ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ANTONIO ROJAS
Plaintiff
- and -
MANUFACTURERS LIFE INSURANCE COMPANY
Defendant
Christian J. Guerette & Jay Rajagopalan,
for the respondent/plaintiff
Alexi N. Wood, for the appellant, Unilever Inc.
HEARD: December 12, 2014
F.L. Myers J.
REASONS FOR decision
Background
[1] The appellant, Unilever Inc., appeals from the decision of Master Muir dated July 17, 2014 adding the appellant as a party to this action and amending the statement of claim accordingly. For the reasons that follow, the appeal must be allowed and the order below set aside.
[2] The Master answered the question that was put to him. As explained below, however, he was not asked the correct question and, as a result, the answer provided cannot stand.
The Facts
[3] In 1977, the plaintiff, Antonio Rojas, became an employee of the appellant, Unilever Canada Inc. At first he worked as an industrial cleaner. Later, he became a food processor. In 2008, Mr. Rojas became disabled as a result of numerous physical and mental health issues. Mr. Rojas was paid short term disability benefits for the first six months of his illness in accordance with the employer’s benefits plans. Mr. Rojas claimed and was paid long term disability benefits for two years. The benefits were paid by the defendant, The Manufacturers Life Insurance Company, under an insurance policy purchased by Unilever under its benefits policies.
[4] On November 12, 2010, Manulife determined that the plaintiff was not eligible for continued benefits under its insurance policy. It informed Mr. Rojas and stopped paying him. Mr. Rojas has been without benefits ever since that time.
The Plaintiff’s Claim
[5] By statement of claim issued October 24, 2012, Mr. Rojas sued Manulife. The claim is for breach of the insurance contract. In addition, the plaintiff claims for negligence in the administration of the insurance contract.
[6] While concurrent torts may be pled with a breach of contract, the particulars of negligence relied upon by the plaintiff are essentially the grounds relied upon by the plaintiff to argue that Manulife breached the insurance contact when it stopped paying benefits to the plaintiff. The result of these allegations, if proven, would be completely coincident with the enforcement of the insurance policy itself. The tort is not separate or independent in any sense from the breaches of contract alleged.
[7] The evidence of the plaintiff’s lawyer is that in February 2013, Manulife advised him that its insurance policy only covers employees for three years. Thereafter, “long-term disability benefits are insured by Unilever Canada Inc. and administered by Manulife”. This was an incorrect statement that seems to have led the other parties down an errant path.
The Motion Below
[8] As a result of the advice received from Manulife, the plaintiff brought a motion in July, 2013, seeking to amend his claim to add Unilever as a party defendant. The draft amended statement of claim claimed the following relief against Unilever:
(a) Payment of all disability benefits due and owing from the date(s) of the breach of contract, until the date of trial;
(b) An Order declaring that the Plaintiff is entitled to recover from [Unilever] monthly disability benefits in a monthly sum from the date(s) of denial and/or date(s) of the various breach(es) of contract and continuing as a monthly rate for such period as the Plaintiff has met and/or meets, as a result of illness, injury or disability, the policy tests as stated in the policy mentioned herein for all relevant policy periods as stated therein, from the date of denial to present and ongoing;
(c) Payments due from [Unilever]to the Plaintiff as hereinafter set out;
(d) An accounting of all benefits paid under the policy discussed herein by [Unilever] to the Plaintiff;
[Emphasis added]
[9] The draft amended claim sets out the Manulife insurance policy in paragraph 5. Paragraph 6 of the draft amended statement of claim reads as follows:
- The long-term disability benefits under this policy are insured by Manulife for its first three years. Thereafter, the Defendant Unilever is the insurer. However, the policy is still administered by Manulife.
[10] The draft amended claim jumbles the relationships. The prayer for relief seems to claim from Unilever under the policy of insurance provided by Manulife. The claim then goes on to add Unilever’s name to all of the allegations of negligent administration of the insurance contract that were already made against Manulife. Paragraph 6 of the draft amended statement of claim set out above, seems to assert that there is one long policy of insurance with the insurer changing from Manulife to Unilever after 3 years.
[11] But Unilever never was and is not an insurer. It is the plaintiff’s employer.
