A recent court ruling that awarded a plaintiff $1.5 million in punitive damages against the Blue Cross Life Insurance Co. of Canada — in connection with its more than six-year denial of long-term disability benefits — could result in increased costs for employer-sponsored benefits plans.
“If this sets a precedent, then higher awards will be handed out and that will make [long-term disability plans] more costly,” says Mitch Frazer, partner and chair of the pensions and employment practice at Torys LLP. “Premiums are going to go up, so some companies just may not get long-term disability insurance. Not every company has it and this may make it inaccessible for the average small company.”
While Blue Cross initially paid disability benefits to the plaintiff, it denied them when it was determined she could return to work in an alternate occupation, despite her doctors’ advice that her cognitive impairments and fatigue rendered her unable to work.
“One thing to remember is the long-term disability plan is a contract, it’s not like a pension plan which is regulated,” says Frazer. “So you have a contract between parties and, if something happens, this insurance is supposed to ensure the person has benefits for a specified period or permanently depending on what the disability is. That’s why it’s there.”
In this case, the court aimed to punish the insurance company for what it perceived as bad behaviour, he says, as Blue Cross was delaying the trial and had more than 300 hours of covert surveillance of the plaintiff, none of which proved any wrongdoing.
“The essential principle here is to treat individuals who’ve had life-altering injuries with compassion and insurance companies need to be consistent in [what benefits] are given to people with similar injuries.”
In an emailed statement to Benefits Canada, Blue Cross said all disability claims undergo a formal review process, based on the parameters outlined in their plan’s coverage, prior to any decision being made. “We respect the legal proceedings that took place and await the Court’s judgement to be entered. The punitive damages awarded merit an examination by the court of appeal and we will continue working with our legal counsel.”