When an Insured submits a proof of loss for disability insurance, the one year limitation period contained in the policy is triggered. The Insurer is not required to give notice to their Insured that the limitation period has commenced, and the limitation period is not postponed by an appeal of the Insurer’s decision by the Insured.

Esau v. Co-operators Life Insurance Co., [2006] B.C. J. No. 1156, British Columbia Court of Appeal

Ms. Esau had a policy of disability insurance with Co-operators Life Insurance Co. (“Co-operators”). In November of 1998, Ms. Esau ceased her employment, claiming that she was disabled and unable to work. Her policy with Co-operators provided for disability benefits commencing May 17, 1999. Ms. Esau completed a written proof of loss and application for disability benefits on June 23, 1999. On October 21, 1999, Co-operators advised Ms. Esau that her application for disability benefits was refused; however, she was advised that she could appeal the decision to deny her benefits and submit additional medical evidence. There was a 31-day time limit for the submission of additional medical evidence. On March 12, 2001, after a variety of correspondence between Ms. Esau and Co-operators, Co-operators informed Ms. Esau that it had completed a review of her claim and its decision to decline her LTD claim remained unchanged.

Ms. Esau commenced a Writ of Summons on March 19, 2002 for payment of LTD benefits. Co-operators sought a Summary Judgment on the basis that Ms. Esau had failed to commence her action within the limitation period created under the policy of insurance. Under the terms of the policy, the Plaintiff was required to commence an action to enforce payment of disability benefits within one year of the date that the proof of loss was provided to Co-operators. The motions judge determined that the fact that the denial of Ms. Esau’s benefits had been appealed was irrelevant. The motion’s judge noted that he could not accept Ms. Esau’s suggestion that the contact of Co-operators in continuing to consider her appeal after the expiration of the limitation period could create an estoppel as there was no detrimental reliance by Ms. Esau on Co-operators’ actions after the expiration of the limitation period.

On appeal, Ms. Esau argued that an Insurer was required to provide a clear and unequivocal denial of the claim prior to the commencement of the limitation period. Thackray J.A., for the Court, noted that the clear and unequivocal test only comes into play when it is the conduct of the Insurer that invokes the commencement of the limitation period. In this case, since it was the conduct of the Insured, in applying for benefits, that invoked the limitation period, no clear and unequivocal notice from the Insurer was required.

In concurring Reasons, Madam Justice Levine noted that the commencement of the limitation period in conjunction with the appeal process created uncertainty for both lawyers and claimants. A judicial plea to the legislature was made to relieve consumers, insurers and the courts from the current, “untenable”, situation in which disabled persons experience the stress of technical legal battles rather than the peace of mind that their disability insurance was intended to provide. Despite these comments, a unanimous court dismissed the appeal.

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