Factors to Consider When Handling a Long Term Disability Benefits Case
Several issues may arise in the course of a lawsuit for long term disability
benefits. This paper provides strategic suggestions on how to handle certain
issues a lawyer may encounter when acting for the claimant.
Rehabilitation Programs
Often lawyers are consulted by potential clients even before the client’s long term
disability benefits are terminated. For example, many insurers take a very active
role in the claimant’s recovery and employ rehabilitation consultants. The client
might contact counsel because the insurer has requested them to participate in a
rehabilitation program purportedly designed to assist them in returning to work.
The client may feel they are unable to do so because of their disability.
It is important to carefully analyze the circumstances surrounding the insurer’s
request because in many policies, participation in a reasonable rehabilitation
program is a specific condition of the claimant’s right to continue to receive
benefits.
Further, even in the absence of such a clause, the plaintiff has a
general duty to take reasonable steps to mitigate their loss. Undoubtedly, a
refusal to participate in such a program would be perceived by the insurer as a
failure to mitigate.
Generally, the court will weigh the risk to the plaintiff in participating in such a
program with the potential benefits, and require evidence that the proposed
rehabilitation program has a good chance of success. Therefore, the related
provisions of the long term disability policy and the factual basis prompting the
insurer’s request should be carefully reviewed. It may very well be appropriate
for the lawyer to obtain opinions from the client’s treatment providers on such
issues in response to the request.
Some policies afford unilateral discretion to the insurer to determine the
appropriateness of a rehabilitation program. It is submitted that this does not
mean that the insurer can act unreasonably when exercising its discretion, and in
fact to do so could arguably provide a basis for a bad faith claim. Further, the
circumstances may be such that the claimant wishes to participate in a
rehabilitation program and the insurer refuses to fund it.
In Garriock v. Manufacturers Life Insurance Co.1, the claimant attended an
independent assessment at the insurer’s request where the insurer’s physician
reported a diagnosis of moderate to severe fibromyalgia.
That physician’s
prognosis was that with the proper support of multidisciplinary resources, “a
return to work at least in a part time capacity could be anticipated within the next
6 – 12 months”. As a result of the report, the insurer approved the claim for long
term disability payments and continued payment.
1
[2009] O.J. No. 2265 (S.C.J.)
Months later, the insurer
terminated payment stating that the medical evidence no longer supported that
the claimant was disabled.
The claimant brought an application whereby she requested ongoing payment of
benefits and funding for an active rehabilitation program specialist. On the issue
of funding rehabilitation assistance, the policy provided that the insurer may, at
its discretion offer an employee rehabilitation to assist the employee in returning
to gainful employment where the insurer determines that the employee is totally
disabled.
After reviewing the application material, the court found that the applicant’s
diagnosis was uncontested. The insurer, in its own reports and letters, accepted
the diagnosis and accepted that the applicant’s condition restricted the applicant
from performing certain physical tasks. The court found that the applicant was in
fact totally disabled as defined by the terms of the policy based on the medical
reports. The insurer’s conclusion on the disability claim was unsupported by
medical evidence and the court ruled that a reasonable interpretation of the
policy in question was that a work hardening program was included in the
coverage for rehabilitation and vocational retraining efforts. As a result, the court
granted the relief sought in the application and the insurer was ordered to not
only pay long term disability benefits, but fund the rehabilitation program as well.
Simplified or Ordinary Procedure, Small Claims Court, Applications
Law suits for long term disability benefits may be commenced in Small Claims
Court, by way of action under the ordinary or simplified Rules of Civil Procedure,
or even by way of application in certain circumstances.
Normally, law suits for long term disability benefits proceed by way of action in
the Superior Court of Justice. When the simplified rules were first introduced,
discoveries were not permitted under the regime. As a result, there was concern
that a judgment for benefits in a simplified procedure case would effectively bind
the insurer to make payment of benefits after a trial. This issue was argued in
Keddy v. Clarica2, where the Superior Court of Justice dismissed the insurer’s
motion for a declaration that the plaintiff’s action was improperly brought under
simplified procedure. The court found it was unable in the circumstances of that
case to provide a direction for future payments. Interestingly, the court stated
that this was not necessarily as a result of such relief being corollary to
declaratory relief (which is not permitted in simplified rules matters) but rather
because of the court’s inability to find that the disability at issue would continue
either totally or proportionately, within the meaning of the policy.
The same
position was taken by the appellate court when dismissing the insurer’s motion
for leave to appeal3.
2
[2002] O.J. No. 5109 leave to appeal dismissed [2002] O.J. No. 4984 (S.C.J.)
See also Antunes v. Great-West Life Assurance Co. [2005] O.J. No. 5529 (S.C.J. – Master),
where the court found that a judgment for benefits in the simplified procedure would not bind the
insurer to make payment of benefits after trial.
3
Payment of long term disability benefits may be sought by way of a Plaintiff’s
Claim in Small Claims Court, although one must keep in mind the monetary cap
which could be problematic by the time of trial, as well as the limitations imposed
in the Small Claims Court regime with respect to disclosure issues. Further,
declaratory relief is not available in Small Claims Court4.
The ability to seek payment of long term disability benefits by way of application
is limited. As indicated above, in Garriock v. Manufacturers Life Insurance Co.5,
the claimant brought an application which effectively resulted in a finding that the
claimant was disabled within the terms of the policy. The insurer argued that the
matter should not be allowed to proceed by way of an application as there were
material facts in dispute necessitating a trial of the action.
