Court File and Parties

Court File No.: CV-16-0409 Date: 2017-01-27 Superior Court of Justice – Ontario

Re: Krista Leigh Morriseau, Plaintiff And: Sun Life Assurance Company of Canada, Defendant

Before: Mr. Justice W.D. Newton

Counsel: V. Popescu, for the Plaintiff S. Simpson, for the Defendant

Heard: December 22, 2016, at Thunder Bay, Ontario

Reasons For Judgment

Overview

[1] Sun Life moves to dismiss Ms. Morriseau’s action on the ground that the Court does not have jurisdiction and argues that the proper forum is arbitration under the Collective Agreement.

[2] Ms. Morriseau is a unionized employee of the Lakehead District School Board (“Board”). Under the terms of the Collective Agreement, Ms. Morriseau, upon entitlement, was eligible for long-term disability (“LTD”) benefits. Sun Life provides administrative services, including claims administration, to the Board and asserts that the legal and financial liability and final decision-making for payment of LTD benefits rests with the Board.

[3] By letter dated June 2, 2016, Sun Life denied Ms. Morriseau’s claim for long-term disability benefits.

[4] Ms. Morriseau sued Sun Life and seeks an order directing Sun Life to approve payment of long-term disability benefits. The Board is not a party to this action.

The Facts

[5] It is necessary to review the Collective Agreement, the Administrative Services Contract, the Benefit Booklet and the correspondence from Sun Life to determine what is intended by the parties. Unfortunately, some of the language is contradictory and leaves the impression that Sun Life would be a proper party in claims such as this.

The Collective Agreement

[6] The Collective Agreement is divided into two parts: part A – Central Terms and part B – Local Terms.

[7] Article L8.1 provides that the Benefit Plans referred to in this Article are more particularly described in Appendix A to the Agreement.

[8] Article L8.2 sets out that the Board agrees to pay 50% of the monthly premiums of the Long Term Disability Plan.

[9] Article L8.12.1 provides that the Board shall notify the bargaining unit president of any of the LTD applications, LTD acceptances, and LTD terminations.

[10] Appendix A – Benefits Summary begins with the proviso that “This is a summary only. For further information call the Benefits Clerk at the Board Office.”

[11] With respect to Long Term Disability, Appendix A states this:

1. Eligibility – Continuous disability for six months.
2. Monthly benefit – 70% of pre-disability monthly earnings to a maximum of $5300 per month.
3. During rehabilitation programs, Long Term Disability benefits will be reduced by only 50% of your rehabilitative earnings.
4. Recurrence of the same disability within a six-month period will be treated as the original disability. After six months it will be treated as a new disability.
5. During disability, Basic and Optional Group Life continues and premium contributions are waived.
6. L.T.D. claimants must participate in L.T.D. rehabilitation programs, subject to appropriate medical approval.

[12] A grievance is defined as any question or dispute involving the interpretation, application or alleged violation of any term, provision or condition of the Collective Agreement. Article L 14.1 states that the question of whether a matter is arbitral may be processed under the grievance procedure and be submitted to arbitration.

The Administrative Services Contract

[13] The Administrative Services Contract defines Sun Life as agent of the plan sponsor, the Board. It provides that the Board retains the legal and financial liability to pay benefits and the Board contracts to indemnify Sun Life with respect to damage, liability, and expenses arising from claims. It confirms that the Board may direct Sun Life to pay, or refuse to pay, any claim or amount that Sun Life would otherwise have refused to pay or pay. Sun Life undertakes to perform its responsibilities under the contract to the described standard of care.

[14] Fees are paid to Sun Life based on benefits processed and a general administration and profit charge on percentage of paid claims plus other expenses as incurred.

The Benefit Booklet

[15] The Benefit Booklet is provided to employees to explain their insurance benefits.

[16] Under the general information, the following statement is made on page 1:

The contract holder, Lakehead District School Board, self-insures the following benefits:

Long Term Disability Extended Health Care Dental Care

This means The Lakehead District School Board has the sole legal and financial liability for the benefits listed above and funds the claims. Sun Life provides administrative services only (ASO) such as claims adjudication and claims processing. All other benefits are insured by Sun Life.

[17] At page 32 of the Benefit Booklet under the heading Long Term Disability, a similar statement is made:

The contract holder has the sole legal and financial liability for this benefit. Sun Life only acts as administrator on behalf of the contract holder.

[18] From pages 32 to 40 the particulars of the long-term disability plan are set out which include eligibility, payments, and rehabilitation programs and return to work. Details are provided on when and how to make a claim.

[19] Benefit entitlement is explained at page 32 as follows:

Long-Term Disability coverage provides benefit to you if you are totally disabled. You qualify for this benefit if you provide proof of claim acceptable to Sun Life that:

• you become totally disabled while covered and are under continuous care of a doctor.
• you have been following appropriate treatment for the disability since its onset.

