Disability-insurance case shines spotlight on deadline for denial challenges

A legal expert is urging legislative change after an Ontario court ruled in favour of the insurer

Disability-insurance case shines spotlight on deadline for denial challenges
As a matter of good faith, insurers are obligated to provide policyholders with a wide range of facts and information relating to their policies. But in Ontario, that obligation doesn’t include one crucial notification.

A three-judge panel of Ontario’s top court unanimously upheld a decision shooting down a man’s motion challenging the termination of his disability benefits, reported the Law Times. According to the panel, the claimant should have made his claim within two years of the termination, whether or not his insurer told him about that deadline.

“The insurer’s duty of good faith did not require it to give notice of the limitation period to its insured,” wrote Ontario Chief Justice George Strathy on behalf of the court. “While the legislatures of some provinces have imposed a statutory obligation to that effect, there is no such requirement in Ontario.”

Fadil Usanovic, the claimant in the case, bought a disability policy from Penncorp in 2009. He started receiving benefits after falling from a roof in 2007. In early 2012, he received a letter from the insurer saying that he no longer met the definition of “total disability” required under the policy, so his benefits were cut off. He launched a legal action to challenge the claim in 2015, long past the limitation period allowed for challenges.

In court, Usanovic explained that he didn’t seek legal representation earlier because he could not afford it. However, he said he would have acted in time if he’d known about the two-year deadline, and insisted that it shouldn’t apply to his case as Penncorp had failed to warn him about it.

But the court ruled in favour of the insurer, saying that the company’s duty of good faith should not include disclosing information outside the realm of the policy, such as the existence of the two-year time limit.

Maple Cameron, Usanovic’s legal representative during the appeal, said that most laypeople who learn about the case assume that insurers have an obligation to inform policyholders of limitation periods.

“You have a set of vulnerable insureds who are in an inferior position when it comes to knowing the law,” said Cameron, a partner at Fife Cameron Trial Lawyers. “Adding one sentence to a letter to advise them would make a big difference.”

“We’re hoping that a further decision or a change to the legislation will make it a requirement,” she added. A request has been made to appeal the decision at the Supreme Court of Canada.

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