Insurance Company , 2020 ONSC 2802

Court File and Parties

COURT FILE NO.: CV14-60147 DATE: May 4, 2020

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: SHIRLEY HALLADAY Plaintiff – and – MANUFACTURERS LIFE INSURANCE COMPANY (c.o.b. as MANULIFE FINANCIAL CORPORATION) Defendant

Counsel: Paul Champ, for the Plaintiff Luke C. Mullin, for the Defendant

RULING ON MOTION

ABRAMS, J

Introduction

[1] This is a motion brought by the Defendant, Manufacturers Life Insurance Company (“Manulife”), for summary judgment seeking to dismiss the plaintiff’s claims for both short term disability benefits (“STD benefits”) and, long term disability benefits (“LTD benefits”) pursuant to two policies of disability insurance (“the policies”) issued by Manulife, to the plaintiff’s employer.

[2] The plaintiff alleges in her Statement of Claim that she is totally disabled and entitled to payment of both STD benefits and LTD benefits under the policies from October 24, 2008 forward, as a result of, inter alia, a diagnosis of depression, and anxiety.

[3] Manulife contends that there is no genuine issue for trial in connection with the plaintiff’s claims for benefits under the policies, as the plaintiff’s Statement of Claim was commenced after the expiration of the limitation periods set out in the policies. Further, the plaintiff at no time submitted an application to Manulife for LTD benefits, nor does the Statement of Claim reference or make a claim under the LTD policy.

[4] In the alternative, if it is found the plaintiff did apply for LTD benefits, Manulife asserts that she has been in breach of several key provisions of the LTD Policy, such that no benefits would be payable to her in any event.

[5] In the further alternative, the failure of the plaintiff to provide Manulife with medical and other evidence in support of her claim for LTD benefits means that Manulife has been prejudiced, as it was not able to assess the plaintiff’s claim on an ongoing and timely manner.

[6] The parties did not dispute the appropriateness of resolving the questions on a motion for summary judgment, either in whole or in part.

Background Facts

Employment, Sick Leave, and Initial Application for Disability Benefits

[7] The plaintiff began working at the Brockville Mental Health Centre (“BMHC”) as a full-time cleaner with the centre’s housekeeping services in 1990. This was a union position and the plaintiff received an hourly wage, pension, and benefits, including loss of income disability benefits provided by Manulife. [1]

[8] The plaintiff is currently 59 years old and has struggled with mental illness throughout her life. She went off work on sick leave in October 2008 and has never been able to return to work due to her illness. The plaintiff was accepted on the Ontario Disability Support Program (“ODSP”) in August 2011 and has received monthly ODSP benefits since that time. [2]

[9] The plaintiff provided a medical note to her employer when she went off work in October 2008. The human resources department at BMHC provided the plaintiff with partially completed application forms for disability benefits. The plaintiff and her doctor completed the forms and returned them to the employer. The employer submitted these forms, together with other relevant materials, to Manulife on November 7, 2008. [3]

[10] The plaintiff’s disability benefits were initially approved for one month, from October 24 to November 30, 2008. However, the plaintiff was unable to return to work within this period and struggled without income, as Manulife did not agree to continue her disability benefits immediately. Manulife sought additional records from the plaintiff’s pharmacist, family physician, and treating psychiatrist. [4]

Denial of Disability Benefits and First Appeal

[11] By way of correspondence dated March 27, 2009, Manulife advised that it approved benefits only to January 11, 2009. The letter also advised the plaintiff that she could request a review of her claim and invited her to provide additional medical documentation regarding her condition from January 11, 2009 to the present. [5] The plaintiff was upset and did not know what to do upon learning that she was turned down for further benefits. Her family doctor advised that it was his opinion that she was too disabled to work, but that he was unsure what additional information was required to appeal Manulife’s decision. [6]

[12] The plaintiff contacted Manulife by phone and spoke to the author of the March 27, 2010 letter, Marian Zomer, on or about April 14, 2009. She told Ms. Zomer that she remained too ill to work and had no income, and that she wanted to appeal Manulife’s decision but did not know what information they required. Ms. Zomer explained that the plaintiff should submit a letter outlining her reasons for disagreeing with Manulife’s assessment. Notably, Ms. Zomer did not mention anything to the Plaintiff about submitting a separate application for LTD benefits, advising only that she should submit a letter to appeal her benefits being cut off on January 11, 2009. [7]

