In the 2014 decision of Bhasin v Hrynew, the Supreme Court of Canada held that the duty of good faith requires that an insurer deal with its insured’s claim fairly, both with respect to the manner in which it investigates and assesses the claim, and the decision whether or not to pay it. This decision has and will be the subject of much interpretation by our courts (see my partner, Bill Armstrong’s, recent post here).
In Bonilla v Great-West Life Assurance Company et al, the Ontario Superior Court applied the Supreme Court of Canada’s reasoning in Bhasin v Hrynew to determine that an employer did not breach its duty of good faith by refusing to fund a $72,750 rehabilitation program requested by the insurer of an employee on long term disability.
The employee worked as a call centre specialist at a large Canadian bank but was injured in a car accident causing ongoing health difficulties. The employee went on long term disability for nearly 13 years and was unable to return to work. The insurer who administered the employer’s income protection plan requested that the employee undergo an expensive and difficult rehabilitative program, but required the employer’s consent under the terms of the plan. The employer refused to fund the program, citing concerns that the program was onerous and the employee had participated in similar programs in the past without success. Immediately after this treatment program was rejected, the employee submitted a further rehabilitation plan at roughly 10% the cost of the first, but the employer refused to fund it citing the same concerns.
The Court held that the employer’s decision to refuse to implement the treatment program was not carried out in bad faith. The terms of the income protection plan required any rehabilitation program to be approved by the employer. There was no evidence that the employer exercised its discretion to refuse the program in bad faith. The employer was entitled to reject the second plan because it was based and premised upon the first treatment plan and the employee was “attempting to obtain a result through the back door which it could not through the front door.” Finally, the employer did not breach its duty of good faith by withholding payment of one month’s long term disability benefits during a period that the employee had travelled abroad without notifying the employer—as required under the terms of the plan.