The Plaintiff’s Workplace was Unionized
[12] The plaintiff was a member of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union and its Local Union 264. The Union is the collective bargaining agent for the plaintiff and other employees at Unilever’s Orenda Road plant in Brampton. The Union and Unilever had entered into a collective bargaining agreement that applied at the time that the plaintiff became disabled. In article 21.01(b), the CBA provided that eligible employees will be covered for benefits including “Long Term Disability – 70% or [sic] pre-disability base pay for eligible disabled beyond twenty-six (26) weeks”.
[13] CBA expired in 2010 and was replaced with a new one. The new CBA, that remains in force until 2015, has an amended article 21.01(b) that provides, in part, “All eligible employees will be covered by the Unilever Flexible Benefits Program except as set out below”. Unfortunately, the Unilever Flexible Benefits Program is not in evidence. Nor was there argument over whether the plaintiff’s rights fall to be decided under the CBA that was in force when he became disabled or the CBA in force when Manulife cut off his benefits. What is of significance however is that neither CBA makes any reference to Manulife or to any policy for insurance whatsoever.
[14] When met with the plaintiff’s motion to amend his claim, counsel for Unilever first asserted that the plaintiff was not entitled to sue it and that his claims, if any, had to proceed by way of arbitration under the CBA then in force. The plaintiff’s counsel disagreed and noted that Manulife is not subject to the CBA among other issues.
The Parties’ Arguments
[15] While I do not have the parties’ facta from the motion below, it is apparent from the affidavits, the Master’s brief Endorsement, and the arguments before me, that the motion was argued principally on issues concerning expiry of limitation periods. Unilever argued that it was too late for the plaintiff to sue it under Manulife’s insurance policy because Manulife terminated benefits in October, 2010 and the motion was not brought until July, 2013 at the earliest. Unilever then argued that it could not be sued under its own insurance because Manulife’s determinations under its policy also bound Unilever and that, in any event, the draft amended statement of claim does not make reference to Unilever’s subsequent insurance in any event. There were references to the CBA, but largely as an afterthought or to respond to the plaintiff’s allegations that a single lawsuit was required to avoid issues of inconsistent verdicts if Unilever is sued or arbitrated against in different proceedings.
[16] The parties before me agreed upon a very helpful timeline document that was provided by Unilever’s counsel. It differentiated among the first six months of STD coverage; the next three years under Manulife’s LTD insurance policy; and then the future under Unilever’s policy administered by Manulife. The time periods are correctly identified and do mark relevant differentiations – just not the ones noted by the parties.
The Master’s Endorsement
[17] The Master considered the facts and arguments and held as follows:
There was no breach of contract by Unilever in the fall of 2010 when benefits were terminated because it was not responsible for paying any portion of those benefits. There could be no breach on the part of Unilever until it was responsible for making those payments which was the fall of 2011. The plaintiff’s Notice of Motion was served in July 2013, before the expiry of the limitation period.
It is also my view that Unilever is a necessary and proper party as it will be responsible for payment of any LTD benefits the court may decide are owing to the plaintiff after the fall of 2011. It is therefore important that Unilever be bound by any judgment the court may make in that respect as it would avoid the necessity of a further proceeding to enforce payment from Unilever should it choose not to pay. This action is at a very early stage. Pleadings have not yet closed. There will be no prejudice to Unilever. Of course Unilever can avoid much of the time and expense associated with this action if it chooses to agree to be bound by any settlement or judgment. However that is entirely up to Unilever.
Finally, I should note the Unilever does not oppose this motion on the basis of the jurisdiction issue referring to the collective agreement although though [sic] there was some initial confusion on this point.
[18] If the Master was saying that Unilever could not be liable to the plaintiff under the Manulife policy of insurance, he was correct of course. However, that is not the same thing as saying that Unilever could not be found liable to the plaintiff for the failure to pay LTD benefits to him after Manulife cut him off. Unilever may well have contractual liability to pay LTD benefits to the plaintiff from the first day of his entitlement until he turns 65. There is, therefore, a significant limitation issue to be considered as well. I, therefore, turn to the analysis of the facts and law.
Analysis
General Principles
[19] The plaintiff is an employee of Unilever. The terms of his employment are found in a contract – the applicable CBA. Under the pre-2010 CBA, the plaintiff is entitled to be paid if he became disabled for more than 26 weeks. He is entitled to “Long Term Disability - 70% or [sic] pre-disability base pay for eligible disabled beyond twenty-six (26) weeks”.
