Ontario court finds disability claim was time-barred

“While the legislatures of some provinces have imposed a statutory obligation to that effect, there is no such requirement in Ontario. Whether there should be is a matter I would leave to the legislature.”

Rob Deutschmann, the principal at Kitchener-based Deutschmann Law, says MPPs at Queen’s Park should take their cue from the decision and change the law.

“I think the legislative route is the way to go. Whether it’s a backbencher or the government who sponsors the bill, someone has to undertake that process,” he says. “Given the dominant position of an insurer compared to an insured person, I would have thought that informing people of their legal rights would be part of their obligations.”

Fadil Usanovic, the man at the heart of the case, ran his own eavestrough installation business and bought his disability policy from the company back in 1999. Following a fall from a roof while on the job in 2007, the decision says, he suffered serious injuries and subsequently collected disability benefits until November 2011.

In early 2012, Usanovic received a letter from a Penncorp lawyer explaining that the company had cut off his payments because he no longer met the definition of “total disability” required for their continuance under the policy. By the time he finally went to a lawyer and launched his action in early 2015, the limitation period had long since passed.

In court, Usanovic said he hadn’t sought legal advice earlier because he couldn’t afford it but he would have brought his action in time if he had known about the two-year deadline. He argued the insurer should not be allowed to rely on the limitations defence because of its failure to warn him about it.

However, the appeal court panel ruled for Penncorp, finding that, if Usanovic got his way, it would substantially extend the boundaries of an insurer’s duty of good faith by requiring them to disclose information outside the realm of the policy.

“The consequences of the appellant’s proposed expansion of the duty of good faith are significant. The appellant’s interpretation would effectively judicially overrule the provisions of the Limitations Act, 2002 by making notice given by an insurer to an insured the trigger for the limitation period, rather than discoverability of the underlying claim. This would defeat the purpose of the statute and bring ambiguity, rather than clarity, to the process,” Strathy’s decision reads.

Maple Cameron, who acted for Usanovic on the appeal, says most laypeople who hear about the case assume that insurers are obligated to declare limitation periods to their insureds.

“One of the key issues for us was the consumer protection element of this. You have a set of vulnerable insureds who are in an inferior position when it comes to knowing the law. Adding one sentence to a letter to advise them would make a big difference,” says Cameron, a partner at Fife Cameron Trial Lawyers in Kitchener.

“We’re hoping that a further decision or a change to the legislation will make it a requirement,” she adds, noting that leave has been sought to appeal at the Supreme Court of Canada.

“This may not be the final word on the subject, but it’ll be interesting to see where the dust settles one way or the other,” says Daniel Fife, Cameron’s legal partner and co-counsel on the file.

Vincent Genova, a founding partner at Toronto firm Rochon Genova LLP, acted for Penncorp, and he says the appeal court got the verdict right.

“The plaintiff wanted to expand the law of good faith in a way I think was inappropriate,” he says. “We get into uncharted and unwanted territory by asking courts to do something that is by and large in the domain of legislatures.”

The appeal court noted that provincial lawmakers elsewhere in Canada have mandated limitations warnings to insureds. For example, in British Columbia, a 2012 regulation requires that insurers give written notice of applicable statutory deadlines at the time of denial or shortly afterwards, unless the claimant is already represented by a lawyer. Failure to notify stops the clock on the limitations period.

And, in Alberta, a similar regulation means insureds must be provided with notice of applicable limitations periods within five days of having their claim denied or else they can apply to a court to have the deadline extended.

Around the same time as the Alberta and B.C. regulations were enacted, Ontario amended its own Insurance Act, creating new, less stringent warnings that companies must provide to their life and disability insurance policyholders. Rather than at denial, they kick in at issuance, in the form of language inserted into insurance polices and certificates warning that any action for the recovery of money under the contract is barred unless started within the time frames set out in the province’s Limitations Act.

Clarence Lui, a partner at Toronto firm Monaghan Reain Lui Taylor, says that if Ontario were to adopt the stricter approach already in place in Western Canada, its practical effect would be minimized by conventions in the insurance industry.

“Most property and causality insurers in Ontario take the initiative to advise customers in their communications about applicable limitation periods, so it would simply be a codification of existing practice,” he says. “This case does help clarify the state of the law insofar as it relates to long-term disability insurance.”