Sometimes applications for long term disability benefits are submitted late. In some cases that leads insurance companies to deny benefits applications. However, such a denial should be thoroughly reviewed with a lawyer, because a denial often isn't appropriate just because of a late application.
When an application is late, claimants can often rely on a principle called "relief from forfeiture". Relief from forfeiture is an equitable discretionary remedy that has been codified in Section 98 of the Courts of Justice Act and s. 129 of the Insurance Act. These provisions should be interpreted liberally to provide relief where the result would otherwise be inequitable or unjust. (Courts of Justice Act; Kozel v. The Personal Insurance Company).
A court should find that an insured’s breach constitutes non-compliance only in rare cases where the breach is substantial and prejudices the insurer. In all other instances, the breach will be deemed imperfect compliance, and relief against forfeiture will be available. (Kozel v. The Personal Insurance Company; Monk v. Farmers’ Mutual Insurance Company (Lindsay)).
In the majority of recent cases that I have reviewed, where the insured has missed a deadline, the Courts have held that the delays in claiming benefits from insurers is an imperfect compliance, thus the result turns on the fact specific second-step of the test. (Ferguson v. Halton; MacIvor v. Pitney Bowes; Nguyen v. SSQ Life Insurance Company Inc.; Dube v. RBC Life Insurance Co..).
The Supreme Court of Canada, in Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., [1989] 2 SCR 778, 1989 CanLII 38 (SCC) ["Falk Bros."], interpreted Section 109 in The Saskatchewan Insurance Act, identical in language to Section 129 of the Ontario Insurance Act. The Supreme Court observed:
The first consideration is that s. 109 is a remedial section and as such should be given an appropriately broad interpretation. In Minto Construction Ltd. v. Gerling Global General Insurance Co. (1978), 1978 CanLII 1441 (ON CA), 86 D.L.R. (3d) 147, citing Canadian Equipment Sales & Service Co. v. Continental Insurance Co. (1975), 1975 CanLII 670 (ON CA), 59 D.L.R. (3d) 333 (Ont. C.A.), MacKinnon J.A. noted at p. 151 that the equivalent Ontario "section is `an ameliorating clause', and [that] it should be given a fair, large and liberal interpretation".
In the same vein, see also The Interpretation Act, R.S.S. 1978, c. I-11, s. 11 which provides:
11. Every Act and every regulation and every provision thereof shall be deemed remedial, and shall receive such fair, large and liberal construction and interpretation as best ensures the attainment of the object of the Act, regulation or provision.
The purpose of allowing relief from forfeiture in insurance cases is to prevent hardship to beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer. This purpose is consistent with interpreting s. 109 as permitting the court to grant relief from contractual as well as statutory conditions.
In Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 SCR 490, 1994 CanLII 100 (SCC), the Supreme Court described the proper applicable of the relief against forfeiture clause as follows:
The power to grant relief against forfeiture is an equitable remedy and is purely discretionary. The factors to be considered by the Court in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value of the property forfeited and the damage caused by the breach: Shiloh Spinners Ltd. v. Harding, [1973] A.C. 691 (H.L.); Snell's Equity (29th ed. 1990), at pp. 541-42.
In Dams v. TD Home and Auto Insurance Company, 2016 ONCA 4 (CanLII), the Ontario Court of Appeal upheld relief from forfeiture in the case of imperfect compliance. The plaintiff, who was injured in an accident that involved an unidentified vehicle. The plaintiff failed to report the incident to his insurer within the company's required reporting time. When he did report the incident, the insurer refused his claim. The plaintiff brought a claim against the insurer in the Superior Court. In the lower court decision, the Judge granted relief to the plaintiff under Section 129 of the Insurance Act and Section 98 of the Courts of Justice Act.
