March 10, 2014

SABS Update – Time Waits for No One – CA rules on Two Year Limitation Period

For the week of March 10 to March 14, 2014 

Sietzema v. Economical Mutual Insurance Company, [2014] CanLII 111 (O.N.C.A.) before Juriansz, Pepall and Strathy JJ.A.

On November 29, 2005, she submitted an application package for accident benefits which included the following:

Employer’s Confirmation Form: providing details of her employment and income

Disability Certificate:  signed by her physician

Claim for Income Replacement Benefits (IRBs):  the physician answered “Yes” to the question of whether the applicant was “unable to perform the essential tasks of his/her employment at the time of the accident as a result of and within 104 weeks of the accident.

Claim for Non-Earner Benefits(NEBs): the physician answered “No” to the question “Does the applicant suffer a complete inability to carry on a normal life?”

On December 19, 2005 the EOB stated the Insured was eligible for IRBs for two years, and  not eligible for NEBs because she was employed at the time of the accident.

 

DECISION

In 2005, it was generally assumed in the industry that employment at the time of the accident precluded receipt of the NEBs. The Court of Appeal clarified the law in Galdamez v. Allstate Insurance Company of Canada [2012] CanLII 508, (O.N.C.A): rare though the situation might be,  a person who was able to continue to work might nevertheless qualify for NEBs.  This Insured may have been entitled to NEBs after her IRBs were terminated and she returned to work.  The outright denial on the basis that she was employed at the time of the collision was incorrect in law but the refusal to pay was clear and unequivocal.  The Insured’s real complaint was that the she was given an incorrect reason for her ineligibility for Non-Earner Benefits.

The Court of Appeal relied on three decisions for the proposition that clear and unequivocal notice given by the Insurer, cancelling the Insured’s benefits, was sufficient to trigger the limitation period, notwithstanding the fact the Insurer gave legally incorrect reasons for cancelling the benefit. Further, there is nothing in the Insurance Act or the comprehensive SABS retime to require an Insurer, on termination of benefits, to give the claimant a further notice advising that he or she may have a right to renew a claim for a benefit that had previously been denied.  The only remedy for the insured person is to appeal the termination of benefits within the two year period.

 

IMPLICATIONS

Limitation periods are sacrosanct and bring certainty to the law.  However, what is of concern is that an Insured may elect to let a limitation period toll on the basis of misinformation or on an industry standard which is subsequently reconsidered.  This decision fails to encourage adjusters to act in good faith when denying a benefit because the Court has held that the basis for the denial need not be legally correct.  Implicitly, this decision suggest that an Insured will not be saved by discoverability where an insurer knowingly misrepresents the law but the denial is clear and unequivocal for the purpose of triggering the limitation period. Neither the insured nor the lawyer should assume the insurer’s position on the law is correct and must complete their own research when confronted with a denial. This decision also leaves counsel in a conundrum about pursuing benefits which appear to have little chance of success based on industry standards at the time of the denial on the off-chance that a future clarification in the law could result in entitlement.

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