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Disability
Insurance Concepts
CBAO
(Insurance Section)Dinner Meeting
Tuesday, April 6, 1999
By
Richard Hayles
In
order to succeed in a disability claim, the insured must establish
that he is "disabled" as this term is defined in the
policy. The existence of disability, and its duration, is the
issue most likely to form the basis of a dispute between the
insurer and the insured. Policy definitions of terms like "disability"
and "total disability" are varied. Typically, the
policy will cover the insured against the inability to perform
"each and every duty pertaining to his occupation,"1 or
against the inability "to engage in any gainful occupation
for which he is reasonably fitted by education, training or
experience,"2
or "having regard to his skill and ability."3
The outcome of the case will depend on the interpretation
which the court gives to the policy definition.
Disability policies
fall into two broad categories: "own occupation" coverage,
which insures the claimant against the inability to pursue his
usual line of work, and "any occupation" coverage,
in which benefits are payable only so long as the insured is
prevented from engaging in work for which he is suited. Since
"any occupation" benefits terminate as soon as the
insured has recovered sufficiently to perform work for which
he is reasonably fitted, regardless of whether or not he can
do his usual job, the insured will find it much more difficult
to establish "any occupation" disability than "own
occupation" disability.
Interpretation
The principles
which apply to the interpretation of the policy definition of
"total disability" were established by the Supreme
Court of Canada in Sucharov v. Paul Revere.4
The insured was the owner-manager of
an insurance brokerage who suffered from hypertension and stress.
He had a very hands-on involvement in his business, and performed
most of the tasks involved in a brokerage, including sales,
bookkeeping, and servicing policies. Although he admitted he
could perform most, if not all, of these tasks on an individual
basis, attacks of stress and nervousness prevented him from
performing all of the tasks together.
Under the policy
definition of disability, the insured qualified for benefits
if he was "completely unable to engage in his regular occupation."
In a dissenting opinion, Mr. Justice Ritchie took a literal
approach to the policy language:
I am unable to
satisfy myself that an insured who incorporates in his claim
under this policy the statement that he is able to perform
individually most of the duties of a general manager can be
said to be completely unable to engage in that occupation.
The use of the
word "completely" in the above definition appears
to me to preclude recovery by an insured under this policy
for "total disability" when he is able to perform
individually most of the duties of his regular occupation.
To my mind the word "completely" imports reference
to an inclusion of each individual part making up the totality
described.
The literal approach
was rejected, however, in the majority opinion, which was delivered
by Mr. Justice Laskin. He concluded that the court had to look
at the insured's occupation as a whole, and that Mr. Sucharov
was disabled so long as he was unable to perform "substantially
all" of his normal duties. The fact that he could function
as a bookkeeper or sales agent in an insurance brokerage did
not prove that he could perform as an owner and manager taking
on these roles and other duties besides. To hold otherwise would
change the policy from "own occupation" to "any
occupation" coverage.
In subsequent cases,
Sucharov has been taken to mean that the policy
definition of disability is to be construed liberally rather
than literally,5
and that the term "total disability"
means substantial inability regardless of the particular language
of the policy.6
Although the distinction between "own occupation"
and "any occupation" coverage is important, the principles
of interpretation established in Sucharov apply
to both categories of coverage.7
Disability always means the substantial inability
to perform the proposed job taken as a whole, and not the complete
inability to perform each and every one of the discrete tasks
that make up the job.
“Own
Occupation” Coverage
If the insured
has an "own occupation" policy, he is entitled to
benefits so long as he is unable to resume his regular occupation.
Usually, this refers to the occupation the insured was engaged
in at the time he became disabled. Total disability does not
require complete helplessness, so the insured can collect benefits
if he is "unable to perform all the substantial and material
acts necessary in his usual occupation."8
The insured is
disabled if a reasonable man would recognize that he shouldn't
work. Sometimes the insured is capable of carrying out the tasks
which make up his job, but his performance is hindered by pain,
fatigue, or medication. In other cases, medical advice or common
sense make it necessary to cease work in order to effect a cure
or prolong the insured's life.9
Business
Owners
Often the insured
has recovered sufficiently that he can begin to assume some
of the duties of his former occupation. At what point he is
able to perform "all the substantial and material acts"
which make up that occupation is a question of degree, but the
courts tend to be lenient towards the insured. This is especially
so where the claimant is self-employed or operates his own business.