The Court of Appeal focused on the purpose of Section 129 of the Insurance Act:
[19] TD Home argues that the reporting requirements contained in s. 3 of the Regulation are akin to conditions precedent in the nature of limitation periods, because s. 8(1) of the Regulation provides that no person can bring an action to recover an amount under the contract of insurance “unless the requirements of this Schedule with respect to the claim have been complied with.”
[20] I am not persuaded by this argument, for two reasons. First, the decision of the Supreme Court in Falk Bros. stands squarely against it. The reporting requirements contained in s. 3 of the Schedule are functionally similar to the notice of claim requirement at issue in Falk Bros. Both operate with the view of providing the insurer with timely information about the loss so that it can investigate the matter, if it so choses. The nature of Mr. Dams’s failure to comply in the present case clearly falls within the class of cases covered by the statutory language in s. 129 – i.e. a statutory condition as to the proof of loss to be given to the insured or other matter or thing required to be done omitted by the insured with respect to the loss.[1]
[21] Second, to assess the effect of s. 8(1) of the Schedule on the availability of relief under s. 129 of the Insurance Act, the Schedule must be read in its entirety. Section 8(1) applies to all the requirements of the Schedule concerning uninsured automobile coverage. In addition to the reporting requirements imposed by s. 3, the Schedule also requires a person entitled to make a claim to give notice of the claim and to provide a proof of claim: s. 6. To accept the interpretation of s. 8(1) advanced by TD Home would result in that section of the Schedule precluding relief from forfeiture for imperfect compliance with the obligation to provide a proof of loss, a matter for which s. 129 specifically affords relief from forfeiture. Such an interpretation of the Schedule would run counter to the very purpose of the statutory provision. In my view, such an untenable interpretation signals that s. 8(1) of the Schedule does not transform all the requirements imposed on a claimant by the Schedule into conditions precedent to a claim for which relief from forfeiture is not available. Instead, s. 8(1) must be read in the light of s. 129 of the Insurance Act and the principles set down by the Supreme Court in the Falk Bros. case. When so read, relief from forfeiture under s. 129 of the Insurance Act is available where a claimant has failed to meet the time periods for the reporting requirements set out in s. 3 of the Schedule.
In Kozel v. The Personal Insurance Company, 2014 ONCA 130 (CanLII) ["Kozel"], the Ontario Court of Appeal analyzed the scope of Section 129 of the Insurance Act and Section 98 of the Courts of Justice Act. The Court went on to consider whether the breach was imperfect compliance or non-compliance with a condition precedent:
[40] The difference between imperfect compliance and non-compliance is crucial for the purposes of the relief against forfeiture analysis. If the respondent’s breach of statutory condition is 4(1) is imperfect compliance with a policy term, relief against forfeiture under s. 98 of the CJA is available. If, however, the breach amounts to non-compliance with a condition precedent, the court cannot award relief under s. 98: Stuart, at p. 333.
Ultimately, the Court of Appeal found that relief from forfeiture was available in this case:
[59] Having resolved the two threshold questions in the respondent’s favour, It remains to be decided whether she is entitled to relief against forfeiture. As noted above, the relief against forfeiture analysis is informed by three factors: (i) the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity between the value of the property forfeited and the damage caused by the breach: Saskatchewan River Bungalows, at p. 504.
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[73] [I]f this court were to allow the appeal, the insurance company would enjoy a large windfall at the expense of an individual who acted in good faith and whose breach caused no prejudice to the company. This result would be contrary to fundamental notions of equity. Accordingly, I would dismiss the appeal.
In Dube v. RBC Life Insurance Company, 2015 ONCA 641 (CanLII), the respondent employee was in a car accident and since then has not returned to work. His employer had a group insurance policy with the appellant RBC Life Insurance, which provided employees with long-term disability benefits. The employee did not give notice or proof of his claim within the time limits under the policy, so RBC denied his claim. The motion judge determined that the employee was entitled to relief from forfeiture. Ontario Court of Appeal outlined the test for relief from forfeiture as follows:
[5] Under the policy Dube ought to have given notice of his claim within 30 days of his alleged disability (the date of the accident) and proof of his claim no later than one year and 90 days after his disability arose. Dube did not give any notice of his claim until March 2012, and did not give proof of his claim until June 2013.
