Disability Insurance Issues and the Damages Recoverable by the
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Transcript of Disability Insurance Issues and the Damages Recoverable by the
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Disability Insurance Issues and the Damages Recoverable by the Disabled Employee for Wrongful Dismissal A Presentation by:Andrea F. Raso AmerFraser Milner Casgrain LLPTel: (604) 622‐5152Email: Andrea.RasoAmer@fmc‐law.com
Wednesday May 4, 2011Vancouver, B.C.
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Disability Benefit Plans
Short‐Term Disability Plans
Typically:• Self‐insured by employer
• Percentage of salary up to 100%
• 17 to 26 weeks
• Unable to do all or essential duties of job
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Disability Benefit Plans (cont’d)
Long‐Term Disability (LTD) Plans
Typically:• 3rd party insurer : ASO or private insurer
• Qualifying period
• Replacement ratio → 66⅔%
• Employer funded or employee funded or combination
• Unable to do all or essential duties of job; “any occ” after 24 months
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A. Termination of Employment
Q. Do you continue benefit eligibility during notice period?
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A. If working notice, yes!
If lump sum payment or salary continuance in lieu of notice, depends on wording of the Plan.
Prince v. Eaton, BCCA, 1992
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Best Practice
1. Work with insurer to understand implications upon termination.
2. Review benefit handbooks and employment contracts. Ensure wording is clear.
3. Consider “bridge” coverage.
4. Revise Release to explicitly release any claims for disability benefits.
5. Compensate for loss of disability benefits.
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B. Deductibility of Disability Benefits from Severance
Employee injured during non‐working notice period
Q. Should disability payments be deducted from notice/severance payments?
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A. Courts have wrestled with this issue and the law is confusing.
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Deductibility of Disability Benefits
Sylvester v. British Columbia, Supreme Court of Canada, 1997
• Benefit plan established and paid solely by employer• Mr. Sylvester received disability payments during the notice period
Issue: Should the disability payments be deducted from pay in lieu of notice?
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Court said:
Depends on intention of parties to the employment contract.
In other words, query whether the parties intended that the employee should receive both amounts.
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Court concluded:
Parties did not intend that Mr. Sylvester would receive both amounts because contract for benefits was not distinct from employment contract but an integral component of it. Disabilitybenefits were therefore deducted.
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BUT result may be different where:
– Private insurance plan/employee funded, or
– Employee provided some form of consideration for benefit
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Difficulty for employer: Intention of parties at time of hire is often elusive.
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Post Sylvester cases:
• Fact that employee pays all of part of premium is only one factor
• Not deductible where benefits were from a private insurer which employee paid for
• Despite both parties contributing equally, disability benefits were deductible because both parties considered the benefits to simply be a substitute for salary
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Summary
1. Notice period: always continue disability benefits.
2. Lump sum payment or salary continuance: check language of Plan, handbook, contract and compensate where necessary.
3. Whether employee gets “double recovery” if injured/ill during notice period depends on intention of parties at time of hire.
4. Consider who pays premiums.
The preceding presentation contains examples of the kinds of issues companies dealing with disability insurance could face. If you are faced with one of these issues, please retain professional assistance as each situation is unique.