[13] By this time, Ms. Zomer had already discussed the case with Angel Kirkland, a BMHC Human Resources advisor. Manulife noted that the plaintiff’s STD benefits could only run to a “max date” of February 19, 2009. However, neither the employer nor Manulife informed the plaintiff of this cut-off date. Ms. Kirkland confirmed to Ms. Zomer on February 26, 2009, that the plaintiff had LTD coverage and that she had already prepared the employer’s portion of the paperwork for LTD benefits but advised that she would not send the forms until the plaintiff was approved to receive benefits for the full STD period. Neither Manulife nor BMHC ever mentioned these LTD claim forms to the plaintiff. [8]

[14] The plaintiff remained medically unable to work throughout this time, and her doctor could not say when she might be fit. As directed by Ms. Zomer, the plaintiff prepared a letter of appeal dated April 21, 2009, and submitted her appeal package, including additional medical information, by fax on May 7, 2009. [9] Had she known a separate application was required for benefits beyond February 19, 2009, the plaintiff would have submitted one. [10]

[15] The plaintiff’s life was falling apart during this period. She could not work due to her illness and had no income. The plaintiff’s personal life was also stressful, as her common law partner was abusive to her, and the police were investigating her stepfather for sexually abusing her and her siblings during their childhood. She contacted a Manulife representative on June 2, 2009, to inquire about her appeal and explain her circumstances. [11]

[16] Manulife contacted the plaintiff on July 15, 2009, to advise that her appeal was denied. Manulife advised the plaintiff that she could appeal again, with medical evidence to support her disability. Manulife’s decision letter provided further particulars with respect to the plaintiff’s appeal rights. Manulife also advised Ms. Kirkland that the decision to terminate the plaintiff’s claim had been upheld. [12] Although Manulife was aware that the plaintiff remained off work due to her claimed illness, she was not informed that a further application was required for LTD benefits.

Second Appeal and Claim for LTD Benefits

[17] The plaintiff submitted her second appeal by faxed letter on August 20, 2009. At the time she submitted her appeal, the plaintiff understood that she was appealing her entitlement to ongoing benefits, as she continued seeing her physician regularly and remained medically unfit to work. [13]

[18] Manulife responded by advising that it would proceed with the appeal “when you have notified us that all documentation in this regard has been forwarded for our review.” The plaintiff asserts that she did not understand what this meant and was too overwhelmed at the time to follow up: she continued to be sick and unable to work; she had no money; her common law partner was abusing her; and the police were interviewing her and her siblings about their step-father’s sexual abuse. [14]

[19] The plaintiff reached out to her union, the Ontario Public Service Employees Union (“OPSEU”), for assistance and signed an authorization that would allow Manulife to discuss her claim with an OPSEU representative. When Manulife refused to accept the first authorization, a second was submitted. On or about February 11, 2010, Manulife advised the OPSEU representative, Isla Carmichael, that there was no record of an LTD claim for the plaintiff. [15]

[20] Within days of learning of Manulife’s position that no LTD application had been received, OPSEU wrote to Manulife on February 16, 2010, to express its position on the merits of the benefits claim, noting that the plaintiff remained medically unable to work and formally advising that the plaintiff was “hereby submitting a claim for long term disability benefits”. [16]

[21] Shortly thereafter, Manulife informed BMHC that the plaintiff was appealing the denial of her STD benefits and applying for LTD benefits. Manulife wrote to OPSEU “with respect to the subject claimant’s long-term disability benefits” and requested additional documentation for its review of the appeal. When providing its file to OPSEU, Manulife described the material as the plaintiff’s “LTD file”. Manulife did not suggest that the OPSEU letter of February 16, 2010, was deficient notice of the plaintiff’s LTD claim, or that the claim for LTD benefits would not be processed. [17]

[22] OPSEU submitted additional documentation and a letter from the plaintiff’s physician in support of her appeal for disability benefits on August 19, 2010, and later provided further medical information from a psychiatrist. [18]

[23] Manulife accepted and reviewed this additional information and, by way of a letter dated May 15, 2012, advised that it was denying the plaintiff’s appeal for disability benefits. The letter stated; however, that Manulife would consider a further appeal if submitted by May 14, 2013. [19]

Final Appeal and Commencement of Proceedings

[24] The plaintiff submitted a third appeal, including updated medical information and an independent medical examination report, through her union on December 3, 2012. [20]

[25] Manulife referred the plaintiff’s appeal materials to a consulting psychiatrist for review, informing the specialist that the plaintiff was “appealing for STD benefits from January 12/09 and LTD follows”. Manulife asked the consulting psychiatrist to specifically address several issues, including his assessment of the plaintiff’s level of function “on a continuous basis from January 9, 2009 to November 2012 and continuing”. The psychiatrist’s report noted a “well supported psychiatric diagnosis” and, as requested by Manulife, addressed the progression of the plaintiff’s symptoms from January 2009 to November 2012. [21]

