Long-term Disability (LTD) Insurance: The Danger of Delay

Long-term Disability (LTD) Insurance: The Danger of Delay

Author: Kris Bonn

Many people in Ontario are covered by long-term disability insurance benefits. We buy long-term disability benefits insurance to protect us and our families if we become disabled through an accident, car collision or other serious health condition.

Typically, if you qualify for the long-term disability benefit, the disability insurer will pay you a monthly benefit that is usually between 60 to 70% of you monthly earnings. The amount is specified in the contract of insurance or the long-term disability insurance policy. The policy wording is critically important in long-term disability cases. The rights of injured personas and the obligations of the insurer are spelled out in the policy and our Courts will follow and interpret the policy when deciding disputes over long-term disability benefits. Interestingly, most people who are covered for long-term disability insurance through a group benefits plan at work do not receive a copy of this important document, even if requested. We have had cases where we are representing a disabled person fighting for payment of her long-term disability benefits and the disability insurer and/or the employer refused to provide a copy of the policy. This is not right. Everyone who is covered under the policy is entitled to a copy of the policy. It is also important to confirm if you are covered by a long-term disability policy. Sometimes employees are not even aware that they have coverage. If you are unsure if you are covered at work for long-term disability, you should ask your employer if you have long-term disability benefits coverage. If you are covered, get a copy of the policy.

Having a copy of the policy is important because the policy will contain notice provisions and limitation periods for applying for or disputing a denial or termination of long-term disability benefits. In most policies, there is a deadline to file a Notice of Claim form advising the long-term disability insurer of the disability and notice that you are applying for benefits. There will also be a deadline to file a completed long-term disability application. This will include filing a medical report from a doctor (usually your family doctor) confirming the nature of your disability and that you are unable to continue working.

Don’t delay in submitting the Notice of Claim or the application documents to your insurer – if you miss the deadlines as set out in the policy that could result in the insurer denying your application and not paying you any long-term disability benefits, even though you are legitimately disabled and unable to work. If you are unsure about any time deadlines, contact a lawyer who practices in the area of disability insurance immediately to ask for advice.

In the process of applying for or even investigating if you are eligible for long-term disability insurance, if your insurer sends you any correspondence indicating that it is not paying you benefits, immediately contact a lawyer. The correspondence from the insurer indicating that long-term disability benefits will not be paid could be the trigger for the start of the limitation period to sue the insurer for wrongfully denying your claim for LTD benefits. Even if you have not submitted a completed application for benefits, the disability insurer can still potentially rely on the date of the letter advising you that benefits are not being paid as the start of the limitation period. This issue was reviewed by our Court of Appeal in a decision released in 2021, Kumarasamy v. Western Life Assurance Company, 2021 ONCA 849. In this case, the plaintiff, Mr. Kumarasamy was injured in a motor vehicle crash on August 25, 2014. He hired lawyers to sue the driver that caused the crash and for his no-fault accident benef its. He had long-term disability insurance through his employment. On December 15, 2014, Mr. Kumarasamy’s sister requested the LTD forms from his employer. The employer sent her a Notice of Claim form, not the full LTD application documents. On March 2015, the sister sent the Notice of Claim form to Western Life Assurance. On June 7, 2015, Western Life Assurance sent a letter to Mr. Kumarasamy saying that his file was closed because it never received a completed LTD application within the required time period.

Neither Mr. Kumarasamy nor the lawyers representing him in the motor vehicle collision case did anything further until October 13, 2016 when his lawyer wrote to Western Assurance to obtain a copy of the long-term disability file. That is when Mr. Kumarasamy’s lawyers learned that Western Assurance had closed his LTD file. On February 10, 2017, Mr. Kumarasamy signed a LTD retainer agreement with his lawyers to pursue his long-term disability benefits. His lawyers obtained the LTD application documents and submitted the completed application on March 30, 2017. On June 28, 2017, Western Assurance denied Mr. Kumarasamy’s claim for long-term disability benefits. On June 28, 2019, Mr. Kumarasamy filed a statement of claim suing Western Assurance for payment of long-term disability benefits.

Western Assurance brought a motion for summary judgment arguing that the claim was filed out of time and cannot proceed based on an expired limitation period. Western Assurance argued that the limitation period started to run on June 7, 2015, the date that it had sent the letter to Mr. Kumarasamy advising him that his filed was closed. The judge hearing the motion dismissed the insurer’s argument finding that the claim could not have been denied on June 7, 2015 because at that date no long-term disability application had been submitted by Mr. Kumarasamy to the insurer. The motions judge found that the limitation period did not start until June 28, 2017 when the insurer denied the application for long-term disability benefits.

The Court of Appeal disagreed with the motions judge and overturned the decision. The Court of Appeal found that claim was brought too late i.e. more than 2 years after any reasonable possible start dates for the running of the limitation period:

  • • February 26, 2015, when the LTD payments ought to have started;
  • • June 7, 2015, the date of the file closure letter; or
  • • November 8, 2016, when the plaintiff’s lawyers received the LTD file including a copy of the June 7, 2015 closure letter

The result is Mr. Kumarasamy is not allowed to sue Western Assurance for non-payment of long-term disability benefits.

This case has important lessons for injured workers and for lawyers alike and the danger of delay in filing a legal action without delay. If you are a worker and have been injured, make sure you take proactive steps to apply for long-term disability benefits and contact a lawyer if you meet any resistance or the insurer refuses to pay. For lawyers, we need to ensure that we file claims right away, even if there has not been a clear and unequivocal denial of benefits. Delay is danger.