Many Canadians are fortunate enough to have disability insurance to provide some economic security in the event of an injury. What many Canadians don’t know is that your contract for disability insurance may impose strict guidelines on when you can bring a legal action against your disability insurer if your insurer refuses to pay you benefits. In Ontario the general rule is that you have 2 years to start a legal action. The 2 years begins to run on the date you knew or ought to have known that you had a legal right to enforce. This general limitation period is set out in the Limitations Act, 2002 (the “Act”). What is not commonly known is that this general 2 year limitation period can be reduced for “business agreements”. That is, the law allows two equal parties to a business agreement to mutually agree to reduce the length of time to start a legal action in the event that one party believes the other party has broken or not honoured the terms of the agreement. This makes business sense for business agreements between two equal parties. However, the Court of Appeal in Ontario ruled in the 2013 decision Boyce v. Co-operators General Insurance Company that a policy of insurance can be a “business agreement”. The decision in Boyce was recently interpreted by an Ontario judge to apply to disability insurance contracts in the case Kassburg v. Sun Life. This case is particularly troubling as it involved disability benefits that were provided to employees through a group insurance plan. The employee did not specifically agree to a reduced limitation period, however, the judge ruled that group insurance policies can still qualify as “business agreements”.
In Kassburg v. Sun Life, an employee became disabled and applied for disability benefits. Sun Life refused to pay long-term disability benefits. The employee went through the internal appeal process, however, Sun Life continued to refuse to pay benefits. The employee contacted a lawyer after her final internal appeal was denied. Soon after the employee contacted a lawyer she started a legal action against Sun Life for refusing to pay her long-term disability benefits. The legal action was started 1 year after her final appeal was denied but 3 years after Sun Life initially refused to pay benefits. Sun Life argued that the time limit to bring a legal action had expired. The disabled employee argued that the correct limitation period is 2 years as set out in the Act. Sun Life argued that the policy of insurance was a “business agreement” and therefore the limitation period was 1 year and the disabled employee was therefore out of time.
The judge agreed with Sun Life that a group insurance policy provided to employees can be a “business agreement” and therefore can include a reduced limitation period to bring a legal action. The employee in this case was fortunate that the specific language in this particular disability policy was sufficiently vague so that she was not prohibited from bringing the legal action. However, based on the judge’s reasoning, if the language had been clear, her right to bring a legal action would have been barred for being out of time. This is not fair. Like most employees, the plaintiff in this case did not have any say in the wording of the disability insurance policy and was not provided with a copy of the policy; only the employer was provided with a copy. No reasonable person can reasonably suggest that an employee who had no input into the wording of the policy at the time is prepared is on equal footing with the employer and insurer who created the policy and agreed on the wording. Disability benefits are there to offer peace of mind to workers who become injured and cannot continue working.
The important lesson is to act immediately if your benefits are denied. Do not trust the insurer to tell you about the limitation periods and do not be fooled that an internal appeal will be successful. As soon as your insurer denies you benefits you should contact a lawyer without delay. Protect yourself and your family.
Contributed by Kris Bonn, an OTLA Director and a lawyer practising with Bonn Law Office in Trenton, Ont.