The applicant
submitted that the sole issue in dispute was the interpretation of the policy. The
court ultimately allowed the matter to proceed by way of application pursuant to
Rule 14.05(3) which permits matters to commence by application “where it is
unlikely that there will be any material facts in dispute”. In this regard, the court,
in referencing McKay Estate v. Love6, stated:
While the general principle is, that an application should be used
when there is no matter in dispute and the issues do not go beyond
the interpretation of a document or contract, the wording of Rule
14.05(3)(h) is disjunctive allowing a matter to proceed by way of
application in circumstances where there are some facts in dispute.
4
Section 97 of the Courts of Justice Act, R.S.O. 1990, c. C. 43
Supra note 1.
6
[1991] O.J. No. 2607 (C.A.)
5
In Garriock v. Manufacturers Life Insurance Co., the motion material filed by the
applicant consisted of 13 medical documents including a Functional Abilities
Evaluation. The respondent relied upon an affidavit of a senior claims consultant
which contained no new medical evidence or documentation but for two letters
from the applicant’s physiotherapist supportive of the applicant’s position.
The
court observed that there was no conflicting medical evidence regarding the
applicant’s diagnosis, as the respondent’s expert accepted the diagnosis as
fibromyalgia. The court determined that the dispute was essentially about the
method by which the applicant will become rehabilitated and be able to return to
work. The issue in dispute was that the insurer felt that an immediate graduated
return to work was possible, whereas the applicant felt that a return to work in a
graduated manner was possible only once the applicant increased her strength
and endurance. This was not considered by the court to be a significant area of
dispute or raise issues or facts sufficiently complex to prevent the matter from
continuing by way of application.
In order to determine which procedure is appropriate, the lawyer should consider
the material issues in the case. Factors such as whether the case is for long
term disability benefit payments exclusively, what is the expected quantum of
damages by the time a trial date is likely to be reached, whether there is a
meritorious bad faith claim, whether the medical opinions for the plaintiff and
defendant are consistent, and the prognosis for the client’s disability, should help
determine which procedural regime would be most appropriate in pursuing those
claims. The lawyer should also consider the financial circumstances of the client.
It may be beneficial to turn to the courts by way of application or commence the
action by way of a simplified rules action or a Small Claims Court claim, in order
to move the matter forward in a more timely fashion, however, be wary that
disclosure of the evidence and the relief obtained will be limited as a result.
Independent Medical Examinations
Often, prior to litigation, the insurer has carried out medical assessments of the
claimant to determine its position.
It is important to carefully review the
assessments the client has already had before agreeing to produce him or her
for an independent medical examination during the course of the lawsuit. This is
because the insurer might not necessarily be entitled to one.
If the insurer
carried out pre-litigation medical examinations following its decision to terminate
payment of benefits, these examinations may very well be considered to be the
“first medical examination” for the purpose of section 105 of the Courts of Justice
Act7.
Such was the case in Andersen v. 45859 Ontario Ltd. (c.o.b. Teachers Life
Insurance Society (Fraternal))8, where the court found the insurer’s request for a
defence psychiatric examination to effectively be a request for a second
examination, which was intended to corroborate the opinion of the first doctor
who examined the claimant.
7
8
R.S.O. 1990, c. C. 43
[2010] O.J. No. 6041 (S.C.J. – Master)
In that case, the claimant had attended a
psychiatric evaluation and a neuro-psychiatric evaluation at the insurer’s request
following the insurer’s decision to deny payment of long term disability benefits.
Although the fact that the insurer conducted the previous psychiatric and
neuropsychiatric examinations of the claimant pursuant to its rights under the
policy and prior to the commencement of the action, and although the request
was now in the context of the litigation and pursuant to legislation, the court
found that the test to be met under both regimes was the same - that is, whether
the plaintiff was totally and permanently disabled from engaging in any
employment for which she was reasonably suited by reason of education,
training or experience due to a physical or mental impairment. As there was no
change in the plaintiff’s condition or any other evidence to support a further
examination, the insurer’s request was denied.
Settlement
Often insurers wish to resolve their files on a full and final basis. There are a
number of personal considerations as to whether settlement on this basis is
appropriate for the client. Settling on a lump sum basis may prove advantageous
to both parties if the benefits are taxable, given the Supreme Court of Canada
decision, Tsiaprailis v. Canada9, whereby the court held that the part of a lump
sum settlement for future long term disability benefits was not paid “pursuant to”
the policy, and therefore not taxable under s. 6(1)(f) of the Income Tax Act10 as
there was no obligation to make such a lump sum payment under the policy.
9
10
Tsiaprailis v. Canada, [2005] S.C.J. No. 9 (S.C.C.)
R.S.C. 1985, c.1
Conclusion
In sum, several issues may arise when acting for a plaintiff in a long term
disability case. The need to carefully and promptly review the evidence, the
terms of the long term disability policy and the client’s objectives, cannot be
overstated. There may be opportunities that, as indicated above, a lawyer may
strategically take for their client so that the litigation proceeds in a timely fashion
and the financial consequences of not having an income are minimized for the
client.
Sandra Drozd
Lerners LLP
519.640.6335
[email protected]