[20] Unilever chose to insure its obligation to pay those benefits for the first three years of the plaintiff’s eligibility. The CBA did not apparently require it to obtain insurance. The CBA did not apparently promise the plaintiff that he would be covered by insurance. The plaintiff is apparently entitled to be paid by Unilever if he meets the eligibility requirements as are encompassed within that short quoted phrase from the CBA bolded in the immediately preceding paragraph.
[21] I repeatedly use the word “apparently” as I am not making any final determination of the meaning of the CBA or even which CBA applies. That is for someone else. If the plaintiff has a claim against Unilever for disability benefits, it must be asserted as a grievance by the Union under the CBA. Unilever’s initial position in response to the draft motion in July, 2013, was correct. The court lacks jurisdiction to hear that issue under the Rights of Labour Act, R.S.O. 1990, c.R.33.[^1]
[22] I respectfully agree with the view expressed by Morgan J. in Torres v. Navistar Canada, Inc., 2013 ONSC 4015,
- … The responsibility for paying disability benefits falls on Navistar as party to the Collective Agreement; Navistar and CAW did not agree to turn the benefit plan over to an arm’s length insurance company. The Plaintiff’s claim for disability benefits is directly against Navistar, and his entitlement must rise or fall with the adjudicator’s interpretation of the Collective Agreement. Outside of the Collective Agreement, there is simply no question of any entitlement to long term disability.
[23] It is not quite so simple, however, as to say that the plaintiff can only proceed against Unilever for LTD benefits by way of arbitration under a CBA. The law recognizes at least four categories of LTD benefit promises that an employer can make. The plaintiff’s rights can differ depending on what promise(s) the employer actually made. The four types of LTD promises were first proposed by authors Brown and Beatty in their text Canadian Labour Arbitration and were cited by Arbitrator Dean Stanley Beck in City of Toronto v. Toronto Civic Employees Union, CUPE Local 416, 1999 20410 (ONLA) at page 4. I summarize them as follows:
The CBA does not mention a benefits plan or an insurance policy;
The CBA provides for certain benefits;
The CBA provides that the employer shall pay premiums to put in place an LTD insurance contract in favour of the employees; and
The CBA incorporates specific plans or insurance policies.
[24] Where a CBA contains a Type 3 or a Type 4 promise – where the employer’s sole obligation is to pay premiums or to buy a specified insurance policy, then the plaintiff will have no rights to seek further benefits from the employer. The employer will fulfill its obligations by providing the insurance policy as promised and the employee’s rights will be limited to the insurance. City of Toronto, supra, at page 7 and 10.
[25] Where insurance is bought by the employer, the insurer provides a policy which is enforceable as a contract by the insurance beneficiary under common law and the Insurance Act R.S.O. 1990, c I.8. If an insurer breaches a policy of insurance, it can be sued in court. Labour arbitrators have no jurisdiction over disputes concerning the enforcement of an insurer’s obligations under an insurance contract or policy even one provided by an employer under a CBA. See: London Life Insurance Co. v. Dubreuil Brothers Employees Association, 2000 5757 (ON CA), [2000] O.J. No. 2609 (CA) at para. 31.
[26] What of an employer who self-insures? That phrase is a misnomer. Self-insurance is not insurance at all. Someone self-insures by not buying insurance. It is a phrase that just means that a person is willing to undertake a liability without obtaining insurance for that risk. Many insurance companies offer ASO contracts to people who self-insure (i.e. who do not have insurance). Under an ASO contract, an insurer provides “Administrative Services Only”. That is, it will receive, adjudicate, and pay claims for an employer (its customer), but the insurer is entitled to be reimbursed for the payments that it makes on behalf of the employer. It is not acting as an insurer at all. An ASO agreement is not an insurance policy. City of Toronto, supra, at page 10. The ASO contract provides no rights to the employees. It is just an agency agreement under which an insurance company helps the employer fulfill its contractual obligations to pay LTD benefits. The liability of an employer who self-insures is simply its liability to pay LTD benefits under the CBA. There is no insurance.