The courts don't expect the claimant to shut down his business
altogether because of an illness or injury. The fact that the
insured goes to his usual place of business and does what work
he can, or works through pain in order to keep the business
going, does not by itself establish that he is no longer disabled.10
Thus a restaurant manager was considered
to be disabled, although he could complete his paperwork,11
and a carpenter could be disabled even though
he was able to supervise the renovation of his home.12
In another case, a businessman was held to be
disabled despite the fact that he had arranged financing for
his enterprise and completed some documentation.13
The claimant can continue to draw
profits from the business; this is irrelevant to the question
of disability.14
Employees
The courts take care not to penalize
the claimant for trying to work, so the insured who has taken
temporary work, or who has tried to return to his job without
success, can usually continue to claim benefits:15
No one...should
be discouraged from attempting to take up their former work,
or any work, out of fear that the attempt might be held against
him. Far from necessarily proving that an insured has the
capacity to perform his task it may...prove the reverse. There
is no better evidence of incapacity to perform a task than
the failure of an honest and sustained attempt to do it.
An employee can
collect benefits despite returning to work so long as he can
establish that his duties are restricted to light work,16
or that he is working at a reduced capacity and
that co-workers have taken on some of his responsibilities.17
Some policies,
however, contain a two part definition of disability, under
which benefits are payable so long as the claimant is unable
to work at his own occupation, and is not engaged in any gainful
occupation. Under this type of policy, the insured who returns
to work temporarily may have to account for his earnings, or
may lose his entitlement altogether during the period he is
working. Other policies expressly permit the insured to recover
partial benefits during a period of rehabilitative employment.
Multiple
Occupations
There are cases
in which it is unclear what the insured's occupation actually
is. This issue can arise where the insured has held a variety
of jobs, or has changed occupations shortly before the disability
arose. Sometimes the insured holds two jobs, or operates more
than one business. What if the insured is able to resume one
of his occupations, but not the other?
The courts recognize
that a person can have more than one occupation, especially
if he is engaged in seasonal work.18
In one case, the court resolved the issue by making
a factual determination that one occupation was the claimant's
"principal work."19
There isn't enough case law in this area, however,
to establish a hard-and-fast rule.
Specialists
The court may take
either a broad or narrow view as to what constitutes the insured's
regular occupation. This type of problem can arise in cases
involving professionals who specialize in a particular area
of practice. In one such case, the court found that the insured's
occupation was that of an ear, nose and throat specialist, and
held that he was disabled from this occupation although he may
have been able to perform other work as a physician.20
In another case, however, the court concluded
that a dentist's occupation was general dentistry rather than
a crown and bridge specialist.21
"Any
Occupation" Coverage
A typical employer's
group insurance policy provides the disabled employee with own
occupation benefits for a period of one or two years, followed
by a period of long-term disability coverage offered on an any
occupation basis. The claimant will continue to receive benefits
during the "any occupation" period so long as he is
prevented from engaging in work for which he is "reasonably
suited by training, education or experience," or work which
is suited to his "skill and ability," or some other,
similar phrase.
The transition
from own occupation to any occupation coverage is an important
juncture in the disability claim. Most insurers will take a
hard look at the claim when it reaches this point. They will
ask for an update from the claimant's treating physicians, and
they may request specialists' reports. The insurer may also
exercise its right to have its own physician conduct an examination
of the insured, and if it hasn't done so already, consult experts
in rehabilitation regarding alternative occupations.
