Damages in Long-Term Disability Cases
Many people have long-term disability insurance coverage through either employee group benefits or private plans. It is a stressful experience to be informed by your long-term disability insurer that it is denying your claim or refusing to pay any further benefits. The insurer may, for example, dispute the extent of your work restrictions caused by your medical or psychological condition. The insurer may also take the position that your disabling condition was pre-existing and therefore excluded from coverage, or suggest that you could work in a different occupation even with your work restrictions caused by your medical or psychological condition, therefore disentitling you from benefits after a specified time period.
If this happens to you, you should contact a disability lawyer immediately. There is a time limit in which you must file your claim at the Court of Queen’s Bench of Alberta, so it’s important to contact a lawyer as soon as possible. Weir Bowen has several lawyers who practice in this area, and can be contacted here. Regardless of what position your disability insurer takes, if your treating healthcare practitioners support your inability to work, you may have a legitimate claim.
The rest of this article is about what types of damages are available if you choose to sue your long-term disability insurance provider.
The insurance contract governs what amount you are entitled to get paid per month you are disabled from working, and what can be deducted off that base amount. Normally Canada Pension Plan Disability benefits, some Worker’s Compensation benefits, severance and pension amounts, and any part-time employment income you may be able to make by working on a limited basis, can be deducted from the amount your private insurer has to pay you each month you are disabled from working. It depends on the wording used in your insurance policy. Assuming you are disabled from working and can prove it, most of the money you stand to recover will likely come from the monthly amounts the insurer should have paid you in the past and should be paying you in the future.
Extra Contractual Damages
Canadian Courts have recognized that disability insurance coverage is purchased to provide people with peace of mind that they will be paid benefits in the event they become disabled from working. For that reason, it is possible to recover what are called “aggravated damages” and commonly referred to as “mental distress damages” when an insurer’s decision to withhold disability benefits is found by a Court to be wrong. The amount awarded for this is typically low, and may not be awarded at all by a Court.
Canadian Courts have also recognized that insurance companies are supposed to adjudicate claims fairly and reasonably. If there is clear proof that they failed to do so, Courts have the ability to punish the insurer’s conduct by making them pay to their insured an amount beyond the contractual damages and any mental distress damages. This amount is known as punitive damages. Punitive damages are rarely awarded and as stated, require clear proof of unfair conduct. The amounts awarded are normally quite modest, though they can vary.
Reinstatement or Lump Sum Settlement?
Our civil litigation process in Alberta is complicated and can pose financial risk to Plaintiffs (you can read more about the steps in the civil litigation process here). If you take your long-term disability case to trial and convince the Court you are and have been continuously disabled from working, the Court will award you past contractual damages and declare that you are currently disabled from working and therefore still entitled to receive monthly benefits from the insurer as of the date of their decision. The Court would also have the option of awarding extra-contractual damages as described above if those have been proven. If you are unsuccessful at trial, or if you obtain a less favorable outcome than the insurer formally made available in settlement, then you could be on the hook for some of the insurance company’s legal costs.
In some instances, it is possible to negotiate a lump sum settlement with the insurer whether that is done informally, using a mediator, or in a settlement conference with a Justice of the Court of Queen’s Bench of Alberta. Obtaining a lump sum settlement may be achievable in less time than it would take to get a disability insurance case to trial and removes the uncertainty and stress of prolonged litigation. It also allows the insured to take a lump sum and sever ties with the insurance company.
There are many factors that go into the ideal way to pursue your claim and this should be discussed with one of our disability lawyers.