[26] By way of a letter dated February 21, 2013, Manulife advised the plaintiff that her appeal was denied. The plaintiff commenced this action on February 20, 2014. [22]

[27] The plaintiff continues to be disabled. She lives alone and rarely goes out, as she experiences severe anxiety dealing with people. She often has difficulty doing housework. Her abusive common law partner is no longer in her life, and her step-father pleaded guilty to sexually abusing two of her siblings when they were children and was sentenced to jail. She continues to see a physician regularly for her medical condition and continues to receive ODSP. [23]

[28] Manulife has not paid the plaintiff any disability benefits beyond January 11, 2009. Although it is true that she did not submit a form for LTD benefits, her union, OPSEU, did provide a letter to Manulife on February 16, 2010, asking that the letter be accepted as an application for LTD benefits. At no time was the plaintiff ever advised that any further material was required as an application for LTD benefits, or for ongoing loss of income disability benefits. It was always the plaintiff’s understanding, throughout her three appeals from 2009 to 2013, that she was appealing a denial of ongoing disability benefits, short- and long-term. [24]

[29] The plaintiff did not see a copy of the Manulife LTD Policy until after her claim was commenced and had no idea how to obtain a copy. She had assumed that STD and LTD benefits were covered by a single policy and did not realize this was not the case until she saw Manulife’s statement of defence. [25]

Issues

[30] The issues on this motion are:

1. Should the plaintiff’s claim be dismissed because it was commenced after the expiration of the limitation periods set out in the policies?
2. Should the plaintiff’s claim for LTD benefits be dismissed as a result of there being no application submitted to Manulife and no reference to a claim under the LTD policy in the Statement of Claim?
3. Should the plaintiff’s claim be dismissed based on breaches of several key provisions of the LTD Policy, such that no benefits would be payable to her in any event?
4. Should the plaintiff’s claim be dismissed due to her alleged failure to provide Manulife with medical and other evidence in support of her claim for LTD benefits, resulting in prejudice to Manulife in terms of its inability to assess her claim on an ongoing and timely manner?

Law

[31] A defendant may, after delivering a statement of defence, move with supporting affidavit material, or other evidence, for summary judgment on all or part of the claims in the statement of claim. [26]

[32] The Court shall grant summary judgment if it is satisfied there is no genuine issue requiring a trial with respect to a claim. In determining whether there is no genuine issue requiring a trial, the court shall consider the evidence submitted by the parties, and the judge may exercise any of the following powers for that purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:

1. weighing the evidence;
2. evaluate the creditability of a deponent; and
3. draw any inferences from the evidence. [27]

[33] To determine whether it is in the interest of justice to grant a motion for summary judgment, the motion judge must ask whether the “full appreciation” of the evidence and issues that are required to make dispositive findings can be achieved by way of summary judgment, or can this “full appreciation” only be achieved by way of a trial. [28]

[34] There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case where the process (1) allows the judge to make necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [29]

[35] The test under Rule 20 is for the court to ask whether there is a genuine issue requiring a trial, and not whether there is a genuine issue for trial. [30]

[36] In response to evidence opposing a motion for summary judgment, a responding party may not rest on the mere allegations or denials in the parties’ pleadings, but must set out, through admissible evidence, specific facts showing why there is a genuine issue requiring a trial. [31]

Analysis

Limitation Period

[37] Manulife asserts that as a result of the plaintiff’s failure to submit an application for LTD benefits within the limitation period set out in the policy, her claim must fail: Wilson v. Sun Life 2018 ONSC 1090. I do not see that way.

[38] Notably, courts have been hesitant to dismiss actions by way of summary judgment on the basis of limitations periods in insurance claims. In Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922, an insurer moved for summary judgment on the basis that the claim was beyond the limitation periods under the policy and the Insurance Act. The Court of Appeal upheld the motions judge’s decision not only denying the motion, but instead granting a declaration that the action was commenced within the applicable limitation period. [32]

[39] Noting the Supreme Court of Canada’s call for proportionality, time, and affordable access to justice in Hryniak, the Court of Appeal in Kassburg confirmed that it is both in the interests of justice and open to a motions judge to decide the issue of a limitation defence on a final basis in the context of a motion for summary judgment. Accordingly, the court may dismiss a defendant’s motion for summary judgment on the basis of limitations, and instead issue a declaration confirming that the action was commenced within applicable limitations periods, without need for a formal cross-motion. [33]

