Kardaras v. Sun Life Assurance Company of Canada, 2020 ONSC 392, is a recent long term disability trial decision where Sun Life was ordered to pay general damages for mental distress because it assessed the plaintiff’s claim in a manner that was not reasonable and balanced, contrary to the duty of good faith. The claim is also noteworthy because the plaintiff was found to be “totally disabled” and met the “own occupation” test of disability, both defined terms in the policy, despite working three days per week. She did not meet the more stringent “any occupation” test required for payment of long term disability benefits beyond two years.
This case is essential reading for long term disability lawyers, LTD claims handlers, and anyone with an interest in insurance law.
Ms. Kardaras suffered from mental illness, including depression and anxiety. She was unable to work, and submitted a claim for short term disability and long term disability benefits.
Sun Life initially approved the claim on the basis that the claimant was disabled from her own occupation, which was the test of disability for the first two years under this policy.
While still within the own occupation period, Ms. Kardaras participated in a gradual return to work program. By the time she had built her working tolerance up to four days per week, she experienced a deterioration of her mental health. Her treating psychiatrist recommended she reduce her hours to three days weekly. Sun Life disagreed and denied the claim.
Ms. Kardaras continued to work three days per week, but at a reduced workload. She was less productive and suffered emotional breakdowns. She appealed Sun Life’s denial three times. All three appeals were unsuccessful, despite providing compelling new evidence from her treating psychiatrist. Ms. Karadaras eventually brought a lawsuit, claiming past long term disability benefits owed, under both the own occupation and any occupation tests of disability. She also advanced claims for aggravated and general damages for Sun Life’s breach of duty of good faith.
Success was divided. The plaintiff was entitled to disability benefits for the entirety of the own occupation timeframe, despite working three days per week. She did not, however, meet the more difficult any occupation test of disability. The case is particularly noteworthy because there was a finding of bad faith on the part of Sun Life. The insurer was ordered to pay $10,000 general damages to compensate the plaintiff for the emotional distress it caused her.
Own Occupation Test of Disability
The decision confirms the plaintiff was in fact disabled from her own occupation and awarded payment of past benefits owing for the remainder of the two year own occupation period. The plaintiff’s treating psychiatrist’s opinion prevailed over the limited evidence presented by Sun Life, including an opinion from an internal psychiatrist who never assessed the claimant. The judge stated:
In short, I accept that Dr. Sethna, a highly competent psychiatrist, was engaged in the delicate work of trying various strategies to improve the symptoms of a patient he had treated for many years. Although her symptoms had improved since the time when she first went off work in September 2014, she continued to struggle with symptoms of a reduced level of intensity, but which nonetheless had a serious impact on her quality of life. With respect for Dr. Esche, who was limited by the nature of the review she conducted, her conclusions based on her paper review of the file does not convince me that Ms. Kardaras was medically capable of returning to work full-time on January 25, 2016, without the risk of a major relapse and serious suffering.
The judge continued later in the reasons:
… without having any other medical information or having completed any other medical review, Sun Life maintained its position that Ms. Kardaras was capable of returning to work on January 25, 2016. When Ms. Kardaras appealed this decision, Sun Life refused the appeal and discontinued her benefits effective January 25.
Sun Life also relied on surveillance evidence at trial, which showed the plaintiff shopping and running errands. On some days she was not observed at all. The judge was not impressed by the surveillance, noting it was not inconsistent with the plaintiff’s claims.
Any Occupation Test of Disability
In finding Ms. Kardaras did not meet the more difficult any occupation test of disability, the Judge here focused on the plaintiff’s demonstrated ability to work in her own occupation three days per week, which resulted in 73% of her pre-disability earnings:
In this case, taking all of the circumstances into account, including that Ms. Kardaras has the same title, performs some of the same tasks, and earns approximately 73% of her prior income, I conclude that her current employment is reasonably commensurate to her pre-disability employment in status and reward, and taking into account her education, training and experience. Accordingly, Ms. Kardaras was not entitled to benefits under the Policy from the completion of the “own occupation” period under the Policy and to the date of trial.
Bad Faith And Mental Distress
The contract between an insurer and the individual insured by the policy is a contract of utmost good faith. There is an implied obligation in every long term disability insurance policy that the insurer will deal with LTD claims in good faith. This duty of good faith requires the insurer to assess long term disability claims in a fair and balanced manner.
When an insurer breaches the duty of good faith, there are three types of possible awards: punitive damages, aggravated damages, and general damages. In Canada, these extra contractual damages are rare and generally modest. In this case, the trial judge concluded general damages were appropriate, because:
- Sun Life discontinued payment of long term disability benefits despite a lack of medical evidence the plaintiff could work more than three days per week. It did not have anything solid to contradict the treating psychiatrist’s opinion.
- Sun Life maintained its denial of long term disability benefits on the basis of its own internal medical consultant, who had never assessed nor even met Ms. Kardaras.
- Sun Life did not have an open mind when considering new medical information provided on appeal.
- Sun Life preferred the opinion of its own internal medical assessor over those who had actually treated her.
- Sun Life failed to obtain an independent medical examination in the face of competing medical opinions.
- Sun Life required Ms. Kardaras to participate in a gradual return to work program, and when she was unable to progress to full time, it held the part time work against her by stating the part time work amounted to performing the essential duties of her own occupation.
Ultimately, the damages awarded were modest, just $10,000.
There are several key takeaways here.
Working part time does not preclude the possibility of being totally disabled from one’s own occupation. This is consistent with other caselaw.
The any occupation test of disability is more difficult to meet, and in this case working three days per week in the plaintiff’s own occupation was adequate evidence to demonstrate that she did not meet the test. Had she only worked one or two days per week, she may well have met the any occupation test of disability.
The case is also noteworthy because it is another decision in a small but growing list of cases where the court is willing to call out bad faith on the part of long term disability insurers and award aggravated or general damages.
Long term disability insurers should pay careful attention to the opinions of treating physicians, and not be quick to rely on internal medical consultants who have not conducted in person assessments. Nor should disability insurers rely on weak surveillance evidence, especially in cases involving depression and anxiety.
Lastly, when gains are made in a gradual return to work program, those gains should not be used by insurers as justification for denying meritorious claims.
Michael Jordan is a Toronto long term disability lawyer with offices in London and Ottawa. He represents clients across all of Ontario who have been denied LTD benefits.