An alternative
occupation must be something that is comparable to the insured's
former line of work in status and potential earnings. Even if
the policy doesn't contain the words "reasonably fitted
by education, training or experience," the proposed occupation
must be something for which the insured is qualified by virtue
of his schooling and work experience.22
The words "occupation," "work,"
and "employment" all suggest a degree of regularity
and continuity in a line of endeavour.23
The proposed job
must require some sort of real application or effort on the
part of the insured, and a position that "involves the
performing of practically no work" will not be considered
adequate.24
In a western case, the insured obtained an appointment as postmaster
in a small town, but virtually all of the work was done by employees
and family members, and the court concluded that the appointment
was an occupation in name only.25
The court will
be interested in the insured's physical and mental condition,
age, his formal education, his work history, any professional
or skills development courses he has taken while working, his
tolerance of stress, energy level, consistency, and endurance.
All of these matters are relevant in assessing the capacity
of the insured to succeed at the proposed job. The insured's
tastes, interests, and personality are important, too, as some
kinds of work are unsuited to certain personalities.26
Availability
of Work
Disability policies
cover the loss of the insured's capacity to work, but do not
insure against unemployment itself.27
High unemployment, or the inability of the insed
to find a job, are irrelevant to the issue of disability.
Although the insurer
need not show that there is a job opening for the insured, the
court will require evidence that a specific job does exist and
that the insured is capable of performing that job. Normally,
expert evidence in the form of a transferrable skills analysis
or a labour market survey will be required on this point. In
most cases the insured will not be called upon to relocate,
so the court will want to hear evidence as to the kinds of employment
that are available in the insured's community.28
Remuneration
Often the earning
potential of an alternative occupation is less than that of
the insured's former work. The proposed job must be "reasonably
comparable" to the insured's previous work "in status
and reward,"29
but the pay level need not match the income which
the insured is accustomed to receiving. A disparity between
the income of the two occupations is one factor which the court
will consider when deciding whether or not the new occupation
is suited to the claimant.30
The adequacy of
the remuneration is a question of degree, and there is no clear
rule establishing a point where the discrepency between the
old income and the new is unacceptable.
Nature
and Status of the Work
The courts recognize
that an alternative occupation must be consistent with the insured's
personality and social background. Thus the tastes and interests
of the insured, as well as the nature and status of his previous
work, are important factors. The courts are reluctant to accept
that an individual can retrain for work that involves a social
context and workplace environment that is foreign to him, particularly
where the individual is an older worker, or someone who has
been involved in a particular line of work for a long time.
There are many
cases in which courts have refused to compel people who are
accustomed to physical labour or outdoor work to switch to clerical
duties or light work in a store or office.31
Similarly, courts have often rejected the suggestion
that professionals, managers, and executives should take on
work which involves a reduction in social status, or even a
new speciality within the same profession.32
Where the claimant is a young person
with no long-standing commitment to a particular type of employment,
judges are more likely to conclude that retraining is appropriate.33
1.
Matthews v. Continental Casualty, 56 B.C. 213 (C.A.).
2. Campbell
v. Canada Life (1990), 45 C.C.L.I. 73 (Man. C.A.).
3. DePape v.
M.P.I.C., [1981] I.L.R. 1-1351 (Man. Q.B.).
4. [1984] I.L.R.
1-1732 (S.C.C.).
5. Hiscock
v. Metropolitan Life, [1989] I.L.R. 1-2417 (Nfld. S.C.).
6. Kay v. Blue
Cross (1990), 75 D.L.R.(4th) 571 (N.B. C.A.); Michaud v. Blue
Cross (1989), 41 C.C.L.I. 25 (N.B. C.A.).
7. MacEachern
v. Co-operative Fire & Casualty (1986), 19 C.C.L.I. 189
(N.S. S.C.), aff'd 25 C.C.L.I. 168 (C.A.).
8. Myshrall
v. Commercial Union (1986), 17 C.C.L.I. 76 (B.C. S.C.).
9. Poudrier v.
Imperial Life (1994), 25 C.C.L.I.(2d) 225 (B.C S.C.). The
allegation that a return to work will bring on a new episode
of illness must be supported by evidence rather than speculation,
however: Rose v. Paul Revere (1990), 45 C.C.L.I. 35 (B.C.
