Duane Smith v. Sun Life Assurance Company of Canada, 2021 ONSC 7109

In this case the defendant brought a motion seeking summary judgment dismissing the plaintiff’s claim after the plaintiff failed to submit a formal application for long-term disability (“LTD”) benefits. The defendant raised the issue in their Statement of Defence and the plaintiff subsequently amended his Statement of Claim to plead relief from forfeiture. The plaintiff argued that the lack of a formal LTD application amounted to imperfect compliance with the terms of the disability policy and relief from forfeiture was warranted.

The plaintiff was a gardener with the City of Kitchener who was unable to
continue working as a result of depression in April 2019. The plaintiff applied
for, and received, short-term disability (“STD”) benefits from early April to late
May 2019, at which point he participated in a gradual return to work plan. In
mid-December 2019, the plaintiff discontinued working again due to another
depressive episode.

On April 28, 2020, the plaintiff submitted another application seeking STD
benefits from the defendant with respect to his inability to work beyond
mid-December 2019. In June 2020, the defendant retained a doctor to conduct
two internal psychiatric reviews of the plaintiff’s file. The psychiatric reviews
found that the plaintiff was not entitled to STD benefits and the defendant
advised the plaintiff of this via letter dated July 22, 2020. The plaintiff appealed
the denial of his STD benefits claim and on August 25, 2020, the defendant
upheld their denial of the plaintiff’s claim.

After the plaintiff’s deadline to submit a formal LTD application passed on Sep-
tember 10, 2020, he issued a Statement of Claim on October 29, 2020. Notably, the date the Plaintiff would have been eligible to receive LTD benefits, if he was found to be disabled under the terms of the policy, was June 12, 2020.

In deciding the summary judgment motion, the Court reviewed a line of relevant cases and Rule 20.04(2)(a) of the Rules of Civil Procedure. Rule 20.04(2)(a) of the Rules of Civil Procedure, states “20.04(2) The court shall grant summary judgment if, (a) the court is satisfied that there is no genuine issue requiring a
trial with respect to a claim or defence.”

The Court then reviewed the Supreme Court of Canada case Hryniak v. Maul-
din 2014 SCC 7, [2014] 1 S.C.R. 87, which held that a Court may only use the evidence before it when deciding if there is a genuine issue for trial. In his Endorsement in the case at hand (Smith v. Sun Life), Justice Diamond stated that “The Court may only grant summary judgment if there is sufficient evidence to justly and fairly adjudicate the dispute, and if summary judgment would be an affordable, timely and proportionate procedure.” Justice Diamond noted that the overarching principle is proportionality.

Justice Diamond noted that pursuant to Sanzone v. Schechter 2016 ONCA 566, the moving party must discharge its evidentiary burden of proving that there
is no genuine issue requiring a trial. The burden then shifts to the responding
party to demonstrate their claim has a genuine chance of success. If the Court finds there is a genuine issue requiring a trial, based on the evidence on record, the analysis then shifts to whether a Court can determine if the need for a trial can be avoided by using the fact-finding powers in Rule 20.04 (2.1) of the Rules of Civil Procedure.

After reviewing the record, Justice Diamond posed three questions to deter-
mine the merits of the summary judgment motion:

  1. Does this Court have jurisdiction to hear this proceeding?

    The Court wasted little time on this question before confirming it had jurisdiction to hear the proceeding.
  2. Is the plaintiff’s failure to submit a formal claim for LTD benefits
    non-compliance, or imperfect compliance, with the policy

    The Court then reviewed whether the plaintiff’s failure to submit a formal LTD
    application was non-compliance or imperfect compliance.

    The Court restated the difference between the two concepts, noting the
    jurisprudence has generally treated a failure to give notice of a claim in a timely
    fashion as imperfect compliance, whereas a failure to institute an action within
    the prescribed time period has been viewed as non-compliance.

