F Disability Insurance & Human Rights

F Disability Insurance & Human Rights

Common Law Double Recovery

A brief summary of the apparent present status of the common law is that a plaintiff is allowed to sue for lost income in a wrongful dismissal claim and maintain long term disability benefits without offset where the plaintiff has contributed directly or indirectly to the full cost of the premiums for such insurance.¹

The origin of the possibility of such double recovery stems from the Supreme Court of Canada decision.²

Does this work in the But-For World?

The question of the analysis of this issue to human rights cases is a point which is most worthy of debate. In the application of the “but-for” test, the employer may well submit that the sole sum to be paid, but-for the termination, would have been the disability insurance payments, which would appear to be a logical submission. This argument has not been raised in any tribunal decisions to date. If this argument is accepted, there can be no double recovery.

Take for example, an employee who was suffering emotionally from harassment, could not work and was about to apply for disability benefits when she was terminated. Had the termination not followed – what would have otherwise happened? She would have remained off work and collected disability benefits. Why should her recovery exceed this sum?

A similar, but not the same, context arose due to adverse treatment of the applicant who suffered from a debilitating liver disease. An order of reinstatement was made even when the applicant was unable to return to active employment. No order was made of lost income as it was determined that there was no income loss due to the applicant’s receipt of employment insurance benefits (presumably of the disability genre) and long term disability insurance payments.

A similar, but not the same, context arose due to adverse treatment of the applicant who suffered from a debilitating liver disease. An order of reinstatement was made even when the applicant was unable to return to active employment. No order was made of lost income as it was determined that there was no income loss due to the applicant’s receipt of employment insurance benefits (presumably of the disability genre) and long term disability insurance payments.³

The decision does not reflect that the submission of double recovery was made before it and hence it would be an exaggeration to suggest that this decision may enable the argument.

A comparable, but also not identical issue, arose in a case⁴ in which the applicant had proven that he had been treated adversely due to the failure to accommodate a medical disability.

On the issue of the lost wage claim, the employee asserted that while he had received WSIB benefits, such should not be offset from the lost income claim as they were “locked-in”.

The Tribunal decided, in the application of the “but-for test”, that had the employer provided proper accommodation and allowed the employee to return to work, his worker’s compensation benefit would have ended. Hence the denial of the WSIB offset would have bettered his circumstance and accordingly this sum reduced the lost income claim. The parties also agreed in this case that the compensation benefits should be grossed up to reflect the fact that the payment received was non-taxable.

The plea of “but-for” to deny double recovery, as noted above, may also lead to a stream of disability income which continues for the entirety of the period of the disability as in Prince v Eaton, a common law wrongful dismissal case, as discussed elsewhere.

To the converse of the plea, where the employer is without disability insurance plans, the recovery would be zero.

Employer Conduct Causes the Disability

The exception to this submission is where it is the employer’s conduct which caused the disability in which instance a damage award should follow, regardless of the existence of disability insurance. It is in this fact situation where arguments of double recovery may arise. ⁵

An example of such a double recovery award at common law is based on the argument of consideration for the benefits, as consideration had not been proven in Sylvester. This reasoning is similar to the personal injury cases which allow the plaintiff to sue for full wage loss, even though disability payments were made by a third party insurer.⁶

This principle was applied, without argument to the contrary, in human rights decisions.⁷

The analysis misses the point, as has been discussed above. The application of the “but-for” would show only a disability claim, or not, and nothing more.

Submission on But-For & Sylvester

It makes no sense to apply Sylvester to the “but-for” analysis. But-for the termination, the affected employee would have been entitled to disability benefits and nothing else, full stop, all factors being affirmative as to proof of medical entitlement and coverage.

As noted, the down side to the employer is that the loss may be identified as a claim for LTD and related benefits such a medical and health insurance covers and pension accruals for the entirety of the disability period, one which is not related to the date of hearing. The employer would be prudent to keep disability covers in place as the termination of disability insurance will shift the liability unto itself. This could be a significant liability.

Equally, the converse argument is that absent short and long term disability covers, the employee’s recovery for relief may be lie solely in the short term solace offered by the Employment Insurance Act.

1. In the Ontario Court of Appeal decision in McNamara v Alexander Centre Industries, at trial and on appeal. This may not be the last word as the insurer may have a subrogated claim in its policy.
2. Sylvester v BC. There is also law allowing short term disability sums to be doubly recovered, as in in Zorn-Smith v Bank of Montreal. There is some debate as to whether Sylvester has been substantively eroded by Ontario Court of Appeal in Egan v Alcatel.  The employer’s application for leave to appeal to the Supreme Court was dismissed. Egan appeared very much to contradict Sylvester. Egan was not argued in Altman v Steve’s Music which applied Sylvester and allowed double recovery. It was also allowed by the Ontario Court of Appeal in Deyonge v Liberty Mutual, which was pre-Egan which stated that there was an obligation at common law that an employer must pay common law notice compensation to an employee who suffers from a medical disability, absent frustration.
3. This was the decision made in The Yukon Human Rights Board of Adjudication in its December 2008 decision of Hayes v Yukon College 67 CHRR D/408 (Evans, Tkachuk and Riseborough)
4. Backs v City of Ottawa (Muir), a decision made in February of 2012.
5. Walsh v Mobil Oil; .The argument as noted above were not presented in this cases but it is nonetheless evident that the lost income claim arose due to an inability of the applicants to work due to medical issues caused by the employer’s wrongful conduct.
6. In the Ontario Court of Appeal decision in McNamara v Alexander Centre Industries, at trial and on appeal, the plaintiff, on termination, was medically disabled. He had received the sum of $163,000 in disability benefits from August of 1995 to January 15, 1997. McNamara had testified at trial that had the employer not offered the benefits it did when he was first hired, he would have requested a higher salary. He recovered his severance claim without offset of the disability; To the same effect is the Court of Appeal decision in Sills v Children’s Aid Society of Belleville, which was released concurrently with McNamara.
7. March 2012 decision of the Alberta Human Rights Commission in Schulz v Lethbridge (McFetridge);Kerr v Boehringer Ingelheim (Parrack). The principle of potential double recovery was allowed in concept, but denied on the facts as it was determined the fact that the employer paid the disability insurance premiums was conclusive against the award of doubling up. This decision was the subject of an unsuccessful judicial review application and subsequent appeal on issues which were not related to the issues of lost income claim summarized above.