Car accident and long-term disability cases: What’s the difference?

By Matt Lalande in Car Accidents, Long-Term Disability on March 29, 2022

The key takeaway is that in long-term disability cases, contractual causes of actions (contractual lawsuits) and the test(s) and eligibility for income replacement benefits are governed by the terms of the disability contract, whereas car accident cases are generally governed by Ontario’s Statutory Accident Benefits Schedule – which are what we call no-fault benefits.

An long-term disability case generally arises out of the contractual relationship between an employer, an insurer and an individual – either an employee or a private individual that purchased a private individual policy.

Who’s covered where?

In an employment setting, the contract for disability insurance coverage is between the employer and the disability insurance company, with an employee or class of employees listed as the “third-party beneficiaries”.  An employee can then choose to accept the insurance coverage negotiated and offered by the employer to the employee; they can reject it, in some circumstances; and/or opt for additional coverage or their own coverage in other circumstances. Employees are not involved in the negotiation of what insurance coverage their employer and insurer will offer.

By contrast, no-fault benefit insurers (car accident insurance companies) deal directly with you, as the insured person, in negotiating and providing coverage. Thus, in a typical long-term disability statement of defence (a response to your lawsuit) you will often see defence counsel plead that there is ‘no privity of contract’ between the plaintiff insured and the defendant insurer – which is The relationship that exists between parties to a contract. Only those parties to the contract are bound by the terms of the contract and can enforce the contractual obligations under the contract. Notwithstanding this, an insured employee is still allowed to pursue a legal cause of action against the disability insurer for long-term disability benefits (as a third-party beneficiary). The privity of contract defence is not typically included in a case involving a car accident lawsuit or if a person is disputing denied accident benefits.

Premiums: Long-Term Disability vs Car Insurance

Unlike car accident insurance, an employer can elect to pay the premiums to the insurer directly if they provide long-term disability coverage to an employee. However, the insurance premiums for car insurance are payable by you directly, as the insured. Consequently, it is important for disability lawyers, during their investigation of the disability claim, to determine who is responsible for paying the disability insurance premiums, as they will often times affect the taxability of LTD claims. For example, if an employee paid their own short or long-term disability premiums, any benefits they receive would therefore be tax-free. This matters in term of settlement of a disability claim. The same theory applies to disability insurance premiums that a person pays for an individual disability insurance policy (not provided through work). If you pay premiums for your individual disability insurance policy yourself, using after-tax money, any benefits you would then receive are tax-free. If the premiums were paid by the employee, those premiums might also be recoverable during the period where they did not receive benefits.

Jurisdiction Issues

Where you file your dispute also matters. Typically, the Ontario Superior Court has jurisdiction to hear all long-term disability cases. By contrast, a plaintiff seeking the recovery of denied or unpaid no-fault benefits would have to file a claim with the Licence and Appeals Tribunal of Ontario (“LAT”).

However, there are some instances where an LTD lawsuit cannot be filed with the Ontario Superior Court; particularly, when there is a collective bargaining agreement in place between the plaintiff’s employer and the plaintiff’s union.

If a collective bargaining agreement applies or is in force at the time of an LTD lawsuit, then the Superior Court may not be the proper jurisdiction to litigate LTD denials. If the bargaining agreement governs LTD matters, then the insured will have to consult their union, and the matter might have to go through private arbitration. The courts will look to four distinct factors as to whether an LTD action will proceed in Superior Court or will be decided through private arbitration, when a collective bargaining agreement is in place:

1. where the collective agreement does not set out the benefit sought to be enforced, the claim is inarbitrable;
2. where the collective agreement stipulates that the employer is obliged to provide certain medical or sick-pay benefits, but does not incorporate the plan into the agreement or make specific reference to it, the claim is arbitrable;
3. where the collective agreement only obliges the employer to pay the premiums associated with an insurance plan, the claim is inarbitrable.

At the start of a case, if a collective bargaining agreement is in place, our Hamilton disability lawyers always try to find out whether:

• any grievances have been filed;
• what the status of the claimant’s employment is; and
• whether the LTD matter has already been adjudicated (meaning, did an arbitrator already determine that the LTD matter is not arbitrable?).

What a Judge Can Award at Trial

Another difference between long-term disability and car accident cases is what can be awarded at trial.  In a car accident case, an injured car accident victim may be entitled to (among other things) monetary compensation for pain and suffering, compensation for past wage losses, future wage losses, loss of housekeeping capacity losses and money for past and future medical treatment. In a long-term disability case, a plaintiff is not entitled to such compensation.

A long-term disability case is framed as a case for breach of contract. A plaintiff is not entitled to “compensation” per se – except if bad faith or punitive type damages. A plaintiff is entitled to ask a Judge for a declaration that he or she is disabled pursuant to the terms of the disability contract.  LTD contracts stipulate that a claimant shall receive income replacement benefits if they meet the test for disability, engage in consistent treatment plans, follow recommended medical advice and continue to be off work – but are only eligible to receive such benefits up until the age of 65.

Due to the fact that it is usually unknown whether a claimant will be able to return to work or not, it is unlikely that a judge would rule that a claimant will be disabled till age 65. Thus, a plaintiff could receive LTD benefits that were not paid from the date of the denial to present where the plaintiff was able to successfully show that he was going to be disabled till age 65. Ultimately, whether a claimant is disabled till age 65 will be determined by the evidence presented by both parties at trial.

CPP Disability: Long-Term Disability and Car Accident Cases

Private long-term disability insurers can, and most of the time do, structure their insurance contracts such that any benefits a disabled employee receives from CPP are deducted from the amount the disability
insurer is obligated to pay. For instance, if a worker is entitled under a private LTD policy to $4000 per month in disability benefits, and CPP allows the employee a monthly benefit of $1300, the disability insurer will only pay the amount required to raise the employee’s monthly LTD income to $4000 – in this example, $2700.

From a car accident perspective – you are not entitled to double recovery. CPP disability benefits that are received by an accident victim are deductible from income replacement benefits (IRBs) under the no-fault schedule. There is no way around it.

CPP disability benefits are also deductible from any car accident judge or jury awards of past or future income loss or loss of earning capacity. In terms of your past wage losses, you are entitled to 70% of your gross, less income replacement benefits or CPP benefits which are paid or available to you. In terms of your future wage losses, CPP disability payments are deductible from a Plaintiff’s income award

If you or a loved one has been denied long-term disability or suffered severe car accident injuries, we can help.

Since 2003, Matt Lalande has litigated hundreds of disability and car accident cases and has recovered millions in compensation for victims in Hamilton and across Ontario. If you have suffered serious injuries or you have been denied your long-term disability benefits, call us no matter where you are in Ontario at 1-844-LALANDE (525-2633) or local in the Hamilton / Niagara / Burlington areas at 905-333-8888. Alternatively you can email through our website and we will get right back to you. We would be more than happy to to the time you need to speak to you and your family about your legal situation.