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Long Term Disability Claims and Lump Sum Awards

Long Term Disability Claims and Lump Sum Awards
By David Share

Ontario Trial Lawyers Association
2001 Spring Conference
Saturday, June 2, 2001

Coombs v. Constitution

I have been asked to discuss the topic of Coombe v. Constitution - Dead or Alive? There are a number of perspectives to this series of cases from which to consider that question.

For the uninitiated, Mr. Coombs and Constitution have been litigating entitlement to weekly income benefits arising from a motorcycle accident in June, 1974, since 1976. The amount in dispute is a weekly benefit in the amount of $70. I won't continue with the history of the litigation but will instead move on to the substantive question behind whether this case is "dead or alive".

Does a declaration of entitlement to weekly or periodic benefit payments bring the matter to a close? Coombs has answered this with a resounding no.

In litigation arising out of Long Term Disability contracts ("LTD") or Statutory Accident Benefits disputes in automobile accidents, courts have declined to order or award a lump sum amount in lieu of the declaration of ongoing entitlement (with a discount for present value calculations of future entitlements, reduced by relevant contingencies, such as prospects for future employment, life expectancy, and other factors). The courts have just not seen fit to cross the line into the murky area of substituting their judgment, for the ongoing scrutiny of insurance companies. The basis for denying the lump sum award appears to be the constraints of the LTD contract, or legislation providing for disability and other benefits. Payments are only due for so long as the claimant can establish varying degrees of disability, although most of the litigation focuses on permanent, total or partial disability.

Recent case law indicates that Coombs is very still very much alive.1 The cases noted here all have upheld the concept that only declaratory relief is available with respect to future disability benefit payments. In Richardson v. Great-West Life,2 Justice Holmes stated the following at paragraph 29:

Counsel for the plaintiff argued that the plaintiff should be entitled to terminate the L.T. contract of insurance and receive as damages the present day value of the plaintiff's future benefits to age 65. I agree with representations made on behalf of the defendant, however, that where as here there is some uncertainty as to the permanence of the plaintiff's disabilities and the policy allows the insurer to require the plaintiff to submit to ongoing physical examinations as well as for offsets with regard to receipt of other benefits, a lump sum award for future benefits would not be appropriate. Nevertheless, the plaintiff is entitled to a declaration directing the defendant to pay the plaintiff continuing monthly benefits after April 15, 1996, until such time as she reaches the age of 65 years or dies or is no longer totally disabled within the provisions of the L.T. policy.

While damages in lieu of a declaration may not always be preferable, the possibility of such an award would certainly add a strong weapon to the plaintiff's arsenal. On the basis of the Richardson case, the court has opened a very small window of opportunity in cases where there is certainty as to the permanence of the plaintiff's disability. Tendering evidence with this type of standard may prove to be fruitless in the realm of establishing entitlement to a lump sum award, but it seems to be all that we've got, or is it?

Some of these same recent cases may assist in putting forth more forceful arguments for a lump sum award in the future. Where the plaintiff has had their benefits terminated and has suffered significant mental stress, financial uncertainty and general hopelessness, an argument can be advanced that what is needed is an end to the relationship between plaintiff and defendant insurer.

In the Coombes decision rendered in 1993, 3 the problem of the potential for litigation in perpetuity, was acknowledged at paragraph 1:

"Coombe and Constitution have been battling in court over the payments since 1976 and it appears to me that only the demise of Coombe will bring litigation between these two protagonists to an end.">

Disability insurers, including accident benefit automobile insurers, have the right to require ongoing proof of disability and to periodically scrutinize claimants with respect to claims of permanent and total disability; however, recent cases have shown that a relationship of utmost good faith is frequently anything but.

The Clarfield4 case, which resulted in an unprecedented finding for the plaintiff of aggravated and punitive damages, still did not result in a lump sum award for future benefits. The type of conduct under discussion in that case clearly points to the need for an end to the relationship between claimant and insurer, yet even in those circumstances the Court did not see fit to cross over the line into uncharted territory.

In order to compel our Courts to award a lump sum in these cases, one of two things will have to happen. Either disability contracts or legislation will be amended to contemplate such an outcome in applicable circumstances, or, we need to return to first principles to try and apply existing case law to permit the Courts to make such an award where they are inclined to do so but feel constrained by precedents that do not appear to allow this.

Perhaps we should look into other areas of the law for assistance. For instance, in a rather old case, Zdan v. Hruden 5 the Court upheld a lump sum award in lieu of contract for payment of support. The obvious distinction from disability claims is that in Zdan the contract was for lifetime payments without any obligation to establish ongoing entitlement by virtue of financial need or disability, however, the brief reasons for judgment do raise the spectre of the possibility of a lump sum award:

"When the defendant, for example, absolutely refuses to perform such a contract after the time for entering upon the performance has begun, it would be a great hardship to compel the plaintiff to be ready at all times during his life to be supported by the defendant, if the defendant should at any time change his mind; and to hold that he must resort to successive actions from time to time to obtain his damages piecemeal" 6

The reference to this case was derived from another case, which upholds the notion that a lump sum award in disability claims is not permissible (see Cram v. Great-West Life ). There the Court's answer to concerns about leaving the plaintiff to the whim of the insurer is that other remedies exist, such as aggravated and punitive damages, which would act as a deterrent to terminating benefits in the future without "the strongest evidence of cessation of disability". We are left wondering as to what Justice Williamson would have said had the history of Coombe v. Constitution been provided during the course of the Cram action.

Despite efforts to find more compelling case law to support the argument in favour of a lump-sum award in these cases, there does not appear to be anything else to unearth, save and except for authorities in other jurisdictions. Clarfield points to a willingness by our courts to broaden the scope of aggravated and punitive damages. Accordingly, particularly in cases where insurer conduct is so severely impugned, it seems that lump sum awards cannot be far away. However, for the present time, Coombe v. Constitution is very much alive.


1 See Petrik v. Jevco Insurance Co., 1996 CarswellOnt 2784, 36 C.C.L.I. (2d) 168, 7 O.T.C. 310 (O.C.G.D.); Wachal v. Crown Life Insurance Co., 1999 CarswellMan 378, 140 Man. R. (2d) 26, 14 C.C.L.I. (3d) 284, 48 C.C.E.L. (2d) 181 (Man. Q.B.); Richardson v. Great-West Life Assurance Co., 1996 CarswellAlta 648, [1996] I.L.R. 1-3376, 41 Alta. L.R. (3d) 152, [1996] 9 W.W.R. 326, 189 A.R. 93; Van Allen v. London Life Insurance Co., 1999 CarswellOnt 3219, [2000] I.L.R. I-3749, 15 C.C.L.I. (3d) 63 (Ont. Sup. Ct. Justice); AND Clarfield v. Crown Life Insurance Compan, [2001] I.L.R. I-3895 (O.S.C.J.)

2 See 2 supra.

3 1993 CarswellOnt 54, 48 M.V.R. (2d) 130, [1993] I.LR. I-2983.

4 See note 2 supra.

5 1912 CarswellMan 255, 2 W.W.R. 665, 22 Man. R. 387, 4 D.L.R. 255 (Man. C.A.)

6 Supra, note 6 at paragraph 1.

7 1995 CarswellBC 625, 31 C.C.L.I. (2d) 197 (B.C.S.C.)

8 Supra, note 8 at paragraph 25.

9 Note 2 supra.