Introduction

This section reviews the issue of the requirement of the insured to present his claim on a timely basis and also the question of the limitation period, which remains regrettably complicated, particularly in Ontario, notwithstanding legislative amendments. The new Ontario legislation is not retroactive which has created serious complications. A firm understanding of this issue is essential to avoid missing limitation periods.

It is the commonly mistaken view that disability claims are subject to a “rolling limitation” period which will allow for a claim to proceed notwithstanding that the apparent limitation period has lapsed. Often this argument does not apply. Plaintiff’s counsel must be alive to this issue.

In addition, present case law has concluded that such a concept is not applicable to the revised limitations statutes. Even if the rolling limitation is applicable, the manner in which this claim is proven is not straightforward. This is a complicated subject and an important one to be properly understood.

This question also arises as to whether an employer as an ASO provider is to be considered as an insurer or provider of benefits by private contract, as discussed immediately below. The result is surprising. The impact of this issue is more important historically as all claims are now governed by the same limitation period.

ASO – The Employer as the Insurer

The 2012 decision of the Supreme Court of B.C ¹ provides a good example of the perils that befall the litigant due to the lack of clarity of the law on this subject.

The issue was whether the employer in providing disability benefits by means of ASO ²was an insurer, in which case the shorter limitation period of the Insurance Act would apply, or an employer and governed by the then six year limitation period. The court found that the ASO was insurance and the employer was an insurer, and hence dismissed the action.

This decision is nonsensical, yet other courts have come to the same conclusion in differing contexts. The employer would be startled to know that it is now required to register as an insurer and meet all the reporting and capital requirements mandated by the Insurance Act. The employer should have been estopped from making this plea due to the argument of prejudicial reliance upon its failure of it to register an insurer.

Presenting the Claim

The requirements of submitting the claim differ dependent upon whether the policy is one which is a “disability” or “accident and sickness”.

A "disability" claim is a one tied to a life insurance contract. An "accident and sickness" claim is one which is not. The distinction between “disability” and “accident and sickness” policies regrettably remain important.

Disability Claim

A “disability” claim is generally not subject to a time limit within which the insurer must be notified of the claim. The relevant time issue is usually that the insurer is required to pay the claim within 30 days of its receipt of sufficient evidence.

“Disability” claims are structured really as a one-time payment, which is not appropriate for periodic disability payments. Disability claims should not be tied to the life insurance section of the relevant statute. There is no set time period to submit the claim, which may make sense on a death claim when the evidence is generally fairly conclusive.

For a periodic disability claim, where timely evidence is important, this process makes no sense.³

Accident & Sickness

“Accident and sickness” claims are governed by statutory conditions, applicable only to individual and not group policies, which state that the insured must follow a two-step process, the first being the delivery of the written notice of the claim.

The proof of the claim must then be submitted within 90 days of the event giving rise to the claim, as required by the statutory condition. There is an exemption from meeting the deadline for the submission, subject to the evidence as to the reason for the delay.

Accident & Sickness Group

Group policies are not subject to this statutory condition, but the policies typically have similar wording as in the case of individual accident and sickness statutory conditions.

Labryinthine Statutory Scheme

In a 2006 decision of the B.C. Court of Appeal, Madam Justice Levine, in her concurring reasons, set out the need for legislative reform in this subject:⁴

The confusion that results from the “labyrinthine” statutory scheme and the lack of information about limitation periods is compounded by the insurers’ ongoing references in their correspondence to appeals and time limits to submit additional information. …

…It is clear that insurers have no intention of voluntarily following judicial recommendations that they provide clear information about the effect of their denial of coverage. As my colleague points out, that is understandable, given the confusion arising from inconsistencies between statutory and contractual limitation periods and from the statutory scheme.

So I make yet another judicial plea for the Legislature to act to relieve consumers, insurers, and the courts from this untenable situation in which disabled persons are experiencing the stress of technical legal battles rather than the peace of mind their disability insurance is intended to provide.

