Recent case law around long-term disability (LTD) insurance highlights the growing intersection between employment and disability law principles, personal injury and employment lawyer Steve Rastin says.
The relationship between disability and employment law has become significantly more complex due to the release of a new case by the Ontario Court of Appeal, where a three-judge panel of the province’s top court ruled that a man was able to claim LTD payments, even though he waited until after he left the job where he was covered to apply for benefits.
“LTD litigation is more complicated than people think, and what this case and others show is that there is an interrelationship between employment law and disability law principles,” says Rastin, managing partner at Rastin Trial Lawyers. “As our population ages and becomes more prone to health problems, this trend will only continue. It’s imperative that people get good legal advice on that intersection. The danger is that many people won’t realize there may be coverage available to them,” he adds.
According to the panel’s unanimous decision, the man was a senior employee when he suffered a traumatic brain injury and severe damage to his back during a 2005 company event in Costa Rica. After taking four months off to recover, he returned to work, but the ruling says his performance had deteriorated badly compared to his old level, resulting in a continuous downgrade of his responsibilities before he resigned in the summer of 2008.
The man found a new job almost immediately, but suffered similar difficulties with his work performance and was fired a year later. By the time he applied for LTD coverage from the first employer, two years had passed since his departure, and it was more than five years since his accident. After his application was denied, the man launched a legal claim, and the appeal court ruled he was entitled to coverage because the injury occurred while he was employed.
“The language of the [policy] when considered as a whole is clear — it means that coverage does not continue when an employee begins working for another employer or after the employee has retired,” wrote Justice Jean MacFarland on behalf of the panel. “The ‘Termination of Coverage’ language relates to future claims, not claims that may have arisen during the course of the employee’s employment,” she added. “In other words, if an employee’s claim arises as the result of an occurrence that takes place during their employment, the policy provides coverage.”
The claim survived a limitation defence because the man could not have known he had a cause of action until August 2009, less than two years before he launched the lawsuit, MacFarland wrote.
“The message that people should take is that just because you leave an employer to work somewhere else doesn’t mean you can’t advance a claim under your old LTD insurance policy,” says Rastin, who was not involved in the matter and comments generally.
In addition, employers may be putting themselves at risk if they fail to consider the potential LTD implications when terminating employees, he says, explaining that when workers are let go without cause, common law entitles them to continued pay and benefits during a period of reasonable notice.
“When companies fire employees, they’re usually thinking about the wages element rather than the benefits and will immediately cancel the LTD premiums,” he says. “That’s fine if the worker suffers no illness during the notice period, but if they do, it could cause a big problem if the employer ends up having to pay an award equivalent to the LTD the individual would have received under the cancelled plan.”
Rastin points to another case where a former employee was diagnosed with cancer and became disabled during the notice period but after LTD benefits were discontinued. While the plaintiff secured alternate employment shortly after his termination, his new role did not include benefits or LTD coverage.
The judge found the former employer “consciously chose not to make alternative arrangements to provide its loyal, long-service employee with replacement disability coverage. Rather, it chose to go the ‘bare minimum’ route. It provided only the statutory minimums in pay and benefits and then gambled that he would get another job and stay well.”
In awarding the plaintiff more than $200,000 in damages, the judge also noted the “hardball approach” of the defendant.
Rastin says it’s important his firm keeps up with developments in LTD law.
“Many lawyers may focus entirely on personal injury, but in my view, the law is too complex for such a narrow scope. That’s why our office does labour and employment, LTD, and Canada Pension Plan disability work in addition to personal injury law,” he says.