Disability claim rejected by insurer

Responsibility for income replacement
By Brian Kenny
|Canadian Employment Law Today|Last Updated: 07/29/2009

Question: We have an employee on partial disability who worked half days for four months for one-half salary along with short-term disability coverage. The employee has worked six hours per day for five days a week for the past month with the accompanying salary increase. The insurance company denied disability benefit payment even though ample medical documentation was provided. Is the employer obligated now to return to paying the employee full-time wages? Who is ultimately liable to pay the loss of income replacement?

Answer: The general rule is that unless there is an obligation on the part of the employer either by an individual employment contract or a collective agreement, the employer is only obliged to pay an employee for the work she performs. If an employee is sick and unable to work, there is no legal requirement to pay her during that time unless the employer has agreed otherwise.

To determine what obligations an employer owes to an employee, one must look at the employment agreement. If there is a union, then one must look to the collective agreement, if there is no union then one must look to the individual employment contract. If there is no contractual obligation, an employer only has to pay an employee for the time she works. The employee does not have to be returned to full-time wages and an employer does not have to pay for any lost income resulting from a disability. The employee ultimately bears the burden for the lost income.

Even if an employer has agreed to provide disability insurance, this obligation is still fulfilled if it provides the insurer even if the insurance claim is rejected by the insurer. The employee did not fulfill the requirements for a claim. The employer does not become obligated to pay where the insurer refused to, regardless of the claim’s merits.

Brian Kenny is a partner with MacPherson Leslie and Tyerman LLP in Regina. He can be reached at (306) 347-8421 or bkenny@mlt.com.