04 Jun Former Employer Liable for Undiscovered Claims, The Law Times (June 4, 2018 at p 7)
In MacIvor v. Pitney Bowes, 2018 ONCA 381, the Court of Appeal for Ontario (“ONCA”) determined that an employee could benefit from his former employer’s LTD coverage, even though he did not discover the disability until after he began working for another employer. In the court’s view, the exclusionary language of the Manulife Policy did not limit the LTD coverage to only current employees and extended it to undisclosed disability claims that arose during their employment.
In MacIvor, Lenard MacIvor, suffered a traumatic brain injury and a significant musculoskeletal injury during a company sponsored event in Costa Rica. Following his incident, MacIvor was off work for nearly four months. He was a different man when he returned to his employment, where he encountered difficulties. As a result, his responsibilities were continuously reduced and, in frustration, he quit his employment. MacIvor was unaware of the permanent and disabling nature of his brain injury until after he resigned his employment with Pitney Bowes. Within days of his resignation, MacIvor secured employment with Samsung where he performed a role similar to the one he held at Pitney Bowes. The difficulties he had experienced in job performance before leaving Pitney Bowes, soon became apparent and, less than a year later, Samsung dismissed him. Having asked Samsung about making a LTD claim, MacIvor learned that because his injury occurred when he was working for Pitney Bowes, he would have to apply for the coverage under Pitney Bowes’ policy.
At trial, Pitney Bowes argued that its policy provides for coverage only during employment and that coverage ends when employment ends. In section titled “Termination of Coverage,” the policy stipulated: “[Y]our coverage will terminate on the earliest of the following dates unless continuation of coverage is provided under the Extension of Coverage Provision…the day on which you cease to be Actively Employed.”
Justice Andra Polack accepted Pitney Bowes’ position and concluded that the policy provided no coverage for former employees.
The governing principles of interpretation applicable to insurance policies have been recently re-affirmed by the Supreme Court of Canada in Ledcor Construction Ltd. Northbridge Indemnity Insurance Co., 2016 SCC 37, where it reminded that “[t]he primary interpretive principle is that where the language of the insurance policy is unambiguous, effect should be given to that clear language, reading the contract as a whole.” The top court added “where, however, the policy’s language is ambiguous, general rules of contract construction must be employed to resolve that ambiguity.” It further explained “if ambiguity still remains after the above principles are applied. . .coverage provisions in insurance policies are [to be] interpreted broadly, and exclusion clauses narrowly.”
Relying on these principles, the ONCA reversed Justice Polack’s conclusion, because it was of the view that the exclusionary language of the policy relates to future claims, not claims that may have arisen during the course of the employee’s employment. In other words, if an employee’s claim arises as the result of an occurrence that takes place during his employment, the policy provides coverage.
In the ONCA’s view to conclude otherwise would leave former employees, like MacIvor, in the untenable position of having no disability coverage from either their former employer or any new employer. Such a result “would be contrary to the very purpose of disability insurance and the plain meaning of the coverage provision.”
The policy required MacIvor to file the proof of claim within 90 days of the date benefits would begin. MacIvor filed the proof of claim approximately 10 days late. Pitney Bowes argued that MacIvor’s failure to comply with the policy defeated his claim. In response, the ONCA stated “it would be most unfair…to permit the imperfect compliance with the 90-day contractual period to defeat [MacIvor’s] claim in the particular circumstances of this case.” As a result, the court exercised its discretion and granted an equable remedy of relief from forfeiture, even though it was not raised at trial.
MacIvor is a rare case and a personification of the old adage “where there’s a will, there’s a way.” It serves as a good illustration that, in deserving cases, a court will unilaterally invoke a remedy, if doing so is in interest of justice. The exclusionary language of a policy that terminates former employees’ entitlement to the LTD coverage for undiscovered claims may no longer shield their former employers and their insurers from liability. In a case when a younger employee becomes injured during their employment, but did not appreciate the significance of his injury until after their employment ended, the financial impact on the former employer’s business may be substantial. The former employer could be found liable to pay the value of the LTD benefits, potentially indefinitely.