Many individuals are denied disability insurance benefits that they are entitled to – but what happens when a denial occurs due to a failure to comply with the application requirements?

In the recent case of Smith v. Sun Life Assurance Company of Canada, a plaintiff brought an action against his insurer for payment of long-term disability benefits despite failing to file a formal claim within the time frame required. Ultimately, the court allowed the plaintiff to bring his claim, finding that his actions constituted “imperfect compliance”.

Plaintiff believed he was entitled to Long-Term Disability benefits but failed to formally apply

The plaintiff was employed as a gardener with the City of Kitchener and was covered by a Short-Term Disability (STD) benefits policy and a Long-Term Disability (LTD) benefits policy through his employer. The plaintiff had previously applied and been approved for STD coverage after suffering from depression in April 2019. Later that year, the plaintiff underwent another depressive episode and submitted a second claim for STD benefits.

The plaintiff felt that the second episode left him disabled and therefore entitled him to LTD benefits. He completed an LTD questionnaire with his physician but never submitted a formal LTD claim.

After receiving medical documentation from the plaintiff’s physician and two internal psychiatric reviews, the insurer denied the plaintiff’s second claim for STD benefits on the basis that there was “insufficient information to conclude that the plaintiff was prevented from working.” The plaintiff subsequently retained a lawyer concerning the denial of his disability benefits.

The plaintiff sued for the LTD benefits he was allegedly owed. The defendant insurer brought a motion seeking summary judgment dismissing the plaintiff’s claim on the basis that he had not submitted a formal claim for LTD benefits and thus had no reasonable cause of action.

What is a “Summary Judgment”?

In Ontario, a summary judgment is a decision that can be made by a court without the need for a formal trial. A summary judgment may be granted by the court where “there is no genuine issue requiring a trial with respect to a claim or defence”, as set out in Rule 20.04(2)(a) of Ontario’s Rules of Civil Procedure.

Does the plaintiff’s failure to file a claim constitute non-compliance or imperfect compliance?

The defendant raised multiple arguments relating to the plaintiff’s lack of a cause of action. The court’s decision, however, centred on the argument that the plaintiff had no cause of action due to his failure to file a formal claim for LTD benefits as required by the insurance policy. To that end, the court considered the distinction between “non-compliance” and “imperfect compliance”, noting that non-compliance would result in summary judgment being granted.

The court quoted the Supreme Court of Canada in Falk Bros Industries Ltd. v. Elance Steel Fabricating Co., which distinguished between non-compliance and imperfect compliance as follows:

“The case law has generally treated failure to give notice of claim in a timely fashion as imperfect compliance whereas failure to institute an action within the prescribed time period has been viewed as non-compliance, or breach of a condition precedent. Thus, courts have generally been willing to consider granting relief from forfeiture where notice of claim has been delayed.

On the other hand, cases in which failure to meet a time requirement has been held to be non-compliance rather than imperfect compliance have largely been cases in which the time period was for the commencement of an action rather than for the giving of notice.”

The court determined the plaintiff’s actions constituted “imperfect compliance”. It found the defendant had been made aware of the plaintiff’s alleged disability in the course of receiving, reviewing, and making a decision for the plaintiff’s STD claim. It had also received notice of the plaintiff’s intention to pursue LTD benefits by way of his physician’s questionnaire.

Was the plaintiff entitled to relief from forfeiture?

It is important to note that the court was not deciding the merits of the plaintiff’s claim for LTD benefits in this case – rather, it was determining whether the plaintiff had a right to continue to bring his action against the defendant.

After determining that the plaintiff’s actions constituted “imperfect compliance”, the court considered whether the plaintiff had “relief from forfeiture”. Relief from forfeiture is a legal remedy that allows the court to protect a person against the loss of an interest where they have failed to follow the terms of a contract. The court determined that it was “in the interests of justice” to grant the plaintiff relief from forfeiture and he could pursue his claim for outstanding LTD benefits. It noted there was minimal impact on the defendant as it was aware of the LTD claim, and also pointed to the potentially high value of the plaintiff’s damages.

Contact Tierney Stauffer LLP in Ottawa, North Bay, and Eastern Ontario for Advice on Disability Benefits

At Tierney Stauffer LLP, we understand being denied disability benefits can cause financial ruin for injury victims. We recognize no two claims are the same, which is why we give each client the personal attention needed to bring about the best possible resolution.

Our personal injury lawyers can provide advice to those who believe they have been unfairly denied insurance benefits. We also represent injured individuals in a variety of other personal injury matters and can provide you with strategic legal solutions tailored to your situation. Contact us at 1-888-799-8057 or reach out online to set up a consultation today.

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