S.C.), aff'd 85 D.L.R.(4th) 433 (C.A.).
10. Mercuri
v. Imperial Life, [1990] I.L.R. 1-2660.
11. Garavellos
v. Mutual of Omaha (1976), 14 O.R.(2d) 448. (Co. Crt.).
12. Myrshrall
v. Commercial Union, above, note 8. Div.).
13. Crawford
v. Citadel General Assurance (1982), 54 N.S.R.(2d) 407 (N.S.
S.C.).
14. Glassman
v. Constellation Assurance (1983), 1 C.C.L.I. 22 (Ont. H.C.J.).
15. Foden v.
Co-operators (1979), 88 D.L.R.(3d) 750.
16. Campanella
v. Great American Insurance, [1977] I.L.R. 1-876 (Ont. Co.
Crt.).
17. Cohoe v.
Safeco Insurance, [1993] I.L.R. 1-2951 (Ont. Gen. Div.).
18. Macdonald
v. Mutual of Omaha (1987), 25 C.C.L.I. 91 (N.S. C.A.).
19.Lefebvre
v. C.N.A. (1978), 20 O.R.(2d) 37 (H.C.J.).
20.Attridge v. Fidelity & Casualty Co. (1972), 26 D.L.R.(3d)
730 (B.C. S.C.).
21.Willinsky
v. Imperial Life, [1993] I.L.R. 1-2903 (Ont. Gen. Div.).
22.Stutt v. Alberta (No. 1) (1988), 34 C.C.L.I. 78 (Alta.
Q.B.).
23.Dale v. Commercial
Union, [1980] I.L.R. 1-1271 (Ont. Co. Ct.).
24.Lang v. Metropolitan Life (1937), 4 I.L.R. 302 (Sask. K.B.).
25.Froelich v.
Continental Casualty Co., [1956] I.L.R. 1-210 (Sask. Q.B.).
26.Mercuri v. Imperial Life, [1990] I.L.R. 1-2660.
27.Constitution Insurance v. Coombe (1993), 19 C.C.L.I.(2d)
259 (Ont. Gen. Div.).
28.Collin c. Les Cooperants (1988), 36 C.C.L.I. 263 (Que.
C.A.); Braun v. Mutual of Omaha, [1987] I.L.R. 1-2181 (B.C.
S.C.).
29.Rutherford
v. Crown Life (1996), 38 C.C.L.I.(2d) 260 (Alta. Q.B.); Millward
v. Maritime Life (1989), 38 C.C.L.I. 184 (Alta. C.A.) (an
income which was 60% of the insured's former wage was considered
adequate).
30.Young v. Saskatchewan (1991), 48 C.C.L.I. 193 (Sask. Q.B.);
McCulloch v. Calgary (1985), 15 C.C.L.I. 222 (Alta. Q.B.);
Green v. Mutual of Omaha (1983), 4 C.C.L.I. 34 (N.S. S.C.).
31.Rutherford
v. Crown Life, above, note 29; Hood v. Metropolitan Life (1992),
98 Sask. R. 189 (Q.B.), aff'd (1993), 109 Sask R. 130 (C.A.);
Brooks v. London Life, [1979] I.L.R. 1-115 (Alta. C.A.); McKenzie
v. Federation Insurance, [1981] I.L.R. 1-1412 (Ont. S.C.);
Laflamme c. Bell Canada (1985), 15 C.C.L.I. 210 (Que. C.S.);
Silliker v. Aetna Life, [1976] I.L.R. 1-737 (B.C. S.C.); Campanella
v. Great American Insurance, [1977] I.L.R. 1-876 (Ont. Co.
Ct.).
32.Walls v. Constellation Assurance (1986), 17 C.C.L.I. 212
(Ont. S.C.); Willinsky v. Imperial Life, above, note 21; cf.
Pound v. Continental Casualty, [1977] I.L.R. 1-835 (Que. C.A.).
33.Labelle v. Great-West Life (1986), 17 C.C.L.I.173 (B.C.
S.C.).
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