[40] The approach in Kassburg has been followed where, as in the present case, the plaintiff pursued an insurer’s internal appeals process before bringing an action in court. In Clarke v Sun Life, the court held at paragraph 31 that:

In keeping with the shift in litigation culture toward making decisions by way of summary judgment where possible and with the principles articulated in Hryniak v Mauldin, 2014 SCC 7, [2014] 1 SCR 87, I find that the issue of whether or not Ms. Clarke has brought her claim within the limitation period of 2 years is determinable on this record. [34]

[41] Accordingly, the court in Clarke v SunLife dismissed the defendant’s motion for summary judgment and issued a declaration that the action was not statute-barred. [35]

[42] In my view, the plaintiff’s claim for LTD benefits was not clearly and unequivocally denied by February 20, 2009, 119 days after the date of her disability (October 24, 2008), consequently requiring her Statement of Claim to be issued prior to February 20, 2012, being the end of the 3-year limitation period, as Manulife argues. To that end, it is appropriate to consider what was communicated to the insured and whether a claim has been clearly and unequivocally denied. [36]

[43] I find that it was not until Manulife wrote to the plaintiff on February 21, 2013, advising her that her third and final appeal was denied, based on updated medical information including, but not limited to, the insurer’s independent medical examination report, that she discovered her claim. In these circumstances, it was reasonable for the plaintiff to believe, as she did, that the appeal procedure formed part of the application process and that her claim for LTD benefits was clearly under review, particularly given that Manulife, in referring her appeal materials to its consulting psychiatrist for review, informed the specialist that the plaintiff was “appealing for STD benefits from January 12, 2009 and LTD follows”.

[44] Further, it was reasonable for the plaintiff to pursue her rights of appeal until that process ran its course, prior to commencing legal proceedings against the insurer, which she did on February 20, 2014.

[45] Notably, in both Kassburg and Clark, the insurer expressly cautioned the plaintiffs in each case that the insurer did not intend to waive its rights under the policy, including the right to apply any available contractual or statutory limitations periods, while the parties continued to review the claims through the alternative to litigation process established by the insurer. The communication record between the parties in this case discloses no such caution.

No Application of Claim for LTD Benefits

[46] Manulife contends that the plaintiff’s claim for LTD benefits should be dismissed because the plaintiff at no time submitted an application to Manulife for LTD benefits, nor does the Statement of Claim reference or make a claim under the LTD policy. I disagree.

[47] In my view, it was not until February 11, 2010, that Manulife advised Ms. Carmichael, the plaintiff’s OPSEU representative, that there was no record of a LTD claim for the plaintiff. Within days, OPSEU wrote to Manulife on February 16, 2010, advising, inter alia, that the plaintiff remained medically unable to work and formally giving notice that the plaintiff was “hereby submitting a claim for long term disability benefits”. In response, Manulife informed BMHC that the plaintiff was appealing her denial of her STD benefits and applying for LTD benefits. Thereafter, Manulife wrote to OPSEU “with respect to the subject claimant’s long-term disability benefits” and requested additional documentation for its review of the appeal. Moreover, when providing its file to OPSEU, Manulife described the material as the plaintiff’s “LTD file”. Importantly, Manulife never suggested that the OPSEU letter of February 16, 2010, was in any way deficient notice of the plaintiff’s LTD claim, or that the claim for LTD benefits would not be processed. Put simply, Manulife’s internal documents show that it considered the plaintiff’s appeals seeking LTD benefits and assessed her appeals on that basis.

[48] Admittedly, the plaintiff’s prayer for relief contained in the first paragraph of her Statement of Claim does not specifically reference long-term disability benefits in accordance with the policy. However, I find that the plaintiff did not see a copy of the Manulife LTD policy until after her Claim was commenced. In these circumstances, it was reasonable for her to assume, in my view, that that her STD and LTD benefits were covered by a single policy and did not realize this was not the case until she saw Manulife’s Statement of Defence.

[49] Nonetheless, by a plain reading of the plaintiff’s Statement of Claim, Manulife knew, or ought reasonably to have known, that the plaintiff was advancing a claim for LTD benefits, where she said:

Para. 8 – Individuals covered by the Policy are entitled to short-and long-term disability benefits if they meet the definition of “total disability….

Para. 9 – After receiving LTD benefits for two years, an employee is totally disabled for the purposes of the Policy if he or she is incapable of performing the essential duties….

Para. 20 – The Plaintiff subsequently made several requests for reconsideration to the Defendant, supplying additional medical documentation supporting her claim and expressly advising that, given the passage of time, her application would also constitute her claim for LTD benefits….

