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LTD Benefits Claims Part Six: Limitation Periods and Discoverability and When a Lawsuit the Appropriate Means?

This is the sixth and final installment in our series discussing recent long-term disability caselaw. Part five can be read here.

In Clarke v Sun Life Assurance Company of Canada, 2020 ONCA 11, Sun Life Assurance Company of Canada applied for Summary Dismissal, arguing that the Plaintiff’s action for long-term disability benefits was limitation barred. The motion judge held that the plaintiff sued in time and dismissed the application. The motions judge found that the limitation period did not start until the insurer had served a final communication to the insured that quasi resembled a vague denial letter. The motion judge relied on the initial refusal letter being ambiguous and the insurer having invited the Plaintiff to send more information. Sun Life appealed the decision.

The Court of Appeal allowed the appeal in part.  The Court of Appeal disagreed with the motions judge that the action did not “arise” when the payments of LTD benefits ceased. The Court of Appeal found that the motion judge had not turned its mind appropriately to the question of when the Plaintiff ought to have known, despite the action arising, that a proceeding would be an appropriate means to remedy the loss.  The lower Court had not made a finding on this, since it had found that the claim had not arisen upon presentation of the denial letter.  

The Court of Appeal declined to determine “appropriate means” issue based on the appeal record and remitted the matter back to the court below, since a more fulsome evidentiary record would be required on that issue.

Of note, the insurer did not use the word “denial” or “limitation” in its original denial letter to the insured.  It was this omission that laid the groundwork for a lawsuit to be filed several years after benefits were not provided as contracted.  As with Halladay, most insurers no longer make this omission in their denial letters and, instead, now rely on typical form letters that contain language that puts the insured on notice to bring a claim.  It is also noteworthy that this case is intrinsically tied to limitation legislation in Ontario and, while other jurisdictions have similarly worded legislation, it is unclear whether other jurisdictions will find this decision persuasive.

Michael AA Shepherd