Don’t Delay on Claiming Rights to LTD Benefits – Even if You Have a Lawyer

A recent case concerning long term disability benefits addressed the interesting issue of whether the imitation period for commencing an action against a disability insurer starts on the date the benefits are cut off or only after the insurer definitively advises that an insured’s ongoing claim is being denied?

In Pepper v. Sanmina-Sci Systems (Canada) Inc. the worker, a punch-press operator injured his spine after falling out of a chair at work and landing on a raised platform.   The worker claimed that he suffered from chronic pain and was unable to work and began receiving longterm disability (LTD) benefits. However, the insurer ceased paying those benefits in November of 2007 after having concluded that the worker no longer met the definition of “total disability” under the relevant policy.   Some time later the insurer wrote him a letter definitely stopping the benefits after receiving and rejecting the worker’s additional medical evidence.  The letter also advised the worker that he had a right to appeal.

By January 2008, less than two months after the November 2007 benefit cut-off, the worker hired a lawyer who requested the LTD file from the insurer and made a few other inquiries on the worker’s behalf.  However, nothing substantive was accomplished to advance the worker’s legal position until February 17, 2010 when with the assistance of his lawyer the worker formally launched a lawsuit against the insurer for breach of contract.

Unfortunately, the worker’s right to commence an action was subject to the two-year limitation provided for in the provincial Limitations Act.   Accordingly, the insurer’s position was that the lawsuit was too late and took the position that the deadline started to run in November 2007 when the worker’s benefits had been discontinued or in January 2008, when the worker first hired a lawyer.  Either way, the insurer considered that the February 2010 lawsuit was launched out of time and that the worker right to sue was statute barred.

In response, the worker claimed that even though his LTD benefits were terminated in November 2007, the deadline for suing only started to run after the parties had concluded their discussions and the insurer had made it unequivocally clear that it was unwilling to continue paying benefits to him.

The Ontario Court of Appeal was tasked with determining whether the worker’s lawsuit was indeed too late. In this regard, the Court noted that under the limitations Act, the two-year deadline only started to run only once the worker’s “cause of action” was “discovered” or when the worker knew or ought to have known, that he could start a breach of contract claim against the insurer.

The Court concluded that in this case the worker’s cause of action arose in November 2007 when the insurer first stopped paying out benefits under the policy.  According to the Court, it was at this point that the worker had what the Court determined to be a “fully ripened claim” given the fact that the worker went almost immediately retained a lawyer as this fact established that the worker was aware that he had a claim against the insurer.

In rendering its decision, the Appeal Court also concluded that the insurer had no obligation to advise the worker about the limitations legislation and reject the idea that the fact that the insurer by continuing to deal with the worker after November 2007 had lulled him into believing that he did not have to proceed with his lawsuit in a timely matter.  In this regard, the Court noted that a court action was the only way for the worker to assert his rights since the insurance policy provided for no formal appeal process in situation where LTD benefits were being denied.  In the end, the Court of Appeal overturned the lower court which had previously ruled that the insured’s claim was not statute-barred.

For those who have an action against an insurer arising from the non-payment or denial of LTD benefits, this decision demonstrates the importance of quickly investigating and pursuing your legal rights.   Be sure to take appropriate and well-informed steps from the moment you think you may have a claim.