Application to the Facts of this Case
[27] It is clear that the draft amended statement of claim that was presented to the Master fundamentally confuses the parties and their roles. Whatever obligations there may be on Unilever flow from the CBA. Under the pre-2010 CBA, it appears that the LTD obligation is a Type 2 obligation. Unilever promised to pay a specific benefit to its employees. It did not promise to pay premiums or to buy insurance. Unilever chose to provide an insurance policy to meet its obligations. An arbitrator may decide if that was sufficient compliance by Unilever with its obligations under the CBA.
[28] The plaintiff has the rights of an insured against Manulife. Manulife made no promise to the plaintiff other than to fulfill its insurance commitment.
[29] Unilever does have an ASO agreement with Manulife under which Manulife will administer Unilever’s on-going LTD obligations after the three years. But Unilever is not then functioning as an insurer under an insurance policy. At that time, Unilever will simply remain liable for LTD benefits, as it was for the prior three years, but it will not have a third party insurance policy to pay some or all of its obligations. It will have to pay (or reimburse Manulife as ASO provider to be more accurate). But the obligation to pay benefits to the plaintiff is the same obligation to pay under the CBA. Unless the CBA is a Type 3 or Type 4 LTD promise, Unilever remains liable to the plaintiff for LTD benefits and it has been since the fall of 2008. City of Toronto, supra, at page 10.
[30] As there is but one obligation on Unilever, the date of the breach (if there was a breach) is the date that it failed to make payment to the plaintiff as required by the CBA. That may be the first day of payment of insurance benefits if the insurance policy was not coincident with the CBA obligation. It may be the date that the insurer cut off payments to the plaintiff. That, too, is for the arbitrator to decide (if the limitation period applies to grievances under CBAs).
[31] It follows that the plaintiff’s effort to add Unilever to the lawsuit was misguided. He cannot sue Unilever for benefits due under a CBA. Unilever is not liable as an insurer either under Manulife’s policy or under the ASO arrangement in which there is no insurance. The plaintiff can sue Manulife under the insurance policy as he has done.
[32] The plaintiff says that he should be entitled to sue Unilever in tort. As noted above, however, the negligence claims that the plaintiff proposes are coincident with the breaches of contract alleged. The “essential character of the dispute” is one under the CBA and therefore it cannot be brought in a lawsuit and must be brought under a labour arbitration. London Life, supra, at para. 30. See: Weber v. Ontario Hydro, [1995] 2 SCR 929, 1995 108 (SCC).
[33] The plaintiff relies upon a decision of Maranger J. in Connerty v. Coles, 2012 ONSC 2322 in which the court allowed an action by a unionized employee to proceed against some of her union representatives and others for negligence in allowing the limitation period to run against the insurer under an LTD policy. In that case the LTD claims had been brought for the employee against the employer by way of arbitration under applicable CBA. The separate lawsuit that was allowed to proceed was not against the employer at all, but was a claim for negligence against people who were duty-bound to help the plaintiff and had allegedly let a limitation period expire so as to preclude the plaintiff from suing the insurer who denied her benefits. Nothing in that case assists this plaintiff. He is already suing the insurer and he wants to claim against his employer. Connerty is consistent with my holding that a claim against the employer for LTD benefits must be brought by grievance arbitration under the CBA.
[34] While I leave the issue of any applicable limitation period to the arbitration proceeding, I note that before me, the parties argued both sides of the argument that “special circumstances” allow a court to add a party to litigation after the expiry of the relevant limitation period. That doctrine no longer applies under the Limitations Act 2002, S.O. 2002, c 24, Sch B. See: Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469.
Standard of Review
[35] There is no dispute that the court may only intervene in face of an error of law or a palpable and overriding error of fact or mixed fact and law below.
[36] The Master’s determination that there was no limitation issue because there was no breach by Unilever when Manulife cut off the plaintiff’s benefits because Unilever “was not responsible for paying any portion of those benefits” was incorrect. While Unilever was not liable for the benefits under the contract of insurance, it may have liability under the CBA. As noted above, subject to the arbitrator’s view, it does indeed appear that Unilever was responsible for paying those benefits under the CBA throughout including the first three years for which it bought an insurance policy. That issue should be dealt with in arbitration if the Union is so advised and the limitation period may be an issue in that proceeding.