Para. 24 – As of the date of this claim, the Plaintiff is totally disabled in all respects…. She remains totally disabled according to the definition in the Policy and, as such, is entitled to STD and LTD benefits from January 12, 2009 and ongoing.

[50] Included in the plaintiff’s motion materials is an Amended Statement of Claim setting out her specific claim for LTD benefits under the relevant policy. To that end, on the record before me, Manulife has not demonstrated irreparable prejudice such that the court shall not grant leave to the plaintiff to amend her pleadings at this stage in the proceeding, in accordance with the principles articulated in Rules 1.04(1), 2.01(1) and 26 of the Rule of Civil Procedure.

Breaches of Key Provisions of the LTD Policy

[51] Manulife argues in the alternative that, if it is found the plaintiff applied for LTD benefits, she has been in breach of several key provisions of the LTD policy, such that no benefits would be payable to her in any event. In my view, this issue was not seriously contended in Manulife’s factum or during oral argument. In the circumstances, the issue would be more suitably addressed at trial.

Plaintiff’s Failure to Provide Manulife with Medical Evidence – Prejudice

[52] Manulife argues that the plaintiff has failed to provide it with medical or other evidence to support a claim for LTD benefits at any time, resulting in prejudice to Manulife. Again, I disagree.

[53] For the reasons set out above, Manulife’s own internal documents show that it considered the plaintiff’s appeals seeking LTD benefits and assessed her appeals on that basis. Further, in referring the plaintiff’s appeal materials to its consulting psychiatrist for review, Manulife informed the specialist that the plaintiff was “appealing for STD benefits from January 12, 2009 and LTD follows”. In response, the psychiatrist noted a “well supported psychiatric diagnosis and, as requested by Manulife, addressed the progression of the plaintiff’s symptoms from January 2009 to November 2012.

[54] In advancing this argument, Manulife ignores, in my view, that the plaintiff repeatedly provided further and additional medical information concerning her ongoing disability in response to the Manulife’s requests, including: [37]

• psychiatric consultation report, dated January 27, 2009; [38]
• medical letter from her family physician, dated May 2, 2009; [39]
• clinical notes and medical reports January-April 2009; [40]
• medical letter from her family physician, dated March 9, 2010; [41]
• clinical notes, test results, and reports June 2008 – March 2010; [42]
• psychiatric consultation reports dated March 26 and April 30, 2010; [43] and
• Independent Medical Examination Report by Dr Hughes Chasse, psychiatrist, dated November 28, 2012. [44]

[55] Manulife also neglects to acknowledge that it sought and obtained its own medical assessments concerning the plaintiff, including reviews and reports from its consulting psychiatrist, Dr E. Busse, dated April 25, 2012 and February 15, 2013. Significantly, Manulife’s consulting psychiatrist was specifically advised by the insurer that the plaintiff was “appealing for STD benefits from January 12, 2009 and LTD follows” and was therefore tasked with assessing the plaintiff’s level of function “on a continuous basis from January 9, 2009 to November 2012 and continuing.” [45]

[56] As noted in Wiles, circumstances where no medical information is provided are distinct from cases where the insurance company has received extensive medical briefs regarding the plaintiff’s condition. [46] Moreover, and as was the case in Dube v RBC Life Insurance, the defendant’s prejudice argument cannot be sustained in circumstances where it has itself failed to take any step to request a medical examination or assessment from the time it received notice of the claim. [47] The defendant cannot create prejudice by its own failure to do something that it reasonably could or ought to have done.

Conclusions

[57] For all of these reasons, an Order shall issue for the following:

(a) dismissing the defendant’s motion for summary judgment; (b) declaring that the plaintiff submitted adequate proof of claim for LTD benefits under the relevant policy; (c) declaring that the plaintiff’s action was commenced within the applicable limitation period; and (d) granting the plaintiff leave to serve and file an Amended Statement of Claim in the form proposed by the plaintiff.

[58] As agreed by counsel and the parties at the hearing of the motion, costs of the motion are marked payable by the defendant to the plaintiff, fixed in the sum of $9,000.00, inclusive of all fess, disbursement and HST.

The Honourable Mr. Justice B. W. Abrams

Released: May 4, 2020

Insurance Company, 2020 ONSC 2802

COURT FILE NO.: CV14-60147 DATE: May 4, 2020 ONTARIO SUPERIOR COURT OF JUSTICE B E T W E E N: SHIRLEY HALLADAY Plaintiff – and – MANUFACTURERS LIFE INSURANCE COMPANY (c.o.b. as MANULIFE FINANCIAL CORPORATION) Defendant RULING ON MOTION Abrams, J. Released: May 4, 2020