Who Pays Legal Fees When an Insured Appeals a Denial of WSIB Benefits?
When someone is unable to work for a prolonged period due to an injury, their first resort for financial support is a government-mandated disability benefit, such as those paid by the Workplace Safety & Insurance Board (WSIB) or the Canada Pension Plan (CPP). The next resort, if purchased by the employer or employee, is long-term disability (LTD) insurance.
Generally, an LTD policy will deduct from its benefits any amounts received by the insured from sources such as WSIB and CPP. Further, if the insured is denied benefits from one of these sources but successfully appeals the decision, the amount received by the insured generally must be paid to the LTD insurer since it constitutes an “over-payment”.
But when an insured successfully appeals a WSIB decision, does the insured or the insurer pay the legal fees associated with the appeal? In other words, can the insured deduct these legal fees from the amount they must repay to the insurer?
These questions were recently considered in RBC Life Ins. v. Janson. In that case, the insured successfully appealed a denial of WSIB benefits, meaning there was an over-payment.
The court held that it could not imply a right to deduct legal fees into the policy. The court also rejected the insured’s argument that an LTD policy is a contract of indemnity by which the insured is to be “made whole”. Rather, the terms of the contract govern.
This case affirms that, absent ambiguous language in the contract, the insured pays to appeal a denial of benefits, not the insurer. However, this also means that the insured will have little incentive to pursue an appeal if it will not result in a net benefit after legal fees. It will therefore likely be important for the insurer to incorporate a requirement to appeal into the policy, and to deduct from its payments the amount of WSIB and CPP it estimates the insured is entitled to.
By: Kyle Gossen