[37] In Waxman v. Waxman, 2004 39040 (ON CA), the Court of Appeal defined “palpable and overriding standard” as follows:
[296] The “palpable and overriding” standard addresses both the nature of the factual error and its impact on the result. A “palpable” error is one that is obvious, plain to see or clear: Housen at 246. Examples of “palpable” factual errors include findings made in the complete absence of evidence, findings made in conflict with accepted evidence, findings based on a misapprehension of evidence and findings of fact drawn from primary facts that are the result of speculation rather than inference.
[297] An “overriding” error is an error that is sufficiently significant to vitiate the challenged finding of fact. Where the challenged finding of fact is based on a constellation of findings, the conclusion that one or more of those findings is founded on a “palpable” error does not automatically mean that the error is also “overriding”. The appellant must demonstrate that the error goes to the root of the challenged finding of fact such that the fact cannot safely stand in the face of that error: Schwartz v. Canada, 1996 217 (SCC), [1996] 1 S.C.R. 254 at 281.
[38] The determination that Unilever was not responsible for LTD benefits when they were being paid by Manulife was an error of law or mixed fact and law of sufficient clarity and significance to undermine the outcome. If Unilever were a necessary or proper party, the limitation issue would be an issue. But since it is not liable under the insurance contract, it cannot be a necessary or proper party despite the desire for judicial economy by hearing both claims against Manulife and Unilever together. Unilever will not be acting as an insurer in paying benefits after the Manulife insurance policy expires. Therefore, Unilever cannot be sued for breach of the Manulife insurance contract as proposed by the plaintiff and the court cannot hear a claim against Unilever under the CBA.
[39] I do not see a risk of inconsistent verdicts in this outcome in any event. There are two different contracts at play – the CBA and the insurance policy. The former provided for benefits from 2008 until the plaintiff turns 65. The latter applied for the first three years only. It may be that the issues are the same under the two agreements, or not. It is possible, for example, for a court to rule that Manulife was entitled to cut off the plaintiff’s insurance benefits, but then for an arbitrator to rule that Unilever had broader obligations under the CBA. There is no injustice inherent in that inconsistent outcome. If the court requires Manulife to pay, then the plaintiff will get at least three years of insurance coverage no matter what Unilever’s obligations might have been. After the three year policy expires, the plaintiff’s only rights to benefits are against Unilever under the CBA. If Manulife commits an actionable tort as ASO provider, the plaintiff may be able to sue or he may choose to arbitrate to try to hold the employer liable as principal. One cannot say today whether any such proceedings may be brought or whether the risks of multiplicity may lead to one claim being stayed to await the outcome of the other or whether any number of other possible procedural outcomes may apply.
Result
[40] The parties led the Master to answer the wrong question and, therefore, the decision must be set aside. They misconceived Unilever’s liability as being that of an insurer after the Manulife policy expired instead of that of an employer who promised to pay LTD benefits under a CBA.
[41] The fixing of costs is a discretionary decision under section 131 of the Courts of Justice Act. That discretion is generally to be exercised in accordance with the factors listed in Rule 57.01 of the Rules of Civil Procedure. These include the principle of indemnity for the successful party (57.01(1)(0.a)), the expectations of the unsuccessful party (57.01(1)(0.b)), the amount claimed and recovered (57.01(1)(a)), and the complexity of the issues (57.01(1)(c)). Overall, the court is required to consider what is “fair and reasonable” in fixing costs, and is to do so with a view to balancing compensation of the successful party with the goal of fostering access to justice: Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), (2004), 71 O.R. (3d) 291, at paras 26, 37.
[42] Unilever seeks costs of $8,950 on a partial indemnity basis. The plaintiff sought costs of $8,150 had he succeeded. Bearing in mind the factors in Boucher, I am satisfied that costs ought to follow the event and that the amount sought of $8,950 all-inclusive is reasonable and should be paid to Unilever by the plaintiff. While one can sympathize with the plaintiff’s plight, he did not have to sue his employer. He had free proceedings available under the CBA if the Union agreed to grieve. If the Union is refusing to grieve, very different considerations arise.
F.L. Myers, J.
DATE: December 15, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
ANTONIO ROJAS
Plaintiff
- and -
MANUFACTURERS LIFE INSURANCE COMPANY
Defendant
REASONS FOR DECISION
F.L. MYERS J.
Released: December 15, 2014
[^1]: While not argued before me, I am dubious as to whether the parties can invest the court with jurisdiction in such a matter by consent even if they wished to do so.