There are several ways in which group disability insurance may terminate. They are as follows:

1. Employment may end voluntarily in which case insurance will terminate on the last date of active employment.
2. Employment may end involuntarily in which event insurance will terminate on the last day of Employment, except for Ontario where it will be deemed to continue for the statutory period, presuming no cause. ¹
3. The employer may terminate coverage unilaterally with the insurer.
4. The insurer may terminate coverage due to an employer default, usually due to non-payment of premiums.
5. The policy may terminate and not be renewed.

In each instance, a person suffering from a medical disability on the date of termination of insurance coverage will have a claim for benefits, subject to the usual tests of continuity and the policy terms.

An employee who has hence resigned maintains all rights to claim disability benefits based on an existing disability as of the last date of active employment.

Many policies contain a term which denies any claims following the termination of the employment relationship. Apart from the issue of the benefit continuation period under Ontario's statute, this term refers to claims arising beyond the last date of employment, not claims which have arisen in the currency of the employment relationship and the coverage then provided.

This issue was considered by the Ontario Court of Appeal in its 2018 decision. ² It was concluded that the claim was allowed to proceed, even given that it was initiated following his resignation, yet due to a traumatic event which occurred during his employment with Pitney-Bowes.

A person who has been terminated, presuming no cause, may claim for the value of lost disability benefits against the employer, provided that the commencement date of the disability is within the common law notice period. ³This claim is not limited to the notice period but for the duration of the disability period.

Using this principle, in 1992, the British Columbia Supreme Court awarded Mr. Prince the value of his lost disability benefits which he would have received had he been provided reasonable notice. Such a claim is not limited to the notice period. A person who is terminated on short or no notice and then suffers a medical calamity while uninsured may sue the employer for the full loss of disability benefits, pension accruals and similar benefits typically paid to a disabled employee until age 65. ⁴

The late Justice Randall Echlin came to the same conclusion in his February 2011 decision, ⁵ awarding the plaintiff the value of lost disability benefits due to his illness which fell due in the common law notice period. The Court of Appeal upheld this award.

The issue of mitigation by the purchase of an alternate policy of disability insurance typically does not arise in such a claim as a terminated employee has no income to insure.

The employer is the owner of the group policy and may cancel coverage as it desires, at least in relationship to the insurer. The insurer has the same right in the event of default by the employer. With respect to the bilateral contract, the insured beneficiaries are given no mandated right of notice of termination.

Termination of coverage may arguably give rise to an action against the employer but this will allow only a claim for damages suffered due to lack of insurance against an employer which may well be insolvent. In addition, where the latter is not a factor, there could be a claim for consequential loss due to the inability of the employee to obtain alternate insurance coverage due to what may have then become a pre-existing disability.

Most insurance acts ⁶provide modest relief in this circumstance by allowing existing claims against the insurer to continue. Recurrent claims are generally allowed for the policy period or 90 days whichever is the more attractive to the insured.  Ontario’s Insurance Act, as amended in July 2016, revised the time period of a recurrent claim to 6 months or the policy term, whichever is the greater. This is similar to the statutory terms and conditions for “accident and sickness” policies in all jurisdictions.

Most statutes deal with the rights of the insured in a replacement policy, provided that the replacement contract is entered into within a fixed number of days, usually 31 days, of the former policy. The intent is to provide a continuum of coverage in such circumstance. ⁷

The group insurer maintains the right to cancel the policy for non-payment of premiums. Most statutes set a number of days for notice of default such as 10 days where the initial premium or the renewal premium is not paid. This is similar for all Canadian jurisdictions, again for “accident and sickness” insurance. ⁸

There is no mobility aspect which may allow the insured to continue coverage with the same insurer without medical underwriting on termination of group disability insurance. A person with a medical history will likely be unable to buy private coverage or be highly rated.

Group disability insurance remains the last refuge of the masses. It is not portable and readily terminated without even the knowledge of the insured parties.

Life insurance is generally convertible to a privately paid plan with the same insurer without medical underwriting on termination of employment, although premiums are set to reflect the age of the insured. There is no logical impediment to not including disability insurance with the same mobility feature.

The employee should be allowed by statute the right of continuity of disability insurance. The cessation of coverage will mean the individual is subject to new “underwriting” in one manner or another and risks the possibility of no coverage at all upon new employment. Insurance which is tied to employment is fragile and the risks on non-coverage are well beyond the control of the party which needs it the most.

The ideal solution, of course, is private disability coverage which does not subject the insured to these concerns.