A clear and unequivocal denial of benefits is a pre-condition for the commencement of the limitation period for disability insurance contracts. A communication by an insurer to an insured that a claim for disability insurance has been denied, but would be reviewed upon the provision of additional medical evidence does not postpone the commencement of the limitation period.

Pekarek v. Manufacturers Life Insurance Co., [2005] B.C.J. No. 1344, British Columbia Supreme Court

Ms. Pekarek was insured under a policy of group disability insurance issued to her former employer by the Manufacturers Life Insurance Co. (“Manufacturers”). On December 16, 1993 she applied for long-term disability benefits following a June 1992 motor vehicle accident. On June 1, 1994, Manufacturers wrote to Ms. Pekarek and advised her that her doctor had reported that she would be ready to return to work on September 1, 1994 and that her benefits would be terminated thereafter. However, Manufacturers noted that if she had any additional medical information to submit to them that they would reassess her claim based on the new information. In late August 1994, the Plaintiff provided a note to Manufacturers from her doctor indicating that she was incapable of returning to full time work until December. Manufacturers followed up with the doctor requesting more information, and advised the Plaintiff on October 12, 1994 that it was denying her appeal to provide ongoing disability benefits, and that her file would remain closed. Ms. Pekarek did not provide any additional medical information to the insurance company. In July 2000 she filed a Writ of Summons for a declaration of entitlement to benefits.

Manufacturers brought an application pursuant to Rule 18A for an order that the action be dismissed due to the expiration of the limitation period. The applicable limitation period was set out in section 22 of the Insurance Act, R.S.B.C. 1996, c. 226 which provides that every action on a contract of insurance must be commenced within one year of the furnishing of reasonably sufficient proof of loss. The Court noted that Balzer v. Sun Life Assurance Co. of Canada (2003), 227 D.L.R. (4th) (B.C.C.A.) determined that section 22 applies to disability insurance claims, but that the limitation period is not triggered until there has been a clear and unequivocal denial of a potential claim for insurance benefits. The court placed considerable emphasis on the decision of Gumpp v. Co-operators Life Insurance Co. (2004), 239 D.L.R. (4th) 638 (B.C.S.C.). In Gumpp, the insurer told its insured that the insured’s file would be closed after a certain date. The insured sought review of that decision through the insurer’s internal process. As a result, the insurer concluded that there was no new medical information and advised that the decision remained unchanged and the file remained closed. There was no communication then for one and a half years. The insured then commenced an action for a declaration of entitlement to benefits. The action was dismissed as being barred pursuant to the limitation period.

Dillon J. determined that although Manufacturers was under a continuing duty to consider new evidence, the continuing discussion between Manufacturers and Ms. Pekarek did not detract from the clarity of the denial of her benefits. Therefore, Dillon J. concluded that Manufacturers’ termination of Ms. Pekarek’s benefits was clear and unequivocal and that the action was barred by the limitation provisions of section 22 of the Insurance Act.

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