Skip to Content

Client Update: Recent Developments: Disability Insurance Policies

RECENT DEVELOPMENTS: DISABILITY INSURANCE POLICIES & LIMITATION PERIODS IN NOVA SCOTIA

Two recent Nova Scotia decisions have clarified the issue of limitation periods in disability insurance policies and “rolling” limitation periods.

 

THORNTON V. RBC GENERAL INSURANCE COMPANY, 2014 NSSC 215

In 1998, Unum denied Thornton’s application for disability benefits under a group policy issued by Unum (which RBC later assumed responsibility for). In January, 2008, Thornton started an action against Unum as the disability insurer who provided benefits to employees of Volvo Canada. However, the pleadings were never served.

Fast forward to 2012; Thornton filed an amended pleading, replacing Unum with RBC because RBC had assumed Unum’s liability for the disability benefits. RBC filed a motion for summary judgment, arguing (in part) that the applicable limitation period had expired.

Justice Michael Wood referred to cases from Ontario and New Brunswick considering insurance policies for which the limitation period was said to run from the date on which the cause of action arose. In interpreting such policies, some cases had found that there was a “rolling” limitation period, which started afresh each time a monthly payment was not made as the cause of action arose each time a payment was not made.

The policy before Justice Wood provided that an insured could not start a legal action more than three years after the time proof of claim was required, which was stated to be no more than 90 days after the end of the elimination period. The elimination period was defined in the policy as 180 days following the first day of disability.

The language of the policy, therefore, did not create a rolling limitation period. Justice Wood held that policies that trigger the beginning of the limitation period with a defined date which does not recur every month do not create a rolling limitation period. In order to trigger the beginning of the limitation period for such policies, it is necessary to have a clear and unequivocal denial of benefits. 

Justice Wood found there was a clear and unambiguous denial of Thornton’s request for disability benefits in June 1998, which commenced the three year limitation period and, therefore, the proceedings had to be started no later than 2002.

Finally, the Nova Scotia Limitation of Actions Act gives the Court discretion to extend a limitation period for up to four years. However, even if granted, the four-year extension up to 2006 would not be sufficient to save the action which had been commenced in 2008. Justice Wood found that Thornton’s claim was barred by the expiry of the limitation period eight years prior and dismissed Thornton’s action.

 

APPLYING THORNTON

Following Thornton, RBC brought a motion for summary judgment in Thompson v. RBC Life Insurance Company, 2014 NSSC 434. RBC sought to dismiss Thompson’s claims under a group disability insurance policy on the basis the limitation period in the policy had expired. The policy stated that a claimant could start a legal action “up to 1 year from the time the proof of claim is required”. Proof of claim had to be provided at the latest 1 year and 90 days after the beginning of disability. In Thompson’s case, proof of claim was absolutely required by December 8, 2004, and therefore the latest her claim could be started was December 8, 2005.

The first issue before Justice Jamie Campbell was when benefits had been clearly denied. Thompson’s claim was initially denied in January 2004. She appealed and RBC again denied her claim in June 2004. In November 2004, Thompson provided new medical information to RBC and her claim was reopened. Finally, on November 17, 2005, RBC wrote to Thompson denying her claim yet again.

Each time RBC had denied Thompson’s claim they had informed her that their determination was “final” – although she had a right to appeal each time. Despite this, Justice Campbell held that the word “final” had “not been used and disregarded with such frequency that it can reasonably be said to have lost its meaning”.

Thompson had understood the denial was “final” in 2005 but was unaware she could bring a claim against RBC without having to pay a lawyer upfront (she didn’t know about contingency fee arrangements until 2008). She retained a lawyer in 2008, and then retained a different lawyer in April 2011, and the action against RBC was finally commenced on May 22, 2011 – nearly six years after the denial. Justice Campbell commented that Thompson had known full well she had a legal right to bring a claim against RBC and a person cannot avoid a limitation period by ignoring it or not noticing it.

Following Justice Wood’s decision in Thornton, Justice Campbell held that a clear denial had occurred on November 17, 2005 and Thompson’s claim had been filed well beyond the one year from November 17, 2005 and well beyond the four-year extension period (see above).

The second issue before Justice Campbell was Thompson’s argument that the limitations language in the policy was “unintelligible” and therefore the limitation period should be 6 years as set out in the Limitations of Actions Act. The policy read:

WHAT ARE THE TIME LIMITS FOR LEGAL PROCEEDINGS?

