On May 26th, 2022, the Supreme Court of Canada refused leave to appeal Kumarasamy v. Western Life Assurance Company, 2021 ONCA 849. This case concerns an application for long-term disability benefits where the insurer denied the claim on the basis that the claim was brought outside the 2-year limitation period.
The trial court determined that the claim was brought inside the limitation period and allowed the claim to proceed. The Ontario Court of Appeal overturned this decision and found that the claim should have been brought earlier and thus was out of time. The key issue was when the claim had been denied and whether the claimant had knowledge that his claim was denied such that the limitation period commenced. The Court of Appeal examined the issues of what constitutes proper knowledge, the steps an insurer must follow when denying coverage, and how limitation periods apply to denial of coverage cases.
On August 25, 2014, Mr. Kumarasamy (“the Plaintiff”), was injured in a motor vehicle accident and unable to work. The Plaintiff had long-term disability benefits through his employer Morris National Inc. (“Morris”). Western Life Assurance Company (“Western Life”) was the insurer who provided the benefits.
Immediately following the accident, the Plaintiff retained a lawyer in order to be represented in both tort and accident benefit claims. Strangely, the retainer explicitly excluded representation in matters relating to long-term disability benefits. The Plaintiff had minimal understanding of the law and the English language. However, the Plaintiff’s sister was a legal assistant in the same office as the lawyer whom the Plaintiff had retained. She emailed Morris on December 15, 2014, requesting a long-term disability claim form. This form was to put Western Life on notice with respect to a long-term disability claim. On March 9, 2015, the Plaintiff’s sister helped him fill out the initial Notice of Claim and she faxed it to Western Life.
On March 11, 2015, Western Life sent a letter to the Plaintiff requesting that the Plaintiff submit a completed long-term disability application. However, the Plaintiff did not receive the letter, or the numerous follow up letters, as it was found they were incorrectly addressed. However, a letter sent on June 2, 2015 had in fact been received by the Plaintiff’s lawyer. The letter stated that the file had been closed due to the long-term disability form not being completed. Correspondence between the Plaintiff’s lawyer and Western Life continued. This culminated in the Plaintiff issuing a Statement of Claim against both Morris and Western Life on June 28, 2019.
The Trial Decision
The key issues in the trial decision were: i) when did the Plaintiff know that the claim had been denied; and, 2) when would the limitation period have started and ended.
The first question is specific to when the Plaintiff would have been reasonably expected to know that his benefits were in jeopardy. Western Life argued that the date of loss occurred on the day that benefits would have been paid to the Plaintiff but were not, that being February 25, 2015. However, they alternatively contested:
“[T]hat a reasonable person in Mr. Kumarasamy’s circumstances ought to have discovered his claim on June 7, 2015, the date by which he would have received Western Life’s letter closing his claim. Western Life further argues that Mr. Kumarasamy’s counsel would have discovered his claim on November 10, 2016 when Levy [the Plaintiff’s lawyer] was informed that Western Life had closed the plaintiff’s claim on June 2, 2015” (Kumarasamy v. Western Life at para 41).
The Plaintiff disagreed. The plaintiff argued “that he could not have become aware of the loss until there was a denial of the LTD [long-term disability] claim by Western Life” (Kumarasamy v. Western Life at para 42). Specifically, the Plaintiff argued that the date of the denial letter, June 28, 2017, was when he became aware of the loss.
The trial Court stated that The Limitations Act: “provides in section 4 that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered” (Kumarasamy v. Western Life at para 35).
The Plaintiff issued his Statement of Claim on June 28, 2019. As the limitation period is two years, if the Plaintiff had discovered that he needed to make a claim prior to June 28, 2017, then submitting the claim on June 28, 2019 would mean the application fell outside the limitation period. Therefore, the question of when the limitation period began hinges on the knowledge of the date of loss, or denial, of benefits.
The trial Court found that the letters, which were received by the Plaintiff’s lawyer on May 10 and June 9 of 2017 did not make it clear that there had been a denial of benefits. The lack of clarity on the issue of denial of benefits was due to both letters requesting further information from the Plaintiff. Requesting further information was deemed to be an acknowledgment by Western Life that the file was not closed and that benefits had not yet been denied.
The trial Court determined that the limitation period began June 28, 2017. This was based on the finding that the letter sent by Western Life, which was received by the Plaintiff on June 28, 2017, was clear in advising the Plaintiff that his claim was denied.
Why the Trial Decision was Overturned on Appeal
The ONCA found that the Trial Judge erred with respect to the incorrect interpretation of s. 5(1) of the Limitations Act. This provision of the Limitation Act sets out that analysis of the Plaintiff should focus on their knowledge:
“(i) that the injury, loss or damage had occurred,
(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it.
The subsection then requires a determination of the day when a ‘reasonable person’ first ought to have known of these matters” (Kumarasamy v. Western Life Assurance Company, 2021 ONCA 849 at para 23).
The Court of Appeal contended that at the time of the accident the Plaintiff knew of his own injuries and knew that he was covered by a long-term disability benefit. With the assistance of his sister, the Plaintiff knew to request a form from Morris and fill it out. Specifically, the Court of Appeal found that by June 7, 2015, the Plaintiff must have known that Western Life had closed the file. As such:
“The respondent had to know, from that fact alone, that his claim for coverage was in jeopardy. Further, from this time forward, the respondent had lawyers representing him with respect to his injuries and, more specifically, with respect to his accident benefits. He therefore had access to legal advice and assistance if he chose to use it” (Kumarasamy v. Western Life ONCA para 25).
The Plaintiff did not receive any long-term disability benefits on February 26, 2015. Thus, the Plaintiff must have known that the limitation period had begun. Further evidence of this knowledge was how the Plaintiff expanded the retainer on February 10, 2017 to include representation in matters relating to the long-term disability claim. The Court of Appeal found that the Trial Judge erred in concluding that in order for the Plaintiff to know the loss had occurred, the insurer had to clearly and unequivocally deny the coverage claim. The Court of Appeal found that this standard of ‘clear and unequivocal denial’ was far too high, not supported by any precedent, and in fact was at odds with other authorities.
The Court of Appeal found that the start date for the limitation period was either February 26, 2015, June 7, 2015, or November 8, 2016. Distinguishing which of these three dates was the actual start date is unnecessary as the commencement of proceedings by the Plaintiff occurred more than two years beyond all of them.
As such, the ONCA allowed Western Life’s appeal and dismissed the claim.
- The “reasonable person” test is used when determining whether knowledge of various events should be attributed to a plaintiff; and,
- Although insurers are not required to provide a “clear and unequivocal” denial of coverage in order for a limitation period to start, best practice dictates that they do so in order for there to be no ambiguity as to when denial of coverage occurred.