    Where there is non-compliance, the Court will typically decide in favour of
    the party moving for summary judgment and relief from forfeiture will not be

In the case at hand, Justice Diamond found that the plaintiff’s failure amounted
to imperfect compliance due to the defendant having already known about the
plaintiff’s disability as they had adjudicated his application for STD benefits.
Despite the defendant arguing that the plaintiff had still not submitted an LTD application at the time of the motion, Justice Diamond noted that the defen-
dant’s denial of the plaintiff’s claim for STD benefits made it likely that his LTD benefits application would be denied as well. There was nothing to suggest the
defendant would have acted otherwise, “therefore rending its argument quite
technical and crossing over into the world of ‘gotcha litigation’.”
The Court also pointed out the defendant had provided the plaintiff with an
Attending Physician’s Questionnaire Claim form that was specifically for an LTD claim, and that this form was completed and submitted by the plaintiff’s physician. Therefore, while the plaintiff’s LTD application had not been completed,
the defendant nonetheless “had (albeit imperfect) notice that the plaintiff was
pursuing a claim for LTD benefits.”

Accordingly, Justice Diamond found that the plaintiff’s failure to submit an
LTD application amounted to imperfect compliance, which made the equitable
remedy of relief from forfeiture available to him.

  1. If the answer to Issue #2 is “imperfect compliance”, should relief
    from forfeiture be granted in favor of the plaintiff?

    On the final question, the Court considers three factors before concluding
    whether relief from forfeiture should be granted to the plaintiff:

    a) The conduct of the insured

    Plaintiff’s counsel took the position that they believed a formal LTD application
    was unnecessary. Justice Diamond believed this factor to be neutral at best, noting that he did appreciate the plaintiff’s position that it was somewhat reasonable to assume that the plaintiff’s LTD application would have been denied given how the defendant responded to his STD application.

    b) The gravity of the insured’s breach

    The Court noted that it is to assess both the nature of the insured’s breach and the impact of the insured’s breach upon the insurer. With regard to the seriousness of the plaintiff’s breach, the Court found that any prejudice experienced by the defendant was not substantial as the defendant had already conducted its own investigation into the merits of the plaintiff’s disability. The defendant was aware of the plaintiff’s disability and had conducted at least two internal medical reviews of the plaintiff’s STD claim. Further, the Court explained that documentary and oral discovery remained available to the defendant to obtain additional information as needed. As a result, the Court held this factor favours the plaintiff.

    c) The disparity between the value of the property forfeited and the damages caused by the insured’s breach.

    On the third and final factor, the Court reiterated that any prejudice suffered by the defendant was not substantial with respect to any alleged inability to further investigate the plaintiff’s claim for disability benefits.

There was very little evidence that the defendant has or will suffer any measur-
able damages caused by the plaintiff’s failure to submit a formal claim for LTD benefits. Justice Diamond pointed out that the total value of the plaintiff’s claim for LTD benefits to age 65 is a rather high number, and while it is unknown whether the plaintiff’s claim will be successful or for how long LTD benefits would be paid.

The Court therefore acknowledged that precluding the plaintiff from pursuing
his claim for LTD benefits would cause the plaintiff far more prejudice than his
failure to apply for LTD benefits caused the defendant. Justice Diamond held
that this factor thus also favours the plaintiff.

In the end, given that the factors favoured the plaintiff, the Court found it was in the interest of justice to grant the plaintiff relief from forfeiture and permitted him to pursue his claim for LTD benefits in the proceeding.

The defendant’s motion for summary judgment was dismissed and costs were
awarded in favour of the plaintiff in the amount of $15,000.00.

While the outcome in this case was favourable to the plaintiff, the motion
could have been avoided if the plaintiff filed a formal LTD application prior to
the issuance of their Statement of Claim. Plaintiff’s counsel should be mindful
of making it a practice to have their clients complete and submit a formal LTD
application as early in the process as practicable to prevent the possibility of
having their client’s claim dismissed or lost on a technicality.