The issue of whether long-term disability claims are arbitrable or matters for the court, which has plagued Ontario’s hospital sector for over a quarter of a century, is on its way to the Supreme Court of Canada.
“The current state of the law, which denies employees seeking long-term disability benefits under insurance policies issued pursuant to a collective agreement access to the courts, should be a concern because the insurance sector is getting double recovery at the expense of the hospitals and the public,” says Aron Zaltz, an associate at Preszler Law Firm LLP. “That’s because the hospitals both pay the premiums and then are on the hook if the arbitration succeeds.”
Zaltz, with his colleague John Philp, a partner at the firm, represented Leisa Hutton at the Ontario Court of Appeal in her case for disability benefits against the Manufacturers Life Insurance Co. The court ruled that Hutton, a hospital worker and union member, couldn’t proceed with her claim against the insurer because it arose out of the collective agreement and was therefore subject to arbitration.
Hutton was a laboratory technician at Quinte Health Care Corp. and a member of the Ontario Public Service Employees Union, whose relationship was governed by the terms of a collective agreement.
The collective agreement required the hospital to provide and pay for 75 per cent of an LTD plan that was “at least equivalent” to the plan described in the 1992 brochure for the Hospitals of Ontario Disability Income Plan. The agreement went on to say that LTD claims “under HOODIP may be subject to grievance and arbitration.”
After Hutton was injured in a traffic accident, Manulife denied her claims for “total disability.” Hutton grieved but the matter was settled with the hospital when Hutton withdrew her grievance without prejudice to her right to sue Manulife and “regardless of the outcome” of any proceedings against the insurer.
Hutton then sued the insurer, which responded with a motion to dismiss on the basis that the court lacked jurisdiction. Hutton’s lawyers responded that the claim was inarbitrable because QHC didn’t have legal or financial liability for benefits entitled under a policy issued by Manulife.
The motions judge dismissed the action and Hutton appealed.
But, as the Court of Appeal saw it, the fact that a third-party policy was in question didn’t affect requirement for arbitration. “The fact that LTD benefits are paid or administered under the policy does not change the fact that the employee’s entitlement to those benefits is provided by the collective agreement, and under which it is the employer’s obligation to provide those benefits,” the court reasoned.
But Zaltz says the inclusion of the arbitration clause in relation to HOODIP is a historical anomaly dating back to the era when Ontario hospitals had “piecemeal self-insurance” and “offered different plans” for LTD coverage.
“So essentially, we’re dealing with a grandfathered arbitration clause that both employers and unions believe is meant to apply only to the obligation to obtain the coverage and pay the premiums,” he says. “It’s not as if the employer in this case didn’t arrange the coverage required.”
Zaltz adds that the Court of Appeal’s ruling also leaves substantial practical and legal gaps. “As arbitrators have no jurisdiction over insurers, they cannot decide whether an insurer has breached the policy. Yet, employees who have clear common-law rights to seek contractual remedies against insurers in the courts are being forced to arbitrate against employers who don’t have the necessary medical information, don’t make the decisions on whether coverage should be extended and denied and are nonetheless forced to pay the benefits even though they have complied with the collective agreement, obtained the coverage and paid their share of the premiums.”
Philp says he’ll be filing an application for leave to appeal to the Supreme Court of Canada.
Manulife declined a request for an interview. However, in an email to Benefits Canada, spokesperson Sean Pasternak said the insurer doesn’t typically comment on litigation matters. “We take the responsibility of protecting the privacy of customers very seriously and cannot discuss specific details of any individual.”
Quinte Health Care’s lawyers also didn’t respond to a request for an interview.