In a recent decision, the Court of Appeal affirmed that while a Long Term Disability Insurer’s duty of good faith generally includes the duty to act promptly, fairly, and disclose the contents of the policy to their Insured, it does not require the Insurer to take steps to advise their Insured of statutory limitation periods that are exist outside of those within the policy. The decision is Usanovic v. Penncorp Life Insurance Company (La Capitale Financial Security Insurance Company), 2017 ONCA 395.
We previously discussed the details of the summary judgment decision in our post, “LTD Carriers Embrace Hryniak.” At first instance, the Plaintiff argued that because the Insurer never advised him of the statutory two year limitation period, it had breached its duty of good faith and the limitation clock only began to run when the claim was discovered. Justice Broad disagreed and found that there was no duty on the Insurer to advise the Plaintiff of the statutory limitation period and the claim was discovered upon receipt of the termination letter. The Plaintiff appealed. On appeal the Plaintiff focused solely on whether the Insurer’s common law duty of good faith included the duty to advise the Plaintiff of the 2 year limitation period in its termination letter.
The Court of Appeal upheld Broad J.’s decision and provided helpful guidance for LTD insurers. Notably, the Court of Appeal drew a distinction between the duty of good faith in the context of Accident Benefits and LTD Benefits. The Plaintiff attempted to argue that because the Supreme Court of Canada in Smith v. Co-operators General Insurance Co.,  2 S.C.R. 129, had found that Insurer’s in the Accident Benefits context were required to provide their Insured with the relevant time limits that governed the process, a similar duty should apply in the LTD context. Both benefit schemes bear significant similarities as both are first party Insurers, with similar tests for income replacement based on disability. However, the Court of Appeal found that the source of the Accident Benefits Insurer’s duty to advise of the time limits arose from the complex legislative framework that governed them and not the common law. There was no equivalent statutory provision governing LTD Insurers.
The Court found that the Plaintiff was asking the Court impose something beyond the LTD Insurer’s common law duty to disclose the contents of the insurance policy and to go a step further and disclose information outside the policy. The Court noted that no Canadian court had gone so far and in the jurisdictions that require Insurers to disclose limitation periods this obligation had been put in place by the Legislature. Accordingly, the Court commented that while it might be advisable from a practical standpoint to inform an Insured of the statutory limitation period, the role of making this a legal obligation was that of the government of the day, and not the Courts.
Notably, as of July 1, 2016, amendments to the Insurance Act R.S.O. 1990 c. I.8 came into force and requires that all LTD insurers to include the following statement in the policy and certificate:
Every action or proceeding against an insurer for the recovery of insurance money payable under the contract is absolutely barred unless commenced within the time set out in the Limitations Act, 2002.
Overall, this decision is a welcomed one for LTD insurers. The Court has made it clear that the expansion of an Insurer’s duty of good faith beyond the established case law is the responsibility of the Legislature and not the Courts. Although there are significant similarities between Accident Benefits and Long Term Disability claims, the statutory framework is the source of significant differences in the proper termination and handling of benefits. The Court has provided clarity that in the Long Term Disability context, the Insurer’s duty of good faith has not been extended to require informing the claimant of information outside the four corners of the policy. With the amendments to the Insurance Act, the provision of the policy to an Insured will satisfy their good faith obligation to provide information and provide a strong basis for any limitations argument an Insurer may want to raise against out of time claims.