LTD Benefits Claims Part Two: Can the Court Award a Lump Sum For Future LTD Benefits?

This is part two of our long-term disability benefits series. You can read part one here. This week we are discussing a decision of the British Columbia Court of Appeal regarding future damages in LTD claims.

In Gascoigne v. Desjardins Financial Security Life Assurance Company (Desjardins Insurance), 2020 BCCA 316, the BCCA restated the law on future damages in LTD claims and a clarification on punitive damages in light of breaches of good faith by the insurer.

The Plaintiff was successful at trial in being declared disabled in accordance with the policy terms, and therefore was awarded judgment for benefits in arrears. The Plaintiff had also advanced a punitive damages claim for bad faith but was unsuccessful despite a finding at trial that the insurer had in fact acted in bad faith. The Plaintiff was also unsuccessful in its claim for fundamental breach of contract. This was an attempt to have the policy declared void, thereby obtaining access to future benefits. The Plaintiff appealed the Trial Judge’s decision on the issue of fundamental breach and punitive damages.

The Court held that the law in this area is settled for group policy claims. In a group policy, the employer and insurer are parties to the contract and the policy holder is a non-contracting beneficiary only. The Court echoed prior decisions in holding that a beneficiary may enforce in the beneficiary's own name, and for the beneficiary's own benefit, but that the non-contracting beneficiary of a group policy is not entitled to terminate the policy. As a result, the Court held that the Appellant was precluded from claiming fundamental breach of contract.

With respect to punitive damages, the Court held that not every breach of good faith by an insurer merits an award of punitive damages but, rather, the trial Judge is to appropriately consider whether the conduct is sufficiently egregious to warrant such an award. In effect, the Court found that even though the trial Judge had bad faith, the actions were not so egregious to attract an award for punitive damages.

The Court was silent on whether a personal disability policy claimant could make a claim for future benefits and was careful to limit its decision to group policies only.

by Michael AA Shepherd