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LTD Benefits Claims Part Three: Are Contractually Shortened Limitation Periods Reciprocal?

This is part three of our series discussing recent developments in long-term disability benefits case law. You can read part two here. This week’s post discusses Thorburne v Sun Life Assurance company of Canada, 2020 NSSC 240, a case concerning limitation periods and disability benefits.

In Thorburne v Sun Life Assurance company of Canada, 2020 NSSC 240, the Plaintiff had been paid disability benefits for some time prior to the insurer terminating benefits. Following the Plaintiff bringing claim on the denial, the Plaintiff disclosed in its Affidavit of Records a record of previously undisclosed income earned during the period of disability.  This resulted in the insurer seeking leave to amend its defence to allege bad faith and to counterclaim for benefit overpayments.  The Plaintiff defended the Application primarily on limitation grounds.

The Affidavit of Records was served in early April 2018.  Questioning for Discovery took place over three months later in July.  The Application for amendment was brought forward a few days shy of two years from the date of oral discovery. This made the primary question whether the 2-year limitation clock had started before the oral discovery.   

The Court found that the limitation period did not start running with service of the Affidavit of Records, because the income records were “buried” in otherwise voluminous records (over 600 pages).  While the Court correctly found that the limitation clock would not start running until the claim was discoverable with reasonable diligence, the Court did not make a finding on when a person exercising reasonable diligence would have discovered the income record.  

Instead, the Court found that the limitation clock started at oral Discovery without regard to whether the income records were discoverable prior to the oral discovery with reasonable diligence.  In the author’s opinion, this finding is incorrect; at a minimum, the income record would have been discoverable during preparation in the days leading to the discovery.  In any event, since the date of oral Discovery was within 2 years of the date of the Application to amend, the next question was whether the shortened limitation period contained in the policy for the insured to bring forward a claim (1 year) was reciprocal.  The Court found that the shortened limitation period was not reciprocal on the wording of the policy and that the principle of contra proferentem did not apply since no evidence of unequal bargaining power was before the court.  This particular policy was likely negotiated between a union and the insurer.

In the opinion of the writer, it offends the equities to have differing limitation periods for the insurer and the insured.  On a contractual expectation standpoint, it would be reasonable to assume that the party purchasing the insurance contract would have the expectation that they would have the same amount of time to discover, investigate, and bring forward a claim on the policy.  Nonetheless, the Court based its decision on a lack of evidence of bargaining power inequality and on the express wording of the limitation provision in the contract.  It is these findings which may open the door for future plaintiffs to distinguish the decision.  Further, it is noteworthy that some provinces have legislation which renders contractual limitation periods inoperable when they provide for a shorter limitation than the otherwise legislated provincial limitation period.

by Michael AA Shepherd