[6] Thus the central issue on the motion was whether Dube was entitled to relief from forfeiture under s. 98 of the Courts of Justice Act, which states:
A court may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just.
The relief under s. 98 is both equitable and discretionary. The test for relief is well established. It has three components. The court must consider:
- the conduct of the insured applicant
- the gravity of the breach
- the disparity between the value of the property forfeited and the damage caused by the breach, see: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490.
The trial judge, in Dube v. RBC Life Insurance Co., 2015 ONSC 77 (CanLII), found that:
[7] On the first component of the test the motion judge found that Dube’s conduct was “not unreasonable”. In support of that finding, the motion judge noted that Dube’s employer had incorrectly told him he did not have coverage for long term disability benefits; that Dube was confused or uncertain whether he had this coverage; and that he had complied with numerous requests to provide medical information.
[8] On the second component of the test, the motion judge found that RBC suffered minimal or no actual prejudice because of the breach.
[9] On the third component of the test, the motion judge found that because Dube was 43 years old when the accident occurred and long term disability benefits were payable to age 65, the disparity between the value of the property forfeited and the damage caused by the breach was significant.
The Ontario Court of Appeal affirmed the motion judge's decision:
[14] [...] We therefore conclude that the motion judge exercised his discretion reasonably in granting Dube relief from forfeiture.
Nguyen v. SSQ Life Insurance Company Inc., 2014 ONSC 6405 (CanLII) also considered a summary judgment motion brought by an insurer to dismiss a claim for long-term disability benefits because the claim is barred both by the contractual limitation period under the group insurance policy and the statutory limitation period. The motions judge found that the insured was unable to submit his application earlier because his employer did not provide him with the requisite documents:
[36] Mr. Nguyen was unable to submit his application earlier because his employer, Vision Extrusion, did not provide him, as it was obliged to do under the group insurance policy, with the documents required to exercise his rights under the group insurance policy. As I interpret the group insurance policy in the circumstances of this case, Mr. Nguyen’s application for LTD was timely. This is especially so because the policy also provides that SSQ has the discretion to admit late claims, which it ought to have exercised in the circumstances of this case.
The motions judge would have granted relief from forfeiture under Section 129 of the Insurance Act. Applying the Saskatchewan Rivers test, the judge held:
[45] In exercising its discretion to grant relief from forfeiture, a court should consider three factors: (i) the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity between the value of the property or right forfeited and the damage caused by the applicant’s breach: Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., supra at p. 504; Kozel v. Personal Insurance Co, supra at paras. 31, 59-71; Niagara Gorge Jet Boating Ltd. Carrying on business as Whirlpool Jet v. AXA Canada Inc. et al., [2006] O.J. No. 640 (S.C.J.) at para. 57.
[46] Applying the above three factors to the circumstances of the case at bar, Mr. Nguyen’s conduct was reasonable, and, in my opinion, he cannot be faulted for his employer’s failure to assist him in applying for LTD benefits.
[47] If Mr. Nguyen proves to be entitled to LTD benefits - which entitlement, it is significant to note, has yet to be determined on its merits – then, Mr. Nguyen will lose a substantial entitlement that SSQ contracted to provide.
[48] However, it is also true that SSQ will be prejudiced by Mr. Nguyen’s late-arriving application, because SSQ will have lost the ability at an early date to conduct its own investigation of the merits of his claim, to have medical examinations conducted, and to assist Mr. Nguyen with therapy and rehabilitation treatment that might possibly end his reliance on LTD benefits and SSQ’s liability to pay them.
