassburg that her claim would be given further consideration upon receipt of new medical information – thereby inviting her to continue to appeal their decision. On January 20, 2011, Sun Life wrote to the Plaintiff and requested additional medical information for her “third and final appeal”. On February 24, 2011, Sun Life advised her that her claim was declined and that she could seek independent legal advice if she wished. Her action was commenced on February 22, 2012.
At the summary judgement motion brought by Sun Life, Sun Life argued that if the statutory limitation period of 2 years applied, then it began to run from December 4, 2008 – the date of the first denial letter and therefore the date that the Plaintiff “discovered” her claim – and expired on December 4, 2010. However, Ellies J. held that the limitation period began to run from the date of Sun Life’s final denial letter of February 24, 2011. 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, Sun Life issued numerous letters that did not convey an intention to close her claim, but rather that her claim remained open for consideration. Sun Life used language such as:
“the medical information is insufficient to demonstrate….”
“the medical information on file does not justify…..”
“the medical information does not support….”
This phraseology, according to Ellies J., left the impression that the claim had not been denied. Until the Plaintiff received the final letter of February 24, 2011, Sun Life’s communications were not sufficient to allow her to have concluded that all appeal procedures had been exhausted.
The Court of Appeal affirmed the motion judge’s decision.
Sun Life, in the Kassburg decision, also argued that the contractual limitation period took precedence over the statutory limitation period because the LTD contract was a business agreement, and as such fell within the “business agreement” exemption contained in ss.22(5) and (6) of the Limitations Act, 2002.
Section 22(5) provides that a limtaiton period under the Act may be varied or excluded by a business agreement made on or after October 19, 2006.
Section 22(6) defines “business agreement” as “an agreement made by the parties none of whom is a consumer as defined in the Consumer Protection Act, 2002”. “Consumer” is defined in section 1 of that statute as “an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.”
Sun Life argued that as the parties to the LTD contract were the employer and Sun Life, neither of whom are an individual, the business agreement exception applied. Justice Ellies at the summary judgement motion agreed.
The Court of Appeal, however, found otherwise, favouring Ms. Kassburg’s argument that the insurance contract had a personal, not a business, purpose, and that “the motion judge erred in failing to consider the purpose of the contract, which is to provide personal insurance coverage for loss of income in the event of disability.” Ms. Kassburg would be deemed to be a party to the contract, since she would have to assert her claim under it.
