Ontario case could clear up questions on limitation periods in LTD claims

The Ontario Court of Appeal is poised to hear a case that could clear up the conflicting jurisprudence regarding the point at which limitation periods that apply to disability claims start to run.

“The decisions from lower courts are all over the place and the court will have to reconcile them,” says Nainesh Kotak, a lawyer at Kotak Disability Law in Toronto.

The case, Clarke v. Sun Life Assurance Co. of Canada, originates with April Clarke, who was a postal worker with Canada Post from 1999 until 2011 when health issues caused her to leave work. At the outset, she received disability benefits through her group benefits plan with Sun Life. But in February 2014, the insurer wrote her a letter terminating her benefits.

Read: Long-term disability claims expected to fall in 2019: research

The precise wording of the letter is critical to the outcome of the case, with the relevant part reading as follows: “The current medical information in your file does not appear to support total disability from any occupation. Therefore, your last payment date is April 25, 2013 and your LTD file is now closed.

“Should you feel totally disabled from any occupation, you will need to provide medical information for our review. You will need to provided [sic] objective medical information including diagnosis, treatment, complications to date preventing your [sic] from working in any occupation. Kindly note this is your responsibility.”

In late February, Clarke and her representative from the Canadian Union of Postal Workers spoke to Sun Life by telephone. The union representative told Sun Life that Clarke “would appeal the any occupation phase.” Clark authorized the union to access her file, but took no further steps until more than three years later. On March 31, 2017, the union sent additional medical information to Sun Life.

The insurer received internal advice that, because the letter hadn’t mentioned the two-year limitation period, the company had an obligation to review the file. It evaluated the new information but denied Clarke’s appeal on the basis that the additional medical information didn’t support it.

Read: Court allows terminated employee to continue appeal for LTD benefits

However, the letter denying the claim went on to say that, although the “file is closed,” Sun Life would be “willing to review new and not yet reviewed records or report that may obtain as part of the final level of the appeal process. . . .”

In the same letter, the insurer put Clark on notice that its willingness to consider a further appeal wouldn’t constitute a waiver of right under the policy, “including with respect to the limitation period.”

In August 2018, Clarke sued. Sun Life sought to dismiss the action on the basis that the limitation period had expired. Clarke’s response was that the February 2014 dismissal letter didn’t start the limitation period running because it didn’t amount to a clear denial of benefits. Sun Life countered that it did.

Justice Janet Leiper of the Ontario Superior Court of Justice sided with Clarke. As Leiper saw it, it wasn’t clear that the words used by the Sun Life letter dated Feb. 24, 2014 was a denial of disability benefits. “It used milder language than denial or refusal, and suggested that Ms. Clarke might ‘feel totally disabled from any occupation,'” wrote Leiper. “It invited more information to support her feeling.”

Although Sun Life’s statement that the “file is now closed” created some ambiguity about the insurer’s intention, Clarke still couldn’t have known whether it was legally appropriate to issue a claim with two years of the February 2014 letter.

Read: The case for medium-term disability management

“The unique wording used for denial of benefits here did not give finality to the issue, and that’s a telltale sign as to whether the limitation period starts to run,” says Kotak. “Courts tend to side with the parties who have not done the drafting.”

The upshot is a warning to insurance companies that intend to rely on limitation periods. “The decision is a stark reminder that if insurers are going to maintain that the applicant’s suit is out of time, they had better spell it out quite clearly from the get-go,” says Natalie MacDonald, owner of employment law firm MacDonald & Associates LLP.