[49] That said, the extent to which this prejudice has manifested itself to a real harm, however, is unknown. SSQ may still be in a position to evaluate the LTD claim retroactively based on the medical records gathered for Mr. Nguyen’s SAB and tort claims. And on a go-forward basis, SSQ is able to examine and investigate whether Mr. Nguyen is actually entitled to LTD benefits and whether rehabilitation is possible.
[50] Weighing the various factors, in my opinion, this is an appropriate case to grant relief from forfeiture.
Ferguson v. Halton, 2018 ONSC 5675 (CanLII) deals with relief from forfeiture in the context of a claim for long-term disability benefits ("LTD"). The employee took a leave of absence from employment, claiming to be disabled. He was terminated on leave because he failed to provide medical information to substantiate leave. While on leave, but prior to termination, the plaintiff requested information about benefits, but did not receive information about LTD benefits. Once the employee applied for LTD benefits, he was denied on the basis that the application was filed beyond timelines stipulated in the LTD plan. The Court found that it did have jurisdiction to grant relief from forfeiture:
[30] In the insurance context, a claimant’s failure to give notice of claim and to submit proof of claim to an insurer within the time limits set out in an insurance policy constitutes imperfect compliance with the provisions of the applicable insurance contract: Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co., 1989 CanLII 38 (SCC), [1989] 2 S.C.R. 778, at paras. 13-14 and 18. Relief from forfeiture pursuant to s. 98 of the CJA may be available in such cases: Dube v. RBC Life Insurance Co., 2015 ONCA 641, 127 O.R. (3d) 16. Mr. Ferguson’s failure to comply with the timelines in Halton’s self-funded LTD Plan is analogous to these insurance cases. The Court therefore has jurisdiction to grant relief from forfeiture.
The Court went on to analyze the three factors to be taken into consideration in deciding whether to grant a claimant's request for relief from forfeiture. Under the reasonableness analysis, the Court described what the breaching party must show to prove the reasonableness of missing a deadline:
[34] The first step in the relief from forfeiture analysis requires an examination of the reasonableness of Mr. Ferguson’s conduct. This inquiry “relates to all facets of the contractual relationship, including the breach in issue and the aftermath of the breach”: 8477 Darlington Crescent, at para. 89; and Kozel at para. 61. In cases of breach involving a missed deadline, the Court ought not to grant relief from forfeiture where the breaching party has not acted in an expeditious manner after discovering the deadline or the party has not provided a compelling explanation for the failure to do so: Pilotte v. Zurich North America Canada (2006), 2006 CanLII 4757 (ON SC), 80 O.R. (3d) 62, at para. 66.
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[111] Mr. Ferguson submitted his LTD application to Sun Life on June 3, 2010. I accept Mr. Smitiuch’s testimony that the LTD application was submitted as soon as possible. Sun Life’s application forms include a Plan Member’s Statement that must be completed by the claimant employee and an Attending Physician’s Statement that must be completed by the employee’s treating physician. Allowing for some time to consult with his doctor and complete the forms, I find that Mr. Ferguson acted expeditiously in taking steps to rectify the situation. He submitted his LTD application as soon as practicable after he learned about the need to do so.
[112] Taking into consideration all of the circumstances that gave rise to Mr. Ferguson’s delay in submitting his LTD application and the steps taken by him after the missed deadline was brought to his attention, I find that Mr. Ferguson’s conduct was reasonable.
In MacIvor v. Pitney Bowes, 2018 ONCA 381 (CanLII), the plaintiff suffered a brain injury resulting in disability, but he did not claim benefit through his employer's group benefits until years after he left the employment. The Ontario Court of Appeal granted relief from forfeiture for failing to provide a proof of claim within the contractual timelines, despite the plaintiff not requesting the relief in the motion:
[29] Although relief from forfeiture pursuant to the provisions of the Insurance Act, R.S.O. 1990, c. I.8, or the Courts of Justice Act, R.S.O. 1990, c. C.43, was not raised at trial, given the facts outlined above, it is in the interests of justice to grant that relief here.