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Should you apply for CPP-Disability if you are eligible for private long-term disability benefits?

The Canada Pension Plan disability pension (“CPP-D”) is a Government of Canada program designed to provide financial assistance to CPP contributors who are not able to work regularly because of a severe and prolonged disability.  Service Canada pays monthly CPP disability benefits to eligible applicants and their dependent children.

If you are receiving private disability insurance benefits, your policy likely requires you to make reasonable efforts to obtain any alternative sources of income potentially available, including CPP-D.  Your policy likely allows the private insurer to deduct any amount CPP pays to you (but not to your dependent children) from the baseline amount they owe you per month while you are totally disabled within the meaning of the policy.

If you are approved for long-term disability benefits through your private insurer, they may ask you to apply for CPP-D.  If they ask, you should not hesitate to apply.  Not only are you likely contractually obligated to do so, but it is beneficial to you to do so. Although you will not end up with more money in your pocket while your private insurer is paying your claim (since they will only be “topping up” your CPP-D amount to the baseline amount you are entitled to as per the private insurance policy), it is advisable to apply for CPP-D because once you are approved for CPP-D, it is unlikely that Service Canada will suddenly stop paying your monthly benefits the same way a private insurer might.  It is therefore a nice safety net to have in the event that your private insurer stops paying your monthly disability benefits and you must sue them for payment of further benefits.  The process to sue your long-term disability insurer can be lengthy so it’s best if you already have monthly CPP-D payments coming in.

For that reason, assuming you are unable to work regularly because of a severe and prolonged disability, it makes sense to apply for CPP-D even if your private long-term disability insurer does not expressly ask you to do so.  They cannot penalize you for doing so, and by doing so, you are in fact very likely complying with your insurer’s policy that requires you to obtain any alternative sources of income.  If you end up being approved for CPP-D, it may even make your private long-term disability insurer think twice about stopping payment of your benefits, because if they did so, a Court would potentially one day see that the insurer decided to stop payments even though the Government of Canada had deemed you unable to work regularly because of a severe and prolonged disability.  That could help support an argument that the insurer acted in bad faith in adjudicating your claim.

Even if your application for private long-term disability benefits is rejected, you should still apply for CPP-D if you believe you are unable to work regularly because of a severe and prolonged disability.  Not only is it a way to get some money coming in, it will also go a long way towards showing the private insurer that initially rejected your claim that your claim is legitimate if you are approved for CPP-D.  You will most likely have to sue your private long-term disability insurer to have them take a serious second look at your claim in this event.

A lot of people wait longer than necessary to apply for CPP-D.  Section 42 of the governing legislation [Canada Pension Plan, RSC 1985 c C-8] requires that the disability be one that renders a person “incapable regularly of pursuing any substantially gainful occupation” for a “prolonged period of time”, defined as “to be of long continued and of indefinite duration, or likely to result in the applicant’s death.”  

As a rule of thumb, if you are at the point where you are applying for private long-term disability benefits or are receiving them, it is appropriate to apply for CPP-D, unless you would be able to perform an occupation other than your own occupation,

Information on how to apply is available on the Government of Canada website or at any Service Canada location.  You will need to fill out an application form and have your treating doctor with the most relevant information send in a medical form on your behalf.  

If you have any questions about private long-term disability insurance benefits or about whether you should apply for CPP-D, do not hesitate to contact one of our lawyers.

by John Andreassen