The Superior Court dismissed the plaintiff’s action for damages for failure to pay long term disability benefits because the essential character of the dispute arose from the interpretation, application and administration of a collective agreement which provided that such disputes were to be determined through binding arbitration

Morris v. Manufacturers Life Assurance Co., [2005] O.J. No. 712,  Ontario Superior Court of Justice

In this case, the defendants, the City of Toronto (the “City”) and Manufacturers Life Assurance Co. (“Manulife”), made a motion to dismiss the plaintiff’s action for damages for failure to pay long-term disability benefits.

The plaintiff was a union member employed by the City. The City entered into an agreement with the defendant insurer for the purpose of providing benefits to employees, but elected to have the insurer provide administrative services only. The City agreed to self-insure for the long-term disability payments, and pay a fee to Manulife for the administration of the program. The group benefits contract provided that the City would have the ultimate authority to decide whether to pay or refuse payment of the benefits.

The collective agreement stated that where a difference arose between the parties relating to “the interpretation, application or administration of the agreement, including any question as to whether a matter is arbitrable”, the matter should be determined by binding arbitration. The defendants argued that the essential character of the grievance arose from the interpretation, application and administration of a collective agreement, that the court must decline jurisdiction and that a labour arbitrator must decide at first instance whether the dispute is arbitrable.

The court held that there was an arguable basis to suggest that entitlement to long-term disability benefits flowed from the administration of the collective agreement. Accordingly, the decision as to whether the matter was arbitrable should be left to the arbitrator. The Court also held that the parties to the collective agreement intended that disputes about benefits would be resolved by arbitration. The collective agreement expressly provided that differences as to benefit entitlement would be arbitrated. The fact that every term of the entitlement to long-term disability benefits is not incorporated into the collective agreement was not fatal to the arbitrator’s ability to assess whether benefits should be granted. The arbitrator could examine the plan and the collective agreement and determine whether the plaintiff was entitled to the benefits.

The court cited with approval New Brunswick v. O’Leary, [1995] 2 SCR 967 which held that it is the essential character of the difference between the parties, not the legal framework in which the dispute is cast which is determinative of the appropriate forum for settlement of the issue. Accordingly, the action was dismissed against both defendants with costs.

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