Clark Wilson LLP Insurance Bulletin
Case Law Review Archive
A CLEAR AND UNEQUIVOCAL DENIAL OF BENEFITS TRUMPS A SYMPATHETIC PLAINTIFF:
In Falk v. The Manufacturers Life Insurance Company 2008 BCSC 173 the Plaintiff sued the Defendant to recover disability benefits under a group benefits policy issued through his employer, Western Forest Products. Manufacturers applied to dismiss the claim on the grounds that it had not been commenced within the time limit mandated by s. 22 (1) of the Insurance Act namely, “within one year after the furnishing of reasonably sufficient proof of a loss or a claim under the contract, and not after”.
The 24 year old Plaintiff commenced work with Western Forest Products on January 22, 2004 and coverage with Manufacturers commenced March 6, 2004. On March 31, 2004 the Plaintiff ceased work and claimed for disability benefits producing a doctor’s diagnosis of vertigo and anxiety. The sequence of events which followed is:
By way of letter on October 19, 2004 Manufacturers advised the Plaintiff that his disability claim was approved to October 30, 2004.
On November 30, 2004 the Plaintiff was advised that he was approved for benefits to December 4, 2004 but that there was insufficient medical evidence to support a continued absence from work. This letter went onto state that “Therefore your file has now been closed”.
The Plaintiff wrote on December 28, 2004 providing more information and asking them to reconsider.
From January through August 2005 the matter was internally reviewed twice by two disability specialist as well as sent to the Senior Appeals Committee. At each level the Plaintiff was found not to have provided sufficient proof of total disability and the decision to close the claim was upheld.
On September 25, 2006 the Plaintiff’s counsel sent a demand letter to Manufacturers who responded on September 28, 2006 stating that the information provided was “insufficient for us to change our previous decisions therefore, we will not be reinstating benefits”.
The Action was commenced on May 1, 2007.
Madam Justice Humphries noted that “(m)any courts have grappled with the unsatisfactory language in s. 22 (1) of the Act, and having failed to convince the legislature to change it despite much judicial urging, the courts have redefined the triggering event to be a ‘clear and unequivocal’ denial of benefits”.
Plaintiff’s counsel argued that the “clear and unequivocal” denial of benefits was September 28, 2006 as at no time had the Plaintiff ever been told that he could never get any more benefits or that he was not considered disabled rather all that Manufacturers had said was that the information on file was insufficient. Counsel for Manufacturers argued that the advice to the Plaintiff that his file was “closed” constituted an “clear and unequivocal” denial of benefits.
Madam Justice Humphries referred to the Court of Appeal decisions of Esau v. Co-operators Life Insurance Company 2006 BCCA 249 and Pekarek v. Manufacturers Life Insurance Co. 2006 BCCA 250 which held that advising that an insured’s file is to be “closed” constituted a clear and unequivocal denial of benefits which triggers the limitation period. She also noted that the cases also established that the running of an internal appeal process does not extend the limitation period and quoted the following passage from the trial reasons of Esau, supra (upheld on Appeal):
There is no obligation on the part of the insurer to state in positive terms that it will rely on the limitation period. The insured, seeking to rely on an estoppel, must prove that the insurer said, by words or conduct, that it would not rely on the limitation period.
In my opinion, entertaining an appeal does not constitute an unambiguous representation that the insurer will not rely on the limitation period. There is nothing preventing the appeal process from continuing while the limitation period is running.
Madam Justice Humphries ultimately held the legal test for the triggering of the commencement of the limitation period is clear, namely, a clear and unequivocal denial of coverage. She also noted that the factual issues that must be determined by the trial judge are also clear as:
“is a question of fact whether a particular communication from an insurance company is a clear and unequivocal denial. It is also a question of fact whether the insured understood the notice of termination and understood that she or he was involved in an appeal process. It is also a question of fact whether the insurer, by words or conduct, communicated that it would not rely upon the limitation period.” [para. 54]
In making such a factual determination Madam Justice Humphries held that:
[57] In the case at bar, the insurer told the plaintiff the file was closed. The plaintiff argues that the letters never said “we have concluded that you are not disabled’, but through his corresponded, he showed he clearly understood his file was closed and that he was involved in an appeal process. There can be no other inference than that he understood that the defendant had decided he was not disabled, had closed his file, and his only remedy was to appeal that decision.
While Madam Justice Humphries ultimately dismissed the claim she commented that there was a “basic unfairness” in not requiring an insurer to advise the insured that the limitation period was running but that she was “compelled” to accept the law as set out above. She also commented on the “apparent inconsistency” which arises when an insurer advises the insured that their file is “closed” yet continue to send and receive correspondence regarding entitlement to disability benefits. However, despite this unfairness and inconsistency, on the case authority, which now includes Falk, it is clear that insurers do not have an obligation to advise that the limitation period is running even if they continue to engage in an appeal dialogue with the insured. Further, this dialogue specifically does not render a previous denial equivocal.
While being bound by case authority to dismiss the claim Madam Justice Humphries none the less demonstrated some sympathy for the Plaintiff as in awarding costs she held that the Defendants was entitled to costs “if it chooses to demand them”.
This case provides a nice summary of the law in regards to limitation periods under disability policies. The reasons for judgement can be found at: www.courts.gov.bc.ca/jdb-txt/sc/08/01/2008bcsc0173.htm.
If you have any questions about the decision or any other insurance matter, please contact Krista Prockiw (telephone 604-643-3105 e-mail kxp@cwilson.com) or any other member of the Clark Wilson LLP Insurance Practice Group.
