Client Update: Limitation periods & denial of LTD benefits: the NSSC decision in Cameron
A recent Supreme Court decision tackled two issues that have proven complex in Nova Scotia law: summary judgment and limitation periods. The Plaintiff in Cameron v Nova Scotia Association of Health Organizations Long Term Disability Plan, 2018 NSSC 90 missed the one-year limitation period for suing the Defendant (the “Plan”) after she was denied long-term disability benefits. Justice Rosinski granted summary judgment to the Plan and dismissed the Plaintiff’s claim.
Key facts & findings
The Plaintiff applied for LTD benefits in September 2015 (apparently as a result of anxiety disorder). The Plan denied her application by letter dated May 4, 2016. Under the terms of the Plan, as explained in the denial letter, the Plaintiff could either seek a “claim review” or bring a lawsuit in Court.
The Plaintiff chose the latter option. The Plan provided for a one-year limitation period which began to run “from the date of the claim decision” or “claim review decision”.
However, the Plaintiff’s statement of claim was not filed in the Supreme Court until November 6, 2017 – a year and a half after the claim decision was made and her application was denied.
The Plaintiff raised several arguments to try to circumvent this one-year limitation period.
First, she argued that the two-year limitation period in section 8 of the Limitation of Actions Act, SNS 2014, c 35 applied, instead of the one-year period in the Plan.
The Court rejected this argument. Section 21(1) of the Act states that an agreement can extend but not shorten a limitation period in the Act. However, section 21(2) of the Act preserves shorter limitation periods contained in agreements that were made before September 1, 2015, when the Act came into force. The Plan was dated October 1, 2010, so its one-year limitation period was still valid (although the Court did not explicitly match up the dates).
Second, the Plaintiff argued that she did not have the capacity to start her lawsuit until November 2017. Limitation periods established by the Act “do not run while a claimant is incapable of bringing a claim because of the claimant’s physical, mental or psychological condition” (see section 19). But the relevant limitation period was established under the Plan, not the Act, so this provision did not apply.1
The Court also found the Plan did not act in bad faith in communicating the denial, noting that the Trustees had no legal obligation to bring the one-year limitation period to the Plaintiff’s attention.
Application to LTD policies
Cameron demonstrates the interplay between the law of limitation periods, LTD benefits, and capacity to bring a claim, all within the thorny procedure of summary judgment.
Most long-term disability policies include a contractual limitation period, as in the Plan in this case. The Limitation of Actions Act states that an agreement (such as a long-term disability policy) may extend but not shorten a limitation period. However, if a policy does not specify a limitation period (or has a limitation period that is offside the Limitation of Actions Act), and the policy falls within the purview of the Insurance Act as a policy for life or disability insurance, an insured’s claim will have a one-year limitation period as set out in the Insurance Act.2
While an insurer does not have an obligation to bring a limitation period to an insured’s attention, denial letters should make clear that benefits are being “unequivocally” denied. And if an appeal process is available, the letter should also note that if nothing further is received by way of appeal the claim will be considered closed.
Although Stewart McKelvey was not involved with this case, if you would like to discuss limitation periods in the context of life and disability insurance in greater detail please contact Shelley Wood, Michelle Chai, or the other members of the Stewart McKelvey Life & Disability Insurance Practice Group.
1 Even if it had applied, the Court concluded there was no evidence to prove the Plaintiff’s incapacity (citing the definitions of “capacity” in the Personal Directives Act and Adult Capacity and Decision-making Act). The Plaintiff, in her own evidence, said she understood that her application for LTD benefits was denied when she received the letter in May 2016 and did not provide evidence that she was nevertheless incapable of understanding her options for challenging the denial of benefits. On the applicable test for summary judgment, it was the Plaintiff’s onus to establish incapacity, and she did not meet that burden.
2 See section 209 of the Insurance Act, RSNS 1989, c 231. In these cases, the one-year period should still override the two-year period set out in the Limitation of Actions Act. Section 6 provides that: “Where there is a conflict between this Act and any other enactment, the other enactment prevails.”
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