Short-term and long-term disability insurance is meant to provide financial support when you’re unable to work due to illness or injury. But what happens when your insurance company denies your claim or terminates your benefits prematurely? 

Unfortunately, this is a reality many people face, often at a time when they need support the most. If your claim is denied or terminated, litigation against the insurance company may be your next step. This blog will guide you through the litigation process, so you can understand your rights and what to expect.

Appealing vs. Litigation: What’s the Difference?

Before you rush into litigation, it’s important to understand the internal appeal process that most insurance companies offer. This is often the first step after a denial or termination. Keep in mind that you do not need to appeal before starting a court action and suing the insurance company. Deciding whether to appeal or sue is case specific and best discussed with an experienced long-term disability insurance lawyer. 

Internal Appeals: This process usually involves submitting additional medical evidence or addressing the reasons the insurer gave for the denial. However, the success rate for appeals is typically low because the insurer essentially reviews its own decision and might not be open to changing its determination, even with new persuasive evidence in hand.

While appealing can sometimes resolve the issue, if you have already provided all the information you and your treatment providers have and you are tired and overwhelmed by the thought of having to continue to fight with your insurance company, or if your appeal is denied, then your next step will be finding an experienced disability lawyer to fight your claim in court. 

Consulting a Lawyer

If you’ve decided to pursue litigation, your first step should be to consult with a lawyer who specializes in disability insurance claims. An experienced disability lawyer will help you:

• Review the Insurance Policy: The lawyer will review the specific terms of your insurance policy to understand what’s covered, the definition of disability, and whether the insurer has breached the contract.

• Gather Evidence: Your lawyer will work with you to gather all the necessary medical records, employment information, and expert opinions to support your case. They may also coordinate with your doctors to ensure your condition is clearly and accurately presented.

• Negotiate with the Insurance Company: In many cases, simply having a lawyer on your side can encourage the insurer to reconsider the claim and engage in negotiations before the matter goes to trial.

• Evaluate Your Case: Your lawyer will provide an objective view of your case, helping you understand the likelihood of success and the potential outcomes.

Most lawyers work on a contingency fee basis, meaning they only get paid if you win, which makes it more accessible for you to seek justice while you are without an income.

Starting the Lawsuit: Statement of Claim

Your lawyer will file a Statement of Claim with the court to initiate an action against the insurance company, which outlines:

• The facts of your case
• The insurance company’s breach of contract
• The damages you’re seeking, which typically include payment of the denied benefits, interest, and legal costs

Once the claim is filed, it must be served on the insurance company, which will then have the opportunity to respond with a Statement of Defence. In their defence, the insurance company will typically deny liability and outline their reasons for rejecting the claim.

The Discovery Process

After the lawsuit has been filed, both parties enter the discovery phase. This phase allows each party to assess the strengths and weaknesses of the opposing side’s arguments and prepare for settlement negotiations or trial. The discovery phase is divided in two parts: Discovery of Documents and Examination for Discovery. 

The discovery process typically begins with the Discovery of Documents. Both parties will exchange relevant records. For you, this may include medical files, employment history, and communications with the insurer. The insurance company must disclose internal notes, surveillance reports, and decision-making documents. This exchange helps clarify the facts of the case and lays the foundation for the next steps.

Next comes the Examination for Discovery, where both parties are questioned under oath by the opposing side’s lawyer. You will be asked about your condition and its impact on your ability to work, while the insurer will be asked to justify their denial or termination of benefits.  Your lawyer will prepare you by telling you what the questions will likely be and they will be with you to ensure that the opposing lawyer follows the rules in your examination. 

Settlement/Mediation vs. Trial

Most disability insurance cases settle by way of negotiation.  That’s because getting all the way to trial can be a lengthy and stressful process, taking years to resolve. Legal costs can accumulate and the outcome is never guaranteed. Additionally, the adversarial nature of court proceedings can strain both emotional and financial resources. Many claimants and insurance companies find that a negotiated settlement is often quicker and more favorable than awaiting a court verdict at trial, which could be two or three years away.

A key tool during settlement discussions is Mediation. Mediation often takes place some time between Discovery of Documents and Examination for Discovery. Mediation is a process where both you and your lawyer and the insurance company representative and their lawyer meet. With the assistance of a neutral third party—the mediator—who facilitates open communication and negotiations, the matter is usually resolved. Unlike a judge, the mediator does not make decisions but helps both sides understand each other’s positions and work toward a mutually acceptable resolution. Mediation is confidential, less adversarial, and can result in an agreement faster than a formal trial, making it an attractive option for many claimants.

However, if mediation and settlement fail, the case proceeds through the litigation all the way to trial, where a judge determines the outcome based on presented evidence.The judge will then decide whether the insurer was correct in denying or terminating your claim or whether you are totally disabled and entitled to disability benefits.

Possible Outcomes of the Lawsuit

At the end of the litigation process, there are several possible outcomes:

• You win: The court orders the insurance company to pay the benefits owed to you to date and orders the insurance company to start paying benefits to you every month going forward so long as you continue to meet the terms and conditions of the insurance policy. You may also be successful in an order that requires the insurer to pay for your legal costs.

• Punitive and aggravated damages: In some cases, if you win and the court finds that the insurance company acted in bad faith, punitive damages may be awarded to you in addition to the owed benefits. These are damages meant to “punish” the insurance company for bad behaviour. The court might also order the insurance company to pay an amount to compensate you for your emotional and financial distress.

• Insurance company wins: If the insurer wins, your claim will be dismissed and you get nothing, and you may be responsible for their legal costs and possibly your own legal fees, depending on what you agreed to with your lawyer.

Limitation Period

It’s important to be aware of the limitation period when pursuing litigation against an insurance company for a denied or terminated disability claim. The limitation period refers to the time frame within which a claimant must file a lawsuit. In Ontario, this is typically two years from the date the claim was denied or terminated. Appealing an insurance company’s decision does not extend the time to sue and may delay reaching a negotiated resolution of your claim. Missing this deadline can result in the loss of your right to take legal action. Consulting a lawyer early in the process ensures that you meet this critical deadline and protect your rights, if you claim is later denied or terminated.

Conclusion

The litigation process may seem overwhelming, but it is critical that you pursue your right to receive the disability benefits you deserve. Without that income, your financial situation and your health could be seriously impacted by the stress of being unable to meet you living expenses and pay for necessary treatment. If your short-term or long-term disability claim has been denied or terminated, don’t give up. With the right legal support, you can focus on your health, while your legal team fights for the benefits you are entitled to.

Contact Mulqueen Disability Law for Experienced LTD Litigation Advice in Markham, York Region & Toronto

Mulqueen Disability Law is a boutique law firm, focused on litigating long-term disability insurance benefit claims. Courtney Mulqueen and her team of legal professionals are Trauma-Informed Certified and have over two decades of experience exclusively in the area of long-term disability law. She and her team draw on their “insider” experience working for the insurance companies (including OTIP), that they now sue for their clients.  

Mulqueen Disability Law specializes in hard-to-prove long-term disability claims for “Invisible Conditions” such as mental illness (depression, anxiety, PTSD) and chronic conditions (pain, neurological, immunological, concussion, post-COVID)  Contact us for a free confidential consultation.

The preceding is not intended to be legal advice. This blog is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog, you understand that there is no solicitor client relationship between you and the blog publisher. The blog should not be used as a substitute for competent legal advice from a licensed lawyer in your jurisdiction. If your disability claim has been denied and you require legal advice, please contact a lawyer specializing in disability law.