No Contracting out of Limitations Act, 2002 for Group LTD Policies: Ontario Court of Appeal
Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922, a decision from the Ontario Court of Appeal released on December 29, 2014, represents a big win for Long Term Disability (“LTD”) claimants and provides much needed clarity on the law of limitation periods applicable to group LTD insurance contracts in Ontario.
Andrew Wray and Niiti Simmonds of Pinto Wray James LLP and Geoffrey Larmer of Larmer Stickland PC were co-counsel and successfully argued the case for the plaintiff and respondent, Karen Kassburg before the Court of Appeal for Ontario.
In its decision, the Court of Appeal clarified that group LTD policies are not “business agreements” for the purposes of the Limitations Act, 2002. This means that group LTD insurers cannot contract out of the 2 year general limitation period applicable to most claims in Ontario. The Court of Appeal also upheld the motion judge’s ruling below that the plaintiff Karen Kassburg (and respondent on appeal), had commenced her Statement of Claim within the applicable limitation period.
The facts of the case are as follows. Karen Kassburg worked as a Special Constable for the North Bay Police Services and was covered under a group LTD insurance policy with Sun Life, which she had obtained through her membership in the North Bay Police Association (“NBPA”).
Ms. Kassburg first applied for disability benefits in 2008 but never received benefits. For almost three years, between 2008 and 2011, Sun Life engaged Ms. Kassburg in a lengthy internal appeal process, each time requesting that she provide additional medical evidence to support her claim for benefits. With the help of a NBPA representative, Ms. Kassburg passed through three levels of internal appeal. At each stage, Sun Life refused to pay Ms. Kassburg LTD benefits on the basis that it had insufficient medical evidence to support her claim that she was disabled. After three levels of internal appeal, Ms. Kassburg received a denial letter from Sun Life on February 24, 2011, in which it stated that her final appeal had failed and suggested that she obtain legal advice. Ms. Kassburg then commenced an action against Sun Life on February 21, 2012.
After receiving Ms. Kassburg’s claim, Sun Life brought a summary judgment motion to dismiss Ms. Kassburg’s action for being out of time. Sun Life’s position on the motion was that the limitation period had expired in December 2009, as a result of a one year contractual limitation period contained in Ms. Kassburg’s disability insurance policy. In the alternative, Sun Life argued that Ms. Kassburg’s limitation period had expired two years from when her claim had been first denied by Sun Life in December 2008. Sun Life’s position was that the limitation period had expired while its internal appeal process was ongoing and while it continued to gather additional medical information from Ms. Kassburg.
The motion judge, Justice Ellies of the Superior Court of Justice, found that that Sun Life’s one year contractual limitation period was unenforceable against Ms. Kassburg due to ambiguities in Sun Life’s LTD contract. In his decision, Ellies J.’s explained that but for the ambiguity, Sun Life would have been permitted to contract out of the 2 year limitation period contained in the Limitations Act, 2002, either because the contract had been entered into before January 1, 2004, or else because it was a contract between the Sun Life and the NBPA (and not Ms. Kassburg) and was therefore a business agreement for the purposes of section 22(5) of the Limitations Act, 2002, which permits contracting business to agree to a shortened limitation period.
According to Ellies J., because the contractual limitation period was unenforceable, the 2 year general limitations period applied, and Ms. Kassburg could only have discovered her claim at the conclusion of Sun Life’s appeal period, in which it advised her using clear language that her claim had been denied and her final appeal had failed.
Sun Life appealed Ellies J.’s ruling, and Ms. Kassburg cross-appealed, arguing that Ellies J. had erred in concluding that her group LTD contract constituted a “business agreement” for the purposes of the Limitations Act, 2002.
In its decision released on December 29, 2014, the Ontario Court of Appeal denied Sun Life’s appeal. The Court of Appeal upheld the motion judge’s finding that Ms. Kassburg’s claim was commenced within the applicable limitation period and ruled that this finding of the motion judge was entitled to significant deference on appeal.
The Court of Appeal also clarified that Ms. Kassburg’s disability policy is not a “business agreement” for the purpose of s. 22(5) of the Limitations Act, 2002. According to Van Rensburg J.A., because Ms. Kassburg was entitled to assert her claim directly against Sun Life, she was deemed to be a party for the purposes of her claim, and for the purposes of Sun Life’s limitations defences. Further, because the purpose of the contract was for “personal purposes,” it was not a business agreement pursuant to the Limitations Act, 2002.
The full text of the Court of Appeal’s decision can be found here: Kassburg v. Sun Life Assurance Company of Canada, 2014 ONCA 922.
The full text of the Superior Court of Justice decision can be found here: Kassburg v. Sun Life Assurance Company of Canada, 2014 ONSC 1523.