The General Trend to Two Years to Sue

As noted in the above passage, the issue of the limitation period to sue for disability benefits has historically been far too complicated. The present momentum in Canadian jurisdictions is to legislate amendments to change the insurance limitation period to two years from the date of the discoverability of the breach. There is also always a cap in place as to the absolute number of years which is usually set at fifteen from the act or omission which gave rise to the claim.

Such revisions have been made in British Columbia and Alberta as of July 1, 2012, and Ontario as of January 1, 2004, Manitoba as of March 1, 2015, Nova Scotia and New Brunswick. Saskatchewan has also amended its law. The substantive law is the same in each jurisdiction allowing for a limitation period which is two years from discoverability.

Interesting but not relevant - FYI only

Ontario’s Limitations Act contains a provision which allows a limitation period to be varied or excluded by a “business agreement” post  October 19, 2006, which is defined to be one in which none of the parties is a “consumer” as an individual acting for personal, family or household purposes and does not include a person who is acting for business purposes.

The argument that a group policy of disability insurance was captured by this definition was considered by the Ontario Court of Appeal in Kassburg v Sun Life Assurance The decision was obiter as the fundamental issue was decided against the insurer in any event.

The Court concluded that such a group policy was not within the definition as it was one for personal purposes and further the definition “parties” must be read in the context of a broader purposive intent.

Protective Statutory Provisions

B.C. Alberta, Manitoba and Saskatchewan have also required the insurer to advise the claimant of the limitation date upon receiving the notice of the claim, when the claimant is not represented by legal counsel. Alberta does so by the Fair Practices Act. Failure to do so will allow an application for an extension of the limitation period. The specifics vary but generally there is a mandated notice requirement from the insurer to the insured, when not represented by counsel, between 60 to 120 days prior to the expiry of the limitation period.

In B.C., Alberta and Saskatchewan there is also in place a dispute resolution process which applies to all contracts which contain a provision providing for dispute resolution.

Eliminating the "Disability" vs "Accident & Sickness" Distinction

Generally when the statute has been revised, the distinction between “accident and sickness” insurance and “disability” insurance has been eliminated for the purpose of setting the limitation period, although this is not a universal truth.

Newfoundland passed the Accident and Sickness Insurance Act which requires the insurance proceeds to be paid within 60 days of receipt of the proof of claim and any action be commenced within 12 months of the date of default.

Newfoundland, however, maintains the distinction between “accident and sickness” insurance and life insurance which provides a disability benefit. The above limitation period applies only to “accident and sickness” insurance. “Disability” insurance is governed by the Life Insurance Act, to which applies the Limitations Act and the general rule of two years discoverability.

Nunavut sets the time period as 2 years, which may be extended by the policy, which is the same as the NWT.

The NWT Insurance Act with respect to a “disability” policy requires notice of the claim first be given, 30 days after which the proceeds are to be paid. Any action must then be commenced within 2 years or 6 years from the insured event, whichever comes first. An action for “accident and sickness” benefits must be commenced within 2 years from the date funds were payable. Notice must first be given within 30 days of the sickness and medical evidence within 90 days from the date of the event. Funds are due within 60 days following receipt of the proof of the claim. Nunavut has not passed differing legislation and hence its statute is deemed to be the same as NWT.

The legislation of the Yukon is the same.

P.E.I. has also not revised its Act. It also requires 60 days’ notice and a limitation of one year, or as determined by the contract.

It is a live issue as to whether the “rolling limitation” period will apply to the new discoverability concept applied in the amended limitation periods. The only decided case on the subject has denied its application. This is considered below.

Transition Rules

Even more troubling is the common misbelief in Ontario that the limitation period is now set at 2 years from the date of discoverability. That is not the case for policies in existence prior to January 1, 2004, a number which is likely decreasing, given the passing of time, yet this may still apply to many policies.

