Consider this scenario: An employee is covered for long-term disability (LTD) benefits under his employer’s group policy of insurance. He sustains a head injury, but does not immediately appreciate the seriousness of the same. Three years later he quits the job that provided LTD coverage. Two years after that, he makes application for LTD benefits under his former employer’s policy. Is he still covered?
If you said “of course not”, you would be wrong. In the case of MacIvor v. Pitney Bowes, 2018 ONCA 381, Ontario’s top court ruled that the employee was not only eligible to make application for such benefits, the insurance company was required to respond and pay.
On April 16, 2005, the appellant, Mr. MacIvor, suffered a traumatic brain injury and a severe back injury during a company sponsored event in Costa Rica. At that time Mr. MacIvor was insured under his company’s Manulife group benefit policy.
Following his accident, the appellant was off work for nearly four months and returned to work in August 2005. He was a different man when he returned to his employment following the accident. His responsibilities were continuously reduced and, in frustration, he quit his job at Pitney Bowes on August 11, 2008. Within days he took up employment with Samsung to perform a role similar to the one he held at Pitney Bowes before his accident.
The difficulties he had experienced in job performance before leaving Pitney Bowes soon became apparent and he was fired from Samsung in August 2009. He asked Samsung about making a Long-Term Disability Claim and was told that, because his injury occurred when he was working for Pitney Bowes, he would have to apply under that policy.
It was apparent from the medical evidence that the appellant was, for a long time, unaware of the seriousness of his brain injury and in particular the permanent nature of that disability. To be clear, it was agreed that Mr. MacIvor was unaware of the permanent and disabling nature of his brain injury until after he had resigned his employment with Pitney Bowes.
On September 9, 2010, i.e. over two years after quitting his job with Pitney Bowes, Mr. MacIvor applied to Manulife for Long Term Disability benefits and provided proof of claim. On November 1, 2010, Manulife denied his claim. On April 11, 2011 he commenced a civil law suit against both Pitney Bowes and its third-party insurer, Manulife.
Decision of the Ontario Superior Court
At trial, Mr. MacIvor claimed that he was entitled to payment of LTD benefits pursuant to the Manulife group policy held by Pitney Bowes. Mr. MacIvor sought a declaration from the court that he was entitled to benefits from May 24, 2010 (or alternatively, December 23, 2010), in the amount of $5,834 per month, less 85% of the amounts he received from WSIB and CPP disability over that period of time. He also requested a declaration that he continued to be entitled to benefits under the policy.
Following a two-day trial, the Honourable Justice Andra Pollak dismissed Mr. MacIvor’s claims for reasons reported at MacIvor v Pitney Bowes Inc., 2017 ONSC 1550.
Issues on appeal
As framed by the Court of Appeal for Ontario, there were three issues presented on the appeal: (1) whether the appellant, as a former employee of Pitney Bowes, was entitled to coverage under the Manulife Policy; (2) whether the appellant submitted a timely proof of claim; and (3) whether the one-year contractual limitation period in the policy barred the appellant’s claim.
Writing on behalf of the court, the Honourable Justice Jean L. MacFarland said the following with respect to the first issue, i.e. whether Mr. MacIvor, as a former employee of Pitney Bowes, was entitled to coverage under the Manulife Policy:
With respect to the limitations defence, i.e. the defence that Mr. MacIvor should have commenced his lawsuit earlier, the Court of Appeal held as follows:
In the result, the Court of Appeal allowed the appeal, set aside the judgment of the trial judge and in its place issued a judgment in accordance with the foregoing reasons.
It is hard not to describe the decision as remarkable. Mr. MacIvor sustains an injury on April 16, 2005, quits the job that provided the LTD coverage more than three years later, starts a new job, and then does not make an application for LTD benefits, from his previous employer, until September 9, 2010, nearly five and one-half years after sustaining injury, and more than two years after quitting his former job.
However, there is appeal to the court’s finding that, “if an employee’s claim arises as the result of an occurrence that takes place during their employment, the policy provides coverage.” If not, it would be a prudent course of action for employers to immediately terminate an employee’s employment if he sustained injury, so as to immediately terminate potential disability coverage. (Yes, I appreciate such termination would almost assuredly contravene the provisions of the Human Rights Code, and I do not mean to suggest that such a course of action would be “prudent” from an employment-law perspective, what I intend to do is underline the absurdity of such a course of action as a means of limiting insurance coverage.)
The case is important because it is a common concern of those who become disabled that they will cease to have access to LTD coverage if their employer terminates their employment before LTD benefits commence. What this decision appears to stand for is the proposition that it does not matter when employment ends, it matters when the injury or illness commenced. To put it another way, if an employee becomes sick or injured while employed and therefore covered by a group policy of insurance, a subsequent termination of employment should be irrelevant to the issue of whether the employee is eligible to make application for coverage to the insurer.
With respect to the issue of what happens if the employee becomes sick or injured subsequent to the termination of his employment, during which period of time he ought to have had coverage under an LTD policy, see my summary of the Brito case in the post The Requirement to Maintain Disability Benefits on Dismissal.
Takeaways for employees with labour pains
The takeaway for employees with labour pains is that if you were covered for LTD benefits while employed, and you subsequently become unemployed, you may still have the ability to apply for LTD benefits under your former employer’s group policy of insurance. It would be prudent to investigate the issue.
Moreover, before accepting any severance offer, you should be mindful of the period of time during which LTD benefits will be continued. It is common for LTD coverage to terminate on the date on which notice of termination is provided. Before agreeing to such termination, and accepting the risks that come with such termination, you should speak with a lawyer about what may be possible.
Takeaways for employers with labour pains
The takeaway for employers, especially those who “self-insure” disability benefits, is to be mindful of exactly what you are insuring and for how long. Simply because an employee has left your employ does not necessarily mean that his or her ability to make application for LTD benefits has been terminated as well.
By Sean Bawden, Kelly Santini LLP
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