Source: https://www.sharelawyers.com/understanding-thedisability-insurance-case-a-psych.html
Timestamp: 2019-04-21 02:59:43+00:00

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In Canada, mental illness is by far the fastest growing category of disability claims. Every day, hundreds of thousands of Canadians are absent from work due to mental illness. Mental illness related to short-term and long term claims account for up to one third of workplace claims. According to the Centre for Addiction and Mental Health, one in five Canadians will experience a mental illness or addiction in his or her lifetime. Litigation arising out of whether the claimant has a disabling condition due to a psychological disorder or chronic pain disorder is the most common type of case. Given the current upward trend in mental illness claims and the proliferation of disability insurance disputes, more and more psychologists are being asked to provide their opinion on issues such as whether a client is totally disabled. In order to adequately comment on total disability under a policy of insurance one needs to have an understanding of the disability insurance case. The following paper will, first, discuss the types of insurance policies in order to give the reader an appreciation for the fact that disability policies can vary. Second, this paper will discuss mental health examinations in the context of a disability claim. Third, it will explore how the medical evidence is used during the course of negotiations. Finally, this paper will address the legal concept of total disability where the claimant has a mental illness.
Disability insurance policies have become a common vehicle for individuals to protect themselves against the risk of being unable to work due to sickness or accident. Many professionals, including psychologists and psychiatrists, will purchase individual policies of insurance or be covered by employer-sponsored group policies. Life Insurance carriers market these policies to professionals for protection. As a consumer, we think we understand what we have bought. As professionals, being asked to comment upon disability in the context of these policies, these policies can be complicated and a mine field. Unlike auto insurance policies, there is no standard policy. The legislation comes from provisions in the Insurance Act which do not define disability and the legislation has not been amended for decades.
Historically, the idea of compensation for death by accident or for certain specific injuries began as early as 1541 when ship owners were prepared to pay compensation to families of ship masters who were lost at sea. In 1665 England began paying benefits to soldiers who sustained injury while fighting in the Netherlands. The soldiers were entitled to certain small lump sum payments for specific injuries.
Accident insurance has its origins in England in 1849 when the Railway Passengers Assurance Company was originated; the first policies issued covered passengers sustaining injury in moving trains. These types of policies were extended to cover all types of violent bodily injuries. James G. Batterson of Hartford Connecticut took interest in these policies and by 1863 the Travelers Insurance Company was incorporated to conduct business in 1864 in the United States.
Health insurance was introduced in the 1890’s. At first health insurance was simply attached as a rider to accident policies covering six or eight specified diseases but this list increased. By the early 1900’s practically all diseases were covered and it was also common to find a schedule of payments for certain surgical operations.
In the last 20 years, disability insurance contracts, whether they be accident or sickness insurance policies, have increasingly been sold by insurance companies to both individuals and employers or to organizations on behalf of a group. These policies insure against the inability to pursue a livelihood arising from either accident or illness. Disability insurance is insurance that provides benefits to replace lost income. As a result of the growth of the market share of disability policies, disability insurance litigation, which was far less common 20 years ago, is now commonplace.
Disability insurance litigation is a hybrid between contract law, employment law and insurance litigation. The disability case is litigation based on contract. The outcome of that litigation depends on how the contract and its terms are interpreted. Ultimately, the disability lawyer is analyzing contractual terms, the specific fact scenario and applying years of case law.
Disability insurance policies indemnify against losses resulting solely from disability, accident or sickness. These policies are meant to compensate an insured or third party beneficiary during periods of “total disability” or “partial disability” with the compensation in some way being measured relative to the disabled person’s pre-disability income. Disability insurance policies insure against the loss of capacity to work. These policies are one of uberrimae fidei (utmost good faith). This means that an insurer owes its insured, or a third party beneficiary a duty of good faith in handling of the claim. Likewise there is a corresponding duty of good faith on the insured or the third party beneficiary to tell the insurer the complete truth.
Group policies are contracts between an insurer and the policyholder for the benefit of the third party beneficiary, typically employee. These