Broadly Speaking

Generally the new limitation periods, with the exception of Ontario, will apply to policies in force prior to their respective enactment. Premium rates are adjusted to be lower the earlier the policy had been commenced and also the continuation of the existing policy avoids the need for fresh underwriting approval. For these reasons disability policies, particularly when they are individual and are a component of a life insurance policy, tend to be of a long term duration.

With the exception of Ontario, the application of former limitation period is based on when the claim has been discovered, whether this be prior to or after the effective date of the new statute.

Ontario

Ontario’s amended legislation allows for the continuation of the former limitation rules for certain pre-2004 policies, as noted immediately below.

Ontario’s Insurance Act also still makes an important distinction between “disability” policies which accompany a policy of life insurance and those which have no such connection. The former are governed by Part V and the latter by Part VII of the Insurance Act.

While the operative Insurance Acts in all provinces made the same distinction, this difference remains particularly significant for limitation periods pre-2004 in Ontario.

Prior to legislative reform, limitation periods for a disability claim, group or individual, were set out in the Insurance Act in two different sections. Each of these provisions contained a one year limitation period. However, there was and hence remains an important difference as to when the time clock starts for these two different types of policies.

In determining whether a pre-2004 contract has shortened the statutory limitation period, regard should be had to the Ontario Court of Appeal decision ⁵ in which the Court stated that such provision of the policy must do so in “clear language”, and identify the scope of its application and exclude the operation of other limitation periods.

Where a life insurance policy also contained “disability” coverage, the time clock to issue the “disability” claim ran ⁶from the date the application for payment was first submitted. ⁷

Part V arguably favoured the insured as the clock did not start until the claim had been submitted. This section, however, has been interpreted to deny the rolling limitation argument.

In all individual policies of accident and sickness coverage, the limitation clock began to run from the date the benefit became payable.⁸

Where the wording of the limitation period is set by the policy, as often is the case with group policies made prior to January 1, 2004, there may be an issue as to the interpretation of when the time period has commenced.

An argument may be advanced that the time clock begins when the elimination period has expired. Such was so decided in 1972 by the Supreme Court of Canada. ⁹

Under the transitional rules, the new Ontario legislation states the new rules apply will apply notwithstanding any agreement to exclude them; however, any agreement made before the legislation was enacted will survive. This will apply to any policy of insurance issued before January 1, 2004.

Under the former statute, the parties could by contract determine the proscriptive period, as the statute did not forbid such a practice. Hence if the policy was issued prior to January 1, 2004 and by its terms, created a limitation period, that term in the policy will prevail.

Under the Insurance Act, certain conditions were incorporated into certain policies by the statute. Even if the statutory conditions were later repealed, such conditions were part of the initial contract when it was issued.

A pre-2004 Part VII individual policy ¹⁰will be expected to be still subject to this condition and its limitation period of 12 months. Caution should be taken in dealing with an individual pre-2004 policy as very likely it will be subject to a 12 month as opposed to 24 month limitation period.

Finally to Group Accident & Sickness

With respect to a group accident and sickness contract, to which the statutory condition does not apply, most policies contained a provision requiring an action be commenced within set time periods. It may be possible that such contracts were created prior to January 1, 2004 and hence such term will prevail over the amended Limitations Act. It is hence very important to determine when the policy of insurance was first created. It should never be assumed that the “new” January 1, 2004 Limitations Act period applies.

Some policies mandate that a claim be issued within one year after insurance money was payable; other policies state the action must be commenced within one year after the cause of action arose.

If the group policy contains no time period within which to sue, the time period is that set by the prior Limitations Act, which for prior to January 1, 2004 was 6 years.

The Court of Appeal ¹¹in a decision in December of 2011, confirmed that the limitation period in policies issued prior to January 1, 2004 will not be bound by the amended Limitation Act and hence a prior policy term which was at variance to the then newly legislated time periods set by the Insurance Act will prevail.