DISABILITY CLAIMS IN ONTARIO
A BRIEF OVERVIEW
What is long-term disability insurance?
Long-term disability insurance often refers to a type of insurance contract whereby the insurance company (insurer) agrees to pay a portion of your pre-disability income if and when you become unable to earn your livelihood as a result of an illness or injury, in exchange for payment of monthly premiums by you. In other words, the insurer agrees to pay a percentage of your income if you cannot continue working. Obtaining disability benefit coverage is an excellent idea and provides you and your family with some peace of mind.
Individuals often obtain coverage for long term disability benefits through their employment contracts. Some employers offer disability benefits coverage to some or all of their employees. These are often referred to as “group benefits” or other similar phrases. In certain circumstances your disability insurance premiums are automatically deducted from your paycheck and in others the employer contributes towards your premiums. You are also able to purchase disability benefits insurance directly from one of the many insurance companies that offer these plans.
Who pays the long term disability benefits?
In most circumstances your employer purchases the group policy through a third party insurance company, which is the entity that will pay you disability benefits when you cannot return to work. However, there is a great deal of interplay and connection between your employer and your long term disability insurer. That is because typically you apply for, and go on, sick-leave (paid or unpaid) before applying for long term disability benefits. Some employers require you to provide them with medical records proving that your injuries or illness prevent you from going back to work. In some circumstances your doctor has to fill out forms or at least provide a letter to that effect.
Therefore, when its time for your employer to refer the file to the long term disability benefits insurer the insurance company is very interested in learning about and obtaining your medical file, your absence pattern, and even your employer’s opinion about your disability, from your employer. In most circumstances your employer has to fill out a form for the insurer where it discloses information to the insurer (often called Plan Sponsor Statement or something like that).
What is the difference between long-term and short-term disability benefits?
Short term disability coverage usually provides you with a portion of your income, on a temporary basis, while you are unable to return to work. On the other hand, long term disability is geared towards providing you with a more permanent income replacement plan. Certain disability insurance policies require that you apply for and exhaust your short term disability entitlement before being able to apply for long-term disability benefits.
Certain employers pay the short term disability benefits themselves or through an insurance company separate from the one which provides long term disability coverage. Other employment contracts require you to exhaust your entitlement to sick leave benefits before becoming eligible to apply for long term disability benefits.
Disability benefit policy, as mentioned above, is a type of contract. When you accept the employer’s offer of employment with all that comes in the package, including the disability benefits policy, you and the insurer enter into a contract, the terms of which are mostly governed by the policy. Therefore, it is important to read the policy to fully understand your obligations and entitlements.
How is eligibility for long-term disability benefits determined?
The concept sounds very simple: you pay the premium so that when you are unable to work you receive benefits periodically. However, in reality determination of eligibility is far from simple. It is obviously in the insurer’s interest to collect the premiums and pay out as few disability claims as possible. Insurers often do not hold up their end of the contract and dispute your eligibility as vigorously as they can.
The dispute is often about whether you are disabled from returning to work. The question of disability from returning to work is often applied in two different levels: most contracts stipulate that in order to be considered disabled from returning back to work, during the first two years of your disability, you must demonstrate that your illness or injury prevents you from returning to the essential tasks of your own occupation. Once the two years are up you must prove that your illness and/or injury disables you from returning to any occupation for which you are reasonably qualified. You will not receive disability benefits beyond the two-year mark if you cannot demonstrate that you are disabled from returning to any occupation for which you are qualified. Obviously, the test becomes much more onerous after the first two years.
Policies often use the phrase “total disability”. They may require the insured to be “totally disabled”. This does not mean that your injuries must be so severe that you cannot stand on your feet or leave the hospital bed. Different policies define total disability in different ways but usually total disability means reasonable inability to return back to work. In the leading case of Paul Revere Life Insurance Co. v. Sucharov the Supreme Court of Canada defined total disability as follows:
“The test of total disability is satisfied when the circumstances are such that a reasonable man would recognize that he should not engage in certain activity even though he literally is not physically unable to do so. In other words, total disability does not mean absolute physical inability to transact any kind of business pertaining to one’s occupation, but rather that there is a total disability if the insured’s injuries are such that common care and prudence require him to desist from his business or occupation in order to effectuate a cure; hence, if the condition of the insured is such that in order to effect a cure or prolongation of life, common care and prudence will require that he cease work, he is totally disabled within the meaning of health or accident insurance policies.”
Needless to say, individual opinions may differ in defining disability. There is no mathematical formula to apply.
- To qualify for long-term disability benefits, is it necessary for my illness or injury to arise from work?
No. Disability benefit insurance is different from workplace compensation benefits. You do not need to demonstrate that your illness or injuries resulted from your work duties or environment. Injuries sustained in a car accident, for example, could make you eligible for long term disability benefits. That being said, if you are injured as a result of an incident that occurred at your workplace or become ill from the effects of your work environment, it does not necessarily mean that you are not entitled to long term disability benefits.
What to do when denied disability benefits?
Review the insurer’s letter that denied your benefits carefully. If there is anything you disagree with or do not understand, call your adjuster and try to find out exactly what the insurer’s position is. Then make note of the appeal processes that insurer allows you to complete. Often these are internal appeals, which takes the file from your adjuster’s desk to his/her supervisor’s. More often than not the insurer’s position will not change by way of appeals.
Talk to your doctor about the denial and ask him or her to write to the insurer, in support of your claim.
Do I have to apply for Canada Pension Plan (CPP)?
In many cases, the disability insurance policy requires you to apply for CPP and often other benefits such as ODSP or workers compensation. The insurer is then allowed to reduce from your disability benefits, the sum of what you may receive from those other sources. Your policy may even require you to appeal the denial of CPP. Read the policy carefully. Consult the adjuster when in doubt.
Are my LTD benefits taxable?
It depends. In circumstances where your employer paid the premiums for your disability coverage your benefits are considered income that is taxable. However, if you paid the premiums (or they were deducted from your pay) your disability benefits are most likely not taxable.
Long term disability is one of our areas of specialty. We have handled many claims involving denial of long term disability benefits and are experienced in this area. Give us a call if you have any question. You are under no obligation to retain us by simply making a phone call or meeting us.
 (1983) 2 SCR 541.