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A recent decision by the Ontario Court of Appeal raised eyebrows in stating a former employee was allowed to receive long-term disability (LTD) benefits for an injury he sustained through work three years before he left the company.
Lenard MacIvor worked for Pitney Bowes from 1996 to 2005, ultimately becoming a division sales vice-president. In 2005, he suffered a severe back injury and traumatic brain injury during a company-sponsored event in Costa Rica and was off work for four months.
But his work performance deteriorated after that, so his responsibilities were reduced and — in frustration — MacIvor quit his job in 2008.
Within days, he found a job at Samsung, but the same performance difficulties continued and he was fired a year later.
When MacIvor asked Samsung about making a long-term disability claim, he was told to apply under his policy at Pitney Bowes since the injury occurred while employed there.
But MacIvor’s 2010 claim was denied, so he went to the Ontario Superior Court of Justice seeking benefits in the amount of $5,834 per month, less 85 per cent of the amounts he received for workers’ compensation and Canada Pension Plan benefits.
In 2017, that court denied his claim, saying the Manulife policy clearly stated there was no coverage for people who were not employed by Pitney Bowes. But the Ontario Court of Appeal disagreed.
The policy stated coverage would end on the day a person ceased to be “actively employed,” but citing the 2016 Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. decision and the need for insurance policy language to be clear — “reading the contract as a whole” — the court said the policy meant coverage would not continue “when an employee begins working for another employer or after the employee has retired.”
In addition, the “termination of coverage” language relates to future claims, not claims that may have arisen during the course of the employee’s employment.
“In other words, if an employee’s claim arises as the result of an occurrence that takes place during their employment, the policy provides coverage,” said Justice Jean McFarland in her April 19 decision.
“The Manulife policy does not contain the type of exclusionary language that terminates coverage for undiscovered disability claims the employee had and that originated during their employment, when their employment ceases. To so conclude would leave former employees, like (MacIvor), in the untenable position of having no disability coverage from either their former employer or any new employer. Such a result would be contrary to the very purpose of disability insurance and the plain meaning of the coverage provision.”
It is hard not to describe the decision as remarkable, according to Sean Bawden, a partner at Kelly Santini in Ottawa.
“I think most people would be surprised just on the facts of it. Was it an attempt by the court to see an injured guy get benefits? Yeah, it may have been a bit of an ends driving means. That’s not uncommon in insurance cases… and they found some analysis to get there.”
However, it does make sense for a policy to provide coverage for an occurrence that happened during employment, he said. If not, employers might immediately terminate a worker’s employment after she sustained an injury.
“The takeaway for employers is that simply because employment has been terminated, doesn’t mean one’s ability to apply for LTD does necessarily as well,” said Bawden.
And employers that “self-insure” disability benefits should be mindful of exactly what they are insuring and for how long, he said, “because if the language is similar to that employed by Manulife, you might have liability far beyond what you think… and a termination is not going to end that entitlement.”
However, few injuries would lend themselves to this kind of finding, said Lisa Armstrong, a lawyer at Strigberger Brown Armstrong in Toronto.
And from an employer’s point of view, the termination provisions in the contract were pretty clear, but the court decided there shouldn’t be this gap in coverage in cases of this type, she said.
“It wasn’t that the provision wasn’t clear enough — that’s where I think this decision is quite weak because I’ve never seen a case before where they extended coverage beyond the term of employment.”
But the more concerning part is for insurers, said Armstrong, in the fact that the court used the language of the policy to extend both the proof of claim and the commencement of action provisions.
“On top of that, it granted exceptional relief when it wasn’t even requested so it was definitely interesting from the insurer’s point of view whether or not they should be looking at those provisions,” she said. “And what an employer may find is if the insurers look at those provisions and they can’t fix those gaps, then obviously there’s more exposure for them, which might raise premiums.”
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