Mental Health Disability Claims and Settlement

Practical considerations regarding settlement of disability cases where mental health issues are involved include the following list (by no means, meant to be an exhaustive one):

The mental capacity and competency of the claimant to enter into a settlement agreement;
The ability of the claimant to manage or handle a lump sum settlement award;
Whether LTD insurers should start to consider the use of structured settlements in certain cases;
The structure of settlement agreements and releases bearing in mind the possibility of the future potential for disability claims if and when the claimant returns to the labour marketplace;

In Rowe v. UNUM¹, the plaintiff settled his LTD claim and the Minutes of Settlement contained a clause disentitling him from receiving LTD benefits for any disabling condition arising prior to May 1, 1998 that was caused or contributed to by any illness related to insured's period of disability, unless illness was caused solely by physical illness, trauma, or injury that first occurred after May 1, 1997 -- In March 1998, insured was diagnosed with Hepatitis C. His claim for LTD benefits was allowed as the diagnosis of Hepatitis C was considered distinct from any illness related to his prior disability claim, notwithstanding that the diagnosis did result in the re-occurrence of his depression. The case is lengthy and there is extensive discussion about numerous legal issues, however, the approach to the prior depression versus the depression that developed after the hepatitis C diagnosis can be seen as follows:

It seems to me that both Dr. Quan and Dr. Gow's findings accord with the totality of the evidence before the Court. I find, on the evidence as a whole, that what Mr. Rowe suffered after the commencement of Interferon was significantly different both qualitatively and quantitatively from his episode of major depression 1996. Further, the opinions of Dr. Gow and Dr. Quan find support in the medical literature.

On reading this Judgment, it is clear that the medical issues in this case were complex and perhaps many disability cases would not approach the degree of complexity and the difficulty in coming to terms with those medical issues that the court noted in this case. However, the case is instructive of the potential pitfalls faced in settling LTD cases and drives home the point that such settlements should be crafted with precision and care.

¹ 2006 C.E.B. & P.G.R. 8199, 37 C.C.L.I. (4th) 32, 2006 CarswellOnt 2975

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