The Perils of Long-Term Disability Insurance Know Your Coverage

by Bonn Law

Note: This article was originally published for the Ontario Trial Lawyers’ Association.

Long-term disability insurance provides security. When disability strikes, and you cannot continue working, disability benefits can help ensure mortgage payments are made and food gets on the table. But every policy is different and can be fraught with land mines and unfortunate surprises.

The recent case of Wiles v. Sun Life Assurance Company of Canada, 2018 ONSC 1090, affirmed by the Court of Appeal, Wiles v. Sun Life Assurance Company of Canada, 2018 ONCA 766 is a good lesson for lawyers and lay persons.

The plaintiff, Teresa Wiles, was a long-time employee of Spaenaur Inc. In October 2015, she became totally disabled from working. On November 3, 2015, Spaenaur Inc. terminated her employment. Ms. Wiles consulted a lawyer. On November 17, 2015, her lawyer requested an application for disability insurance coverage from Spaenaur Inc. On November 18, 2015, Spaenaur Inc. sent her lawyer a Salary Continuance Services Plan Members Package, including a blank Plan Member’s Statement Salary Continuance Services. Before I go any further I need to explain the respective responsibilities and Spaenaur Inc. and Sun Life – it is not self-evident and as we will see was confusing not only to Ms. Wiles but also to her lawyer.

As with many employee disability coverage plans, the employer, Spaenaur Inc. was responsible to pay the Salary Continuance plan but Sun Life was responsible for administering the Salary Continuance plan. This meant that Ms. Wiles would send the application for Salary Continuance to Sun Life and Sun Life would make the decision on whether Spaenaur Inc. should pay Salary Continuance to Ms. Wiles. On this basis, on December 21, 2015, Ms. Wile’s lawyer submitted the Plan Member’s Statement to Sun Life to apply for Salary Continuance. On December 30, 2015, Sun Life requested that Ms. Wiles submit an Attending Physician’s Statement, for Salary Continuance. On January 25, 2016, Sun Life again asked Ms. Wiles to submit an Attending Physician’s Statement. On February 16, 2016, Sun Life advised Ms. Wiles that her claim for Salary Continuance had been closed for failure to submit an Attending Physician’s Statement. Ms. Wiles spoke to her family doctor and was told that the Attending Physician’s Statement had been completed and faxed to Spaenaur Inc. Ms. Wiles and her lawyer took no further steps until January 20, 2017 when a Statement of Claim was issued against Sun Life for damages for breach of a group “Disability Policy”. Spaenaur Inc. was not named as a defendant.

The problem for Ms. Wiles and her lawyer was that Sun Life was not legally responsible for paying the Salary Continuance – that would be Spaenaur Inc. and it was not named as a defendant. There were separate long-term disability benefits available to Ms. Wiles, which Sun Life was responsible to pay, however, those benefits only became payable after Salary Continuance had been exhausted and required a separate application. Ms. Wiles had never made the separate application to Sun Life.

On February 7, 2017, Sun Life’s lawyer advised Ms. Wiles’ lawyer that Sun Life was not responsible to Ms. Wiles for Salary Continuance. On February 10, 2017, Ms. Wiles’ lawyer asked Sun Life for a copy of the Salary Continuance Agreement and to advise if Sun Life provides any disability benefits to Mr. Wiles. On February 14, 2017, Sun Life Sun Life forwarded the requested documents. On April 11, 2017, Sun Life filed its statement of defence to Ms. Wiles’ Statement of Claim. On May 11, 2017, Sun Life served its motion for summary judgment.

It was not until after receiving Sun Life’s statement of defence and motion for summary judgment, on May 17, 2017, that Ms. Wiles’ lawyer submitted a completed Plan Members Statement for long-term disability benefits. These are the benefits that Sun Life would be responsible to pay. On July 17, 2017, the Physician’s Statement for Salary Continuance (dated February 22, 2016 that had been sent to Spaenaur Inc.) and an Attending Physician’s Statement for long-term disability benefits dated July 11, 2017. Finally, on September 29, 2017, Ms. Wiles amended her Statement of Claim to seek damages against Sun Life for failure to pay long-term disability benefits.

The problem for Ms. Wiles was that under the terms of the policy she was required to submit Proof of her claim within 90 days after the elimination period. It is unclear in the decision what this date would be, however, what is clear is that Ms. Wiles was well past the deadline.

The judge granted Sun Life’s motion for summary judgment and dismissed Ms. Wiles’ action. The trial judge ruled that Ms. Wiles’ claim against Sun Life for long-term disability benefits must fail, because 1) it was started past the one-year contractual time limit to sue under the terms of the policy; and 2) Ms. Wiles’ failed to submit the necessary documents to apply for long-term disability benefits with the required timeframe.  The judge determined that the conduct of the plaintiff does not justify relieving her of her obligations under the terms of the policy.

Ms. Wiles appealed to the Court of Appeal. At the appeal, counsel for Sun Life conceded that the judge was wrong to apply the one-year contractual limitation period – the Limitations Act, 2002 supersedes the policy and therefore the limitation period was two years and she had started the claim within the limitation. But, the Court of Appeal upheld the decision on not granting Ms. Wiles relief from forfeiture and the dismissal of her action was upheld.

This case is a good lesson for injured persons and lawyers alike. Always, always, always get the documents early on in the process and read the documents carefully. In this case, the judge determined that Ms. Wiles and/or her lawyer would/should have known as of mid-November 2015 that Salary Continuance, which were provided by Spaenaur Inc. were separate and distinct from the long-term disability benefits provided by Sun Life and that separate forms were required to be completed depending on which type of benefit was sought to be accessed. I can understand how confusing these disability contracts and policies can be. This is particularly so when the insurer administers the short term or salary continuation, but the payments are being made by the employer. I have had a number of these situations. If you are an injured person, do not sit on a denial and do not ignore requests for information. An injured person must be diligent in ensuring the right documents, including the doctor’s medical report, are submitted in a timely manner. If not, no matter how injured and disabled the person is, she may be denied needed disability benefits.