In the absence of a specific provision in the policy to the contrary, an insured is not required to prove that, but for the disability, he would have been gainfully employed through the period of the disability. This is an important issue in the interpretation of the disability policy.
A person covered and eligible for disability payments on January 15, who was otherwise scheduled to be terminated for cause or otherwise on January 16, remains entitled to his disability benefits for the duration of his medical eligibility.
Similarly, an employee who had made plans to retire one day following the onset of a disability is not denied his full disability entitlement. Likewise, an employee who has given advance working notice and suffers a medical calamity prior to the effective date of his resignation remains entitled to the full coverage of the policy.
The 1991 decision of the B.C. Supreme Court considered a similar application of this principle. 1
The plaintiff suffered an undisputed total disability, for which she was paid disability benefits, apart from the time when the plaintiff was a guest of Her Majesty, having been convicted for the murder of her husband. The conviction had been later amended to manslaughter following a second trial.
No policy terms allowed for such a holiday from benefits for the insurer. The argument advanced was that the insured was required to prove a pecuniary loss, argued to be an essential feature of a contract of indemnity.
Certain case law supported the theory that a court would consider the extent to which the policy required proof of actual pecuniary loss to be held to be an indemnity policy, as opposed to the converse.
The court noted that within the class of policies identified as being of the genre of indemnity, there has been a “wide range of variations in the extent to which proof of loss is required”. The issue of what deductions are made from the insured sum and in what circumstances double recovery is allowed, are all factors assessed by the court in determining if the policy is one of indemnity or not.
The court stated that under a policy of disability, the insured is not required to establish a specific pecuniary loss for each month of the claim. In this policy, proof of loss was required to be shown at the outset to fix the amount of insurance which was payable. The court held that if the insurer wished such protection as was argued, the policy should have done so explicitly.
A similar result followed in a case before the Manitoba Court of Appeal in which the plaintiff sued for disability benefits following a car accident. He had recovered Section “B” disability benefits for a period of six months, while incarcerated for 11 months for the criminal convictions of breaking and entering and theft. 2
The trial judge denied the claim. The Court of Appeal reversed, awarding the plaintiff disability benefits “as long as the plaintiff remains totally disabled in accordance with the terms of the aforesaid regulation”.
The appellant argued that the insured’s participation in a criminal act should disentitle him to the benefit “as a matter of public policy”. To this issue Philp J.A., spoke as follows at p. 105:
But the principle of public policy is directed to the invalidating of certain contracts, including those whose objects are criminal in nature. The principle does not apply to deprive a party of his contractual rights because of his bad character or even criminal conduct that is unrelated to the contract.
This being said, frequently the policy will specifically deny the insured benefits while they are incarcerated in a penal institution.
A similar refrain, in a much more sympathetic context, was evident in a 1984 decision of the Ontario Supreme Court 3 in which a 16 year old student, who had started a summer job, intending to return to school in the fall, was severely injured, becoming a quadriplegic. The insurer argued, unsuccessfully, that its liability was limited to the expected period of his employment. The claim was allowed for the full extent of the disability.