Have you missed the deadline to apply for long term disability (LTD) benefits? There might still be a recourse available.
What does the law say?
Law makers realized that in some cases, claimants will miss the deadline to apply for LTD benefits even though they acted reasonably. A late claim could be devastating for individuals who can no longer return to work and are denied benefits. Many provinces have enacted laws, such as the Courts of Justice Act and the Insurance Act in Ontario, which allow courts to grant “relief from forfeiture.” This relief is intended for individuals who will be disproportionately penalized for failing to respect the insurance plan deadlines, especially in cases where leniency will not cause significant harm to the insurer.
How will a court decide?
The decision whether or not to grant relief is entirely discretionary and will turn on the facts of each specific case. However, courts have developed a test to determine if claimants acted reasonably and if granting the relief will unjustly harm the insurer (Kozel v. The Personal Insurance Company).
Courts will only grant relief from forfeiture if there was imperfect compliance with a policy term, not if there was a breach of an important part of the contract. In general, missing the window to claim benefits has been considered imperfect compliance (Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co.).
There are 3 main factors that the court will assess in determining whether to grant relief from forfeiture:
- conduct of the applicant;
- gravity of the breach; and
- disparity between the possible harm to the denied claimant and the harm to the insurer.
1. Conduct of the applicant
First, courts will analyze the reasonableness of the claimant’s actions. They are likely to consider the following issues:
- How quickly did you act once you realized the claim was late?
Claimants are expected to act expeditiously once they realize that they have missed the deadline to claim LTD benefits. The line here is not clear-cut, but courts have found that claimants acted unreasonably when they showed “ongoing negligence” or when they learned of overdue payments but then still took many months to respond.
- What if you did not know you were eligible?
In Dube v. RBC Life Insurance Co., the claimant had received conflicting information regarding his LTD benefits and then left an envelope containing important information unopened for many months. As a result, he was not aware that he could make a claim, even though he was in touch with the employer and the insurance company. The court found that while he had not been “the model of perfect diligence” but that his actions were not unreasonable. They granted him relief.
- What if your employer gave you the wrong advice?
The Court might be less likely to fault employees in cases where employers were partially responsible for the lapse. Although it is not firmly established that employers have a duty of care to assist employees in applying for benefits, the Ontario Superior Court has referenced such a duty in some recent cases (see, e.g., Ferguson v Halton, 2018 ONSC 5675).
2. Gravity of the breach
Second, courts will examine the potential harm to the insurer if the application is allowed after the deadline. The insurer could argue that given the delay, it lost the ability to make a timely medical investigation or to assist the claimant in rehabilitation in order to avoid a longer-term absence from work. That’s what the insurer argued in Nguyen v. SSQ Life Insurance Co., but the Ontario Superior Court found that although there was harm, it was not sufficient to prevent a claim for relief from forfeiture and the late claim was allowed to proceed.
3. Balancing of damages
Third, courts will compare the harm to the applicant caused by the loss of coverage with the harm to the insurer by having to consider the late application. At this stage, courts will evaluate the income the claimant will lose if relief is not granted and weigh it against the damages suffered by the insurer.
Relief from forfeiture is entirely discretionary and it is up to the court to assess the particular details of each case and decide whether to grant it. In general, Ontario courts seem to be showing some leniency for late claimants. If you have missed the deadline to apply for LTD and been denied benefits as a result, consult a lawyer.
Ravenlaw gratefully acknowledges the contribution of this post by summer student Anna Rotman.