Long-Term Disability Claim and Limitation Periods in Ontario

On January 1, 2004, the Limitations Act of Ontario came into force. The Limitations Act limits the period of time during which a person may commence a court action in Ontario in respect of a claim.

The Ontario Limitations Act sets out limitation periods for all types of claims in Ontario. In Ontario, the basic limitation period is two years meaning that a person must commence a court action within two years of when they first knew that a claim could be made. In most cases, this would be two years after the injury victim suffered an injury or damage that was the subject of the claim.

When advancing a claim for long-term disability benefits, the two year limitation period applies. The question always is: when does the two year limitation period start to run? From the date of the denial of benefits, the date of decision on an internal appeal or from the date of disability? What is the impact on the limitation period when pursuing internal appeals to the insurance company in the face of denial or termination of benefits?

A recently released Divisional Court decision (Western Life Assurance Company v. Penttila, 2019 ONSC 14 (CanLII)), the Court addressed the issue of limitation periods in the context of long-term disability claims. The disabled person’s application for benefits was approved and then later benefits were terminated when the definition of “disability” under the policy changed. The disabled person indicated to the insurer an intention to appeal the denial decision, delivered medical documents and appealed the decision. The disabled person further supplied additional medical documents requested by the insurance company. The insurer then maintained its decision on termination of benefits. The disabled person then commenced a court action. The issue was raised that more than two years had passed since the date of the termination of benefits. The insurance company argued that the disabled’s person’s claim was statute barred under the Limitations Act. The insurer filed a motion seeking summary judgment.

In Western Life Assurance Company v. Penttila, on a motion, the motions judge found that the limitation period did not start to run until the delivery of the insurer’s last denial letter related to the appeal or from the date of the insurer’s “final letter”.

On appeal, the Divisional Court found that the motion judge was correct in holding that the triggering event for the commencement of the two year limitation period was the date upon which it would be legally appropriate to commence legal proceedings to seek payment of disability benefits that the insurer refused to pay. The policy allowed for a right to appeal the insurer’s denial directly to the insurer. The Court said therefore that it would be premature to commence legal proceedings until that process ran its course. As a result, the Divisional Court upheld the Motion Judge’s decision and the disabled person was able to continue with the court action.

This decision supports the position that the limitation period for commencing a court action claiming disability benefits only begins to run once there is a final, clear, unequivocal denial of benefits. In this case, the limitation period started to run only after that appeal process is completed. That makes sense given that otherwise rights of appeal would have no value or meaning. It should be noted that not all disability policies have internal appeal rights and in many cases even if there is a right to appeal to the insurer internally, the insurer makes its clear either in the policy or letters respecting appeals that the insurer does not waive its rights under the Limitations Act. Waiting until a decision on an internal appeal to the insurer before commencing a court action is always risky.

If you are disabled and have been denied benefits, it is important to ensure that limitation periods applicable to your case are properly assessed, met and a court action is commenced before expiry of the limitation period. It is crucial to consult and retain an experienced disability law lawyer to review the circumstances of your case to determine what the limitation period is and a court action is, in fact, commenced before the limitation period expires.

Ottawa Disability Law Lawyers representing injury victims throughout Ontario.
Marc N. Quinn
Ottawa injury lawyer and mediator