Legal Analysis

A number of factors may determine whether an LTD claim will be approved, what damages may be awarded by the court, or what may be argued in negotiating a lump sum settlement. Below is a summary of some of the relevant case law and legislation that sets out some of the considerations a court may take into account when making a determination on disability entitlement. Some of the cases below also review the factors the court will consider in awarding damages and some outline what happens when an insured person has an LTD claim and a motor vehicle accident (MVA) claim for the same injuries or incident.

Relevant case law is previous judicial decisions that are related to the matter at hand. While most claims generally settle outside of court, case law creates a framework for your lawyer and the insurance company to negotiate around. If your lawyer can demonstrate to the insurance company that a case that is similar to your claim went to court and a judge ruled favourably for the injured person, they can use that information to compel the insurance company towards a settlement.

“Own occupation” versus “Any occupation”

The term “any occupation” does not necessarily mean that the insured person must show they cannot do any job.

Constitution Insurance Co. of Canada v. Coombe, 1997 CanLII 1845 (ON CA)
The Ontario Court of Appeal found that a number of cases have established that the term “any occupation” in LTD policies is generally interpreted by the courts as meaning that the insured person is totally disabled from any occupation if their condition makes them unable to work in an occupation that is:

• reasonably comparable to their old occupation in status and reward; and
• reasonably suitable in work activity in light of their education, training and experience.

Mental distress damages and aggravated damages

For some LTD claims – including those that may be settled through a lump sum settlement – a claim for mental distress damages or aggravated damages may also be made.

Asselstine v. Manufacturers Life Insurance Co., 2005 BCCA 292
The British Columbia Court of Appeal upheld an award for aggravated damages of $35,000. This decision was due to Mr. Asselstine’s increased anxiety, mental, emotional, and financial distress following the rejection of his claim and appeals.

The British Columbia Court of Appeal stated that

It is accepted that awards of aggravated damages are now commonplace whenever claims for benefits on what are characterized as “peace of mind contracts”, like long term disability insurance policies, are wrongly denied.  The award provides compensation for mental distress which will usually be a consequence of a breach of contracts of that kind.”

Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 SCR 3
In this case, the insured person was awarded $20,000 in damages for mental distress.

The Supreme Court of Canada determined that damages for mental distress are evaluated based on whether there was an unwarranted delay and/or a failure to pay the required benefits; whether as a result of the delay or denial there was financial pressure likely to heighten the insured person’s anxiety and stress; and whether the mental distress was of a degree sufficient to award compensation.

Kardaras v. Sun Life Assurance Company of Canada, 2020 ONSC 3925
In this case, the court awarded $10,000 in damages for mental distress due to the breach of the duty of good faith by the insurance company. The insurance company did not approach the issue of the insured person’s condition in an even-handed manner. The insurance company discontinued benefits when the only medical evidence it had was that the insured person was unable to work more than three days per week. It maintained its position despite never receiving any differing medical opinion. It did not have an open mind to reviewing additional medical information provided by the insured person. The insurance company’s approach was aggravated by the fact that the insured person agreed to participate in a gradual return to work and was in good faith attempting to mitigate her damages, which the insurance company used against her to argue that the part-time work constituted performing the essential duties of her own occupation. During a period in which the insured person was highly vulnerable she experienced an increase in stress, a loss of dignity and a feeling of not being heard and acknowledged.

Industrial Alliance Insurance and Financial Services Inc. v. Brine, 2015 NSCA 104
The Court of Appeal awarded a significant $90,000 in damages for mental distress.

In this case, the Court reiterated the Supreme Court of Canada in Fidler, which directed that the insurance company, “In making a decision whether to refuse payment of a claim…must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured’s economic vulnerability or to gain bargaining leverage in negotiating a settlement. A decision by an insurance company to refuse payment should be based on a reasonable interpretation of its obligations under the policy.” A failure to meet these obligations may result in a claim of damages.

Punitive damages
A claim for punitive damages – including when negotiating a lump sum settlement – may be made when there is a breach of good faith by the insurance company and the conduct of the insurance company “depart[ed] markedly from the ordinary standards of decency.”

Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 SCR 3
This case is the authority for the assessment of punitive damages. The Court determined that, when assessing whether there was a breach of the duty of good faith by the insurance company such that punitive damages should be awarded, “the impugned conduct must depart markedly from ordinary standards of decency — the exceptional case that can be described as malicious, oppressive or high-handed and that offends the court’s sense of decency.”

Asselstine v. Manufacturers Life Insurance Co., 2005 BCCA 292
The British Columbia Court of Appeal upheld a $150,000 award for punitive damages. The Court noted that they thought “the [trial] judge was moved by the indifference of the [insurance company] to the predicament of the [insured person]. The [insured person] was struggling with a terrible disease not knowing whether she would have enough to live on.”

It is, essentially, up to the trial judge as the trier of fact to determine, in awarding punitive damages “what seems proportionate to the blameworthiness of the defendants’ conduct.”

Industrial Alliance Insurance and Financial Services Inc. v. Brine, 2015 NSCA 104
The Court awarded $60,000 in punitive damages. In this finding, the court reviewed the considerations for awarding punitive damages set out in Whiten:

• the award should be reasonably proportionate to the blameworthiness of the defendant, the plaintiff’s vulnerability;
• the harm or potential harm directed specifically at the plaintiff and the need for deterrence; [and]
• the judge should take into account other sanctions to which the [insurance company] is subject, and the advantages gained by the [insurance company]’s misconduct.

LTD and MVAs

The following cases are just a couple of examples of many cases across Canada dealing with subrogation in car accident injury cases where the person is receiving LTD payments.

Melanson v. Co-Operators General Insurance Co., 1996 CanLII 18440 (NBKB)
The court explained that insurance is there to cover your losses, nothing more. So, if an insured person gets money from somewhere else for the same injury or harm, the insurance company may ask for a refund of the benefits they paid you. This only happens after you’ve been fully compensated for your losses. To prevent you from getting paid twice for the same thing, all insurance policies have this ‘subrogation’ rule, even if they don’t spell it out.

Nova Scotia Public Service Long Term Disability Plan Trust Fund Trustees v. McNally, 1999 NSCA 129
Mr. McNally got hurt in a car accident. He stopped working and started receiving long-term disability benefits. Later, he won a lawsuit for his injuries and got $85,000, part of which was for lost wages. The insurance company claimed part of this money, saying they should be paid back for the disability benefits they gave Mr. McNally. The court agreed and ordered Mr. McNally to pay back $40,238.21 plus interest to the insurance company.