You can start legal action regarding your claim 60 days after proof of claim has been given and up to 1 year from the time proof of claim is required.

Thompson argued that the time limitation in the policy was “permissive not mandatory” because of the word “can”. Thompson attempted to distinguish Thornton by arguing the policy in Thornton had read “cannot start any legal action…more than 3 years after the time proof of claim is required”.

Justice Campbell held that accepting Thompson’s interpretation would render the provision meaningless, and her argument ignored the words “TIME LIMITS” and “up to”. He concluded the policy’s limitation period was clear, it had been missed, and dismissed Thompson’s claim.

 

LESSONS LEARNED

The limitation period will depend on the specific language of the policy. The case does not decide whether there is a rolling limitation for Section B claims or whether in fact a Nova Scotia Court will accept the concept of rolling limitation periods in disability policies but does clarify when there will not be a rolling limitation.

Some policies which provide for periodic payments may be interpreted to create a rolling limitation period, which starts anew each month that the benefit allegedly payable is not paid. Other policies define the limitation period with reference to a defined date, which does not recur every month, and, therefore, do not create a rolling limitation period.

In order to trigger the limitation period for such policies, the insurer must clearly and unequivocally deny benefits to the insured. Finally, a review of the limitations language in your policies may be necessary to ensure it is understandable and a defined date is calculable.

If you have any questions about limitation periods in Nova Scotia contact Patricia MitchellTyana Caplan, or Michelle Chai.  In other Atlantic provinces contact any member of the  Life & Disability Insurance Practice Group for assistance.

Archive

Privacy rights in the workplace: Supreme Court expands charter protections for public school teachers

BY Chad Sullivan & Chiara Nannucci

By Chad Sullivan and Chiara Nannucci Introduction A recent Supreme Court of Canada decision (York Region District School Board v. Elementary Teachers’ Federation of Ontario, 2024 SCC 22) has once…

Read More

New rules allowing Nova Scotia private sector employers to join Public Service Superannuation Plan take effect

BY Dante Manna & Noah Archibald

By Dante Manna and Noah Archibald The Provincial Government recently proclaimed the Private Sector Pension Plan Transfer Act (the “Transfer Act”) and newly released regulations on February 4, 2025. The…

Read More

Outlook for 2025 proxy season

By Andrew V. Burke, Colleen P. Keyes, Gavin Stuttard, David F. Slipp and Logan G. Walters With proxy season on the horizon, many public companies are once again preparing their…

Read More

Here we go again … how recent updates to Canada’s supply chain transparency reporting guidance may impact your 2025 reporting obligations

By Christine Pound, Colleen Keyes, K.C., and Daniel Roth As reporting entities and government institutions prepare their supply chain transparency reports, Public Safety Canada (“PSC“) has updated its guidance for…

Read More

Energy Watch 2025

Stewart McKelvey is pleased to present Energy Watch – a review of key legislative and policy advancements in the renewable energy sector in 2024 in Newfoundland and Labrador, Nova Scotia and New Brunswick and a look forward to anticipated activities in 2025.

Read More

Land use planning in Prince Edward Island – the year in review

BY Curtis Doyle

By Curtis Doyle Once again, the time has come to review the year that was and to chart the course for the year ahead. For municipalities and planning professionals in…

Read More

The impact of possible tariff changes on Canadian importers and strategies for consideration (Part II)

BY Michelle Chai & Graeme Hiebert

By Michelle Chai and Graeme Hiebert This is the second in a two-part Thought Leadership series. To read Part I, click here. Appearance, design, best use, marketing and distribution While the…

Read More

Canada’s Energy Story: Energy Transition

Lawyers from our Energy Group were pleased to be featured in the latest issue of Canada’s Energy Story, an annual compendium of energy sector articles published by the Energy Council…

Read More

The impact of possible tariff changes on Canadian importers and strategies for consideration (Part I)

BY Michelle Chai & Graeme Hiebert

By Michelle Chai and Graeme Hiebert On January 20th, 2025, Donald Trump will be inaugurated as President of the United States. He has promised to swiftly impose tariffs on all…

Read More

Canada’s new criminal rate of interest takes effect

BY David Wedlake & Noah Archibald

By David Wedlake and Noah Archibald The Federal Government’s changes to the criminal rate of interest under the Criminal Code came into effect on January 1, 2025. These changes reduced…

Read More

Search Archive