No Right to Bring Crossclaim when Disability Insurer had Denied Liability

No-fault statutory benefit insurer had no right to bring crossclaim against disability insurer for reimbursement of benefits paid by no-fault insurer when disability insurer had denied liability to the insured.

Ng. v. Cole, [2013] O.J. No. 4867, October 24, 2013, Ontario Superior Court of Justice, J.C. Murray J.

Manulife Financial brought a motion seeking to strike a crossclaim brought against it by the Dominion of Canada General Insurance Company on the basis that the crossclaim based on unjust enrichment did not establish a valid cause of action against Manulife.

In the underlying action the plaintiff brought a claim against multiple defendants arising out of a slip and fall accident and a motor vehicle accident. The plaintiff applied for long term disability benefits pursuant to a disability insurance policy with Manulife. Manulife denied the claim on the basis that he was not totally disabled and did not qualify for such benefits. The plaintiff sued Manulife. The plaintiff also sued Dominion for no-fault statutory accident benefits. Dominion crossclaimed against Manulife for an amount equal to the disability benefits paid to the plaintiff by Dominion for the time during which it asserted that Manulife was obligated to pay disability benefits to the plaintiff pursuant to the plaintiff’s long term disability coverage.

The Dominion’s crossclaim against Manulife was struck on the basis that Dominion could not set off against income replacement benefits payable to the plaintiff any hypothetical long term disability benefits applied for but refused by Manulife and, further, could not claim reimbursement of such hypothetical benefits directly from Manulife on the basis of unjust enrichment. The statutory right to deduct disability payments would arise only if the plaintiff had been paid benefits or if he had failed to apply for those benefits. The obligation of Dominion to pay income replacement benefits in circumstances where a long term disability insurer has refused to acknowledge liability is a situation contemplated by the legislation.

This case was digested by Cameron B. Elder and edited by David W. Pilley of Harper Grey LLP.

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