For your Long – Term Disability coverage,

• during the elimination. In the following 24 months (this period is known as the own occupation period you will be considered totally disabled while you are continuously unable due to an illness to do the essential duties of your normal occupation, and
• afterwards, you will be considered totally disabled if you are continuously unable due to an illness to do any occupation for which you are or may become reasonably qualified for education, training or experience.

[20] Normal occupation is defined.

[21] At page 40, it is stated:

We will assess the claim and send you or your employer a letter outlining our decision.

[22] At page 8 there is a section entitled “Legal actions for self-insured benefits” which provides that:

No legal action may be brought by you more than one year after the date we receive your claim forms or more than one year from after we stop paying disability benefits.

[23] Arbitration is not mentioned.

The Denial Letter from Sun Life

[24] On June 2, 2016, a case manager from Sun Life wrote to Ms. Morriseau advising her that her claim was not approved and that the Board had been advised that her claim was not approved. The correspondence set out information about the appeal process and stated the following:

If you decide to take legal action against Sun Life, please be advised that your claim is subject to a limitation period. This limitation is set out in the Limitations Act, 2002 or in the applicable contractual provisions.

[25] The following paragraph was also included:

It is important for you to note that Lakehead District School Board’s long-term disability benefits are self-insured. This means that Lakehead District School Board has the sole legal and financial liability for this benefit and funds the claims. Sun Life provides administrative services only (ASO) such as claims processing and case management services.

Additional Evidence

[26] Paul Caccamo, the Teachers’ Bargaining Unit President, deposed that, as a matter of union policy, members’ personal medical issues relating to long-term disability are to remain undisclosed as between the member and the Board and that therefore “the only practical way to maintain nondisclosure of medical information between the employees and the employer is to appoint or contract with a third party to adjudicate on eligibility.” Mr. Caccamo asserts, that as Sun Life is not a party to the Collective Agreement, Ms. Morriseau’s claim against Sun Life cannot be arbitrated under the Collective Agreement. He further asserts that the definition of disability is not a clause in the Collective Agreement. He points out that the definition of total disability is “wholly outside the collective bargaining agreement.”

Positions of the Parties

[27] Sun Life argues that entitlement to LTD is arbitral either because the “policy” is incorporated into the Collective Agreement (category 4) or the Collective Agreement stipulates that the employer is obligated to pay LTD benefits but does not incorporate plan into the Collective Agreement (category 2).

[28] Ms. Morriseau argues that the essential character of her dispute is not a dispute with her employer but with a third party, Sun Life. What is at issue is the appropriateness of Sun Life’s denial of the plaintiff’s LTD claim.

The Law

[29] The parties agree that a court’s jurisdiction to try a matter is displaced where the difference between the parties arise from a collective agreement. As was said in Weber v. Hydro, [1995] 2 S.C.R. 929, the “question in each case is whether the dispute, viewed with an eye to its essential character, arises from a collective agreement” (at para. 67). As stated at para. 52:

In the majority of cases the nature of the dispute will be clear; either it had to do with the collective agreement or it did not. Some cases, however, may be less than obvious. The question in each case is whether the dispute, in its essential character, arises from the interpretation, application, administration or violation of the collective agreement.

[30] In Regina Police Assn. v. Regina (City) Police Commissioners, 2000 SCC 14, [2000] 1 S.C.R. 360 the court, in commenting upon Weber, said this:

25 To determine whether a dispute arises out of the collective agreement, we must therefore consider two elements: the nature of the dispute and the ambit of the collective agreement. In considering the nature of the dispute, the goal is to determine its essential character. This determination must proceed on the basis of the facts surrounding the dispute between the parties, and not on the basis of how the legal issues may be framed: see Weber, supra, at para. 43. Simply, the decision-maker must determine whether, having examined the factual context of the dispute, its essential character concerns a subject matter that is covered by the collective agreement. Upon determining the essential character of the dispute, the decision-maker must examine the provisions of the collective agreement to determine whether it contemplates such factual situations. It is clear that the collective agreement need not provide for the subject matter of the dispute explicitly. If the essential character of the dispute arises either explicitly, or implicitly, from the interpretation, application, administration or violation of the collective agreement, the dispute is within the sole jurisdiction of an arbitrator to decide: see, e.g., Weber, at para. 54; New Brunswick v. O’Leary, supra, at para. 6. [Emphasis added]

[31] London Life Insurance Co. v. Dubreuil Brothers Employees Assn., (2000) 49 O.R. (3d) (C.A.) concerned a denial of long-term disability benefits to a unionized employee. The collective agreement between the employer and the union required the employer to maintain an insurance policy. In determining jurisdiction the court set out the “Brown and Beatty” categories as follows (at para 10):

1. where the collective agreement does not set out the benefit sought to be enforced, the claim is inarbitrable;
2. where the collective agreement stipulates that the employer is obliged to provide certain medical or sick-pay benefits, but does not incorporate the plan into the agreement or make specific reference to it, the claim is arbitrable;
3. where the collective agreement only obliges the employer to pay the premiums associated with an insurance plan, the claim is inarbitrable; and
4. where the insurance policy is incorporated into the collective agreement, the claim is arbitrable.

[32] For that court the important questions were these: “Did the parties intend that the essential character of the dispute of its underlying facts be governed or regulated by their collective agreement? Do those facts engage the rights and obligations of the parties found expressly or by reference in the collective agreement?”

[33] That court concluded that the dispute was not between those bound by the collective agreement but between an employee and an insurer, a stranger to the agreement. As it was a dispute about entitlement to benefits under the policy then it did not arise from the interpretation, application, and administration or violation of a collective agreement. Therefore, the arbitrator had no jurisdiction.

[34] In Hamilton v. ICI Canada Inc., [2001] O.J. No. 3916, the issue was also whether a claim for long-term disability benefits had to be arbitrated. In that case the administrative services contract provided that the insurer had the right to determine the amount of plan benefits, if any, payable to an employee and the trustees agreed to accept and follow that determination. The employer had no discretion with respect to the determination of entitlement. The court ruled that entitlement was not arbitrable.

[35] In Morris v. Manufacturer’s Life Assurance Co., [2005] O.J. No. 712, Morris sued the insurer and the City of Toronto for failure to pay long-term disability benefits. Morris was a union member employed by the City. There was a collective agreement which included the provision of the benefits. The collective agreement provided that the City would provide by contract, with an insurer, a long-term disability plan and pay 100% of the cost. The collective agreement incorporated some, but not all, of the terms of the benefit plan. The insurer provided administrative services only with similar terms to the administrative services agreement between Morriseau and the Lakehead Board. The group benefits contract provided that no legal action may be brought against Manulife. The motions Judge observed that the “Brown and Beatty” categories are not “watertight compartments” and concluded that the fact that every term of entitlement to LTD benefits is not incorporated into the collective agreement is not fatal to the arbitrator’s ability to assess whether benefits should be granted. She, therefore, dismissed the action. The Court of Appeal, , [2005] O.J. No. 3905, agreed that the essential character of the dispute arises from the interpretation, application, or administration of the collective agreement and that courts must, therefore, decline jurisdiction.

[36] In Duke v. Toronto District School Board, [2006] O.J. No. 1983, an employee sued the Board for denying her long-term disability claim. Clarica Life Insurance Company administered the Board’s LTD plan through an administrative services agreement. That agreement, like the agreement in this case, provided that the insurer assesses the claim but the Board maintains sole responsibility to fund the payment of disability benefits. The collective agreement provided for a long-term disability plan that paid 70% of normal earnings with the employer self-insured with respect to the benefits. Like here, the insurer was only the agent of the Board and it was the Board that had the ultimate authority to decide whether benefits were payable. Following Morris and other cases, the court ruled that the dispute was within the exclusive jurisdiction of an arbitrator.

Analysis

[37] In this case, under the Collective Agreement, the Board agrees to pay premiums. Appendix 80 to the Collective Agreement sets out the benefit – 70% of monthly earnings up to a maximum. The Benefit Booklet, which is not incorporated in the Collective Agreement, provides further particulars of the LTD plan including the qualifying criteria.

[38] Arbitration of LTD disputes is not mentioned anywhere. In fact, “legal action” is mentioned in the Benefit Booklet. That section does not specify whether the action is against the Board or Sun Life. While the denial letter refers to these benefits as “self-insured” by the Board, the denial letter also references limitation periods for legal action against Sun Life. I am not surprised that Ms. Morriseau is confused about where she goes for a remedy.

[39] This is not a “Brown and Beatty” category 1 or 3 nor, I conclude, is it a category 4. The “best fit” is category 2 since the Board is obligated to provide LTD benefits but the plan is not clearly incorporated into the Collective Agreement.

[40] What is difficult about this case is the delegation of decision-making regarding entitlement to Sun Life under the administrative services agreement. The insurer is described as the agent of the Board in the Collective Agreement and I am satisfied that the insurer is, in fact, the agent of the Board in these circumstances. The fact that the Board maintains final decision-making is, I suspect, for the most part a “legal fiction” to circumvent the problem encountered in the Hamilton decision.

[41] That does not mean, however, that the arbitrator is not in a position to determine entitlement to long-term disability benefits. Although sloppily done, I conclude that it was the intention that the plan outlined in the Benefit Booklet, including the qualifying criteria, form part of the Collective Agreement. No strong arguments were advanced as to why I should not follow the Morris and Duke decisions. I conclude that the essential character of the dispute arises from the interpretation, application, or administration of the Collective Agreement and, therefore, this dispute, the determination of Ms. Morriseau’s entitlement to LTD, is within the exclusive jurisdiction of the arbitrator. The action is dismissed.

Costs

[42] I received cost submissions from the parties. While the defendant would ordinarily be entitled to its costs, Sun Life by its reference to “legal action” and “legal action against Sun Life” in its denial letter created confusion. Why the denial letter does not, instead, set out that the remedy after exhausting internal appeals is arbitration under the Collective Agreement was not explained. In the circumstances, I exercise my discretion not to award costs to the successful party.

“Original signed by”____ The Hon. Mr. Justice W.D. Newton

Released: January 27, 2017