Long Term Disability Benefits: Relief from Forfeiture: Smith v. Sun Life, 2021 ONSC 7109
Share Lawyers’ Alison Gilmour successfully represented our client Mr. Smith in defending a summary judgment motion brought by Sun Life. Sun Life moved to dismiss Mr. Smith’s action for LTD benefits on the basis that he had not submitted a formal application for LTD benefits. Short-term disability benefits had been declined by Sun Life who adjudicated and managed STD claims on behalf of the City of Kitchener.
In a decision released on November 1, 2021, Justice Diamond of the Ontario Superior Court of Justice, dismissed the motion, finding in favour of Mr. Smith. He determined that there had been imperfect compliance and as such the claim was subject to relief from forfeiture. Of note, he found that Sun Life was already well aware of the nature of the plaintiff’s alleged disability, having been the decision-maker on the STD claim, and also noting the fact that Sun Life’s own medical consultant had conducted two psychiatric reviews prior to the STD claim being denied.
An important factor in the decision was the lack of any evidence to suggest that Sun Life’s position would have been any different had a formal LTD application been submitted. It was also noted that Sun Life had received an Attending Physician Questionnaire, on a form they provided, which stated that it was part of a claim for LTD benefits. Justice Diamond concluded that Sun Life had notice that Mr. Smith intended to pursue a claim for LTD benefits.
It is important to note that the disability claim arose when an STD claim was submitted on April 28, 2020 for a disability that commenced in mid-December 2019. LTD benefits would have commenced on June 12, 2020 if approved. Various other key dates are noted in the decision. The deadline for submission of the LTD application was September 10, 2020 and the medical questionnaire noted above was submitted on September 28, 2020, with the lawsuit being issued on October 29, 2020. With an LTD eligibility date of June 12, 2020, the applicable limitation period would not expire until well into 2022.
In reviewing the test for relief from forfeiture, the three factors were noted as:
- The conduct of the insured;
- The gravity of the insured’s breach; and,
- The disparity between the value of the property forfeited and the damages caused by the insured’s breach.
The Court accepted that the plaintiff’s position in not submitting an LTD application was somewhat reasonable, assuming that any LTD claim submitted would have been denied by Sun Life in any event. Justice Diamond found that the impact of the breach on Sun Life was not substantial because they already had a comprehensive understanding of the merits of the claim and that further evidence regarding the nature and severity of Mr. Smith’s disability claim were available through both documentary and oral discovery. Finally, the Court found that any prejudice suffered by the defendant would be outweighed by the harm to the plaintiff.
Costs were awarded to the Plaintiff in the all-inclusive amount of $15,000.00 payable forthwith.
A full read of the decision is warranted as the decision also addresses some other important areas for the LTD bar, including the jurisdiction of the court and also reviewing the now oft repeated summary of the principles outlined in Hyrniak v. Mauldin, but perhaps the most compelling and quotable portion of the decision can be found at paragraph 26 of the decision:
 While the defendant argues that the plaintiff has still not filed a formal claim for LTD benefits at this stage, there are two factors that respond to that submission. First, if the defendant has already denied STD benefits based upon the medical evidence submitted to date, and thus concluded that the plaintiff is not disabled as that term is defined under the policy, would the defendant have taken any different position if a formal claim for LTD benefits had been submitted? There is no evidence in the record to conclude that it would have, therefore rendering its argument quite technical and crossing over into the world of “gotcha litigation”. [emphasis added]
This suggests that the Court was not impressed by the defendant’s focus on looking for any technicality to shut down unwanted litigation.
The equitable remedy of relief from forfeiture is very much alive and insurers should avoid taking an overly technical approach to defending these claims as such an approach does not reflect well on the concept of fairness in LTD litigation. The focus should be on the merits of the claim rather than seeking loopholes to dismiss claims.