Supreme Court of Canada to Make Landmark Decision Affecting Long-term Disability Insurance Claims

In what will no doubt be a landmark decision affecting long-term disability insurance claims, the Supreme Court of Canada is scheduled to hear the case of Fidler v. Sun Life Assurance Co. of Canada on December 6, 2005.

In Fidler v. Sun Life Assurance Co. of Canada the British Columbia Court of Appeal awarded significant punitive and aggravated damages against Sun Life Assurance Co. of Canada ("Sun Life") for failing to pay long-term disability benefits to Ms. Fidler. Generally speaking, judges award punitive and aggravated damages against insurance companies in order to punish them for bad behaviour or other mistreatment of a policy-holder.

Ms. Fidler became disabled after suffering a severe kidney infection and was unable continue working. She had worked at the Royal Bank and had a long-term disability insurance policy with Sun Life. Sun Life paid her long-term disability benefits for 6 years, but then abruptly stopped payment of benefits. By the time her case got to trial, Ms. Fidler had been without long-term disability benefits for 5 years. The British Columbia Supreme Court, and later the Court of Appeal, found that Sun Life had inappropriately "cut off" payment of benefits to Ms. Fidler. The Judges also found that Sun Life's actions had caused Ms. Fidler significant emotional distress and ordered Sun Life to pay $20,000 in aggravated damages and $100,000 in punitive damages. These amounts were in addition to reinstating Ms. Fidler's monthly payments and paying her for 5 years worth of missed payments.

This case raised eyebrows in the legal and insurance communities because the Court of Appeal departed from the usual approach of awarding punitive and aggravated damages, essentially making it easier for Judges to award punitive and aggravated damages in long-term disability insurance cases.

The written decision of the Court of Appeal quotes internal company memos and offers a rare glimpse into the internal decision-making process of an insurance company.

Long-term Disability Benefits - Basics

Long-term disability benefits are administered by private insurance companies. You may have an individual plan (also called accident or sickness insurance), or you may qualify for disability benefits as a member in your employer's group health insurance plan.

If you are unsure if you have LTD benefits under an individual plan, check your insurance policy or contact your insurance broker. If you are unsure if your employer provides LTD benefits as part of a group insurance plan, then check your employee handbook or ask your employer to provide you with a copy of the group insurance policy.

Either way, it is important that you your application for disability benefits as soon as possible. There are strict deadlines for filing claims. If you miss the deadline, then you may lose your entitlement to disability payments. The deadlines should be set out in the insurance policy. If they are not, then ask your employer, or the insurance company to tell you about them.

Nova Scotia Court orders Government Long Term Disability Insurer to pay "back benefits" to man totally disabled by clinical depression

Wright v. The Nova Scotia Public Service Long Term Disability Plan Trust Fund, [2005] NSSC 146.

An important decision by Justice D. L. MacLellan regarding whether a person can appeal an unfavourable ruling by a Medical Appeal Board, when the person's LTD policy states that the Medical Appeal Board's ruling is "final".

The case involved a man (Mr. Wright) who suffered from clinical depression because of job-related stress. Mr. Wright had a government LTD plan and claimed that his mental illness prevented him from doing any type of work. This claim was supported by Mr. Wright's psychiatrist who had treated him for a number of years.

The LTD plan stopped paying Mr. Wright's LTD benefits on the basis it believed he was not suffering a mental illness. The LTD Plan also believed Mr. Wright had ability to work at a job that would pay him at least 80% of his former salary, which was a requirement under the LTD Plan. 

Mr. Wright followed the appeal process set out in the LTD plan and appealed to the Medical Appeal Board. The Medical Appeal Board denied his claim.

Mr. Wright then sought to appeal the Medical Appeal Board's decision to the Supreme Court of Nova Scotia. The LTD plan argued that Mr. Wright had no right to appeal the Medical Appeal Board's decision because the policy contained a no-appeal-clause that said that the Board's decision was final.

Justice D.L MacLellan followed the decison of Braithwaite v. NS Public Service Long Term Disability Plan (1999), 176 N.S.R.(2d) 173 (C.A.),  and ruled that the Medical Appeal Board's decision was "final" only with respect to medical grounds for disability. In other words, the no-appeal-clause only applied to decisions about the medical grounds for disability. The no-appeal-clause did not apply to other legal issues, such as the interpretation of the contract. Justice D.L. MacLellan then ruled that the the Medical Appeal Board's decision was wrong because it failed to consider whether Mr. Wright could actually handle a job that paid him 80% of his former salary.

Justice D.L. MacLennan then ordered the LTD plan to pay Mr. Wright "back benefits" going back to the time they discontinued payment.

It is highly likely that the LTD Plan will appeal Justice MacLennan's decision to the NS Court of Appeal.