Generally

Benefit coverages are unusual as certain benefits are not replaceable. Disability insurance covers are the prime example as it is typically not possible to purchase disability insurance while unemployed. If alternate employment has been found, the cost of alternate cover would be likely required and also compensable as a damage claim incurred to mitigate.

Similarly, pension plans cannot be purchased without employment.

Other benefits such as drug insurance and similar topics can be purchased and again the same reasoning will follow.

Life Insurance

Life insurance is the significant benefit coverage which is important on termination as, unlike other benefit issues, life insurance is typically convertible to alternate privately paid coverage and, most critically, without the need to pass underwriting. The time limit for this conversion right varies by policy, although it is typically 30 or 60 days from termination.

Where the employer has notified the employee of this conversion option, it is clear that the employee has the obligation to do so and the employee, or perhaps regrettably, more precisely, his estate will have no claim upon the failure to exercise this right.

In EE v ER, the plaintiff was advised of the date of conversion on termination. As it happened, the date was incorrect but was of no prejudice to his rights. The plaintiff took no steps to convert within the conversion period and then subsequently lost his mental capacity. The facts showed that he had six weeks within which he could have converted, did nothing, but then had two weeks in which the option remained open, within which he was incapable for making the decision. The claim for the insurance proceeds failed due to lack of proper mitigation.

To the same end is the Ontario Supreme Court decision in Thom Estate v Goodhost foods ¹ in which the employee was correctly told of the right to convert insurance following his termination and committed suicide beyond the conversion period, yet within the common law period. No claim was allowed on the same principle.

Arguments made be made that where the statute requires benefits continuation for the statutory notice period, as is the law in Ontario, such must include the status quo of life insurance coverage, regardless of the policy terms and indeed, all other insurance covers.

This analysis presumes that the employer has advised the departed employee of the right of conversion. It is possible to advance a claim in negligence where this has not been done.

Such was the liability finding in favour of the plaintiff of the Ontario court in July of 1989 [ efn_note] Card Estate v John A. Robertson Mechanical Contractors (1985) Ltd, (1989) 26 CCEL 294, not on Canlii but referenced in EE v ER [/efn_note] in which the employer failed to advise the employee that he had insurance coverage, never mind the right of conversion.

A similar issue arose in Grams v Maple Leaf Industries, a decision of the Queen’s Bench of Alberta in February of 2006.

Cory Grams died while employed at the business premises of Maple Leaf in Edmonton on February 24, 1999. The details of the employment and benefits eligibility were important as he had missed certain deadline dates for applying. In essence, his estate sued alleging that the details of the deadline dates and the significance of these dates were not explained properly to their son. The court found in negligence against the employer and found against the son to apportion liability equally because of his own failure to mitigate or in negligence language, was contributorily negligent.

Cory had begun full time employment on July 7, 1998 as a steel sorter. He was then eligible for group benefits coverage 90 days after this date. The policy required the employee to apply within 31 days from the date of eligibility. Applications after this date would be subject to underwriting approval.

Cory was hence first eligible to be covered on October 7, 1998. The application for benefits was not submitted until February 23, 1999, thereby missing the waiver of underwriting period. He died in an industrial accident the following day.

The court found a duty of care upon the employer to show reasonable care with respect to the administration of the plan which included the duty to provide information to the employee of applicable dates for applying and the consequences of not doing so.

The trial judge found that the employer did not provide to Cory sufficient information about the benefit plan when he was hired. Cory was given an information booklet in the fall of 1998 which did not set out the relevant dates. The court further found that Cory’s failure to make inquiries as to the working of the benefit plan until February 23 was negligent on his part.

The same analysis was used to determine the alternative claim in contract on the same basis.

A similar finding was made in the Ontario Supreme Court decision of Tarailo v Allied Chemical of Justice R. E. Holland. The plaintiff suffered from a serious mental illness. Following a series of events by which the employer concluded he was not performing, he was terminated. On the same date, the employee submitted his resignation which was accepted. Three years later, he sued claiming an entitlement to disability benefits. The claim by the terms of the policy was due within 12 months and 90 days from the date benefits became payable.

The claim for wrongful dismissal was denied by the trial judge, yet the disability benefits claim succeeded. The trial judge found that the employer was an agent of the insurer and responsible with the insurer for the claim and that the employer was aware of the disability. ²

The issue of a claim against the employer in negligence, notwithstanding the above cases, is controversial, as is reviewed here.