Confirmation of Coverage Statements did not amount to Certificate of Coverage

Confirmation of coverage benefits displayed on an online portal and a confirmation statement did not amount to a certificate of coverage so as to create a contractual relationship between the insured and the insurer in an employer group disability benefits plan. The insured had no chance of success in a claim for breach of contract against the insurer when erroneously high disability coverage was corrected due to an employer error.

Sorensen v. Investors Group Financial Services Inc., [2014] N.S.J. No. 610, 2014 NSSC 398, November 11, 2014, Nova Scotia Supreme Court, P.L. Muise J.

The insured had long-term disability coverage through her employer. The insured was required to enroll in one of four coverage options each year through an online portal. The portal displayed the benefits of coverage after the selection was made. Coverage benefits were further confirmed via a confirmation statement from the insurer. Coverage and premiums were calculated by the insurer on the basis of 70% of average earnings over the previous three years. However, due to an employer error, the insurer provided 100% of annual earning coverage for a number of years, resulting in erroneous coverage and premiums. The insured had Parkinson’s Disease and left work when her condition deteriorated to a certain point. When the insurer discovered the error, the overpaid premiums were returned and benefits at the erroneous level were continued for six months. The insured sued the insurer for breach of contract and negligent misrepresentation. She also claimed that the insurer was estopped from reducing her benefits. The insurer brought a motion for summary judgement.

The court held that the plaintiff’s claim in breach of contract had no chance of success. The disability policy was a contract between the insurer and the employer, while the insured was simply a third-party beneficiary. The benefits of coverage displayed on the online portal and the confirmation statement were representations, not certificates of coverage. Moreover, no obligation to pay the erroneous benefits was created by the portal or the confirmation statement. Further, there was no evidence that the employer acted as the agent of the insurer so as to render the insurer liable for the employer’s error because the plan was insurer administered. Finally, given that there were no accrued or inchoate contractual rights as between the insurer and the insured, the doctrine of promissory estoppel was not available to the insured.

However the court commented that although her case appeared weak, the insured had a real chance of success in the negligent misrepresentation claim because the insured testified that she would have delayed her claim for disability benefits and worked with an assistant in order to bolster her income before leaving work.

This case was digested by Michael J. Robinson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at mrobinson@harpergrey.com or dpilley@harpergrey.com or review their biographies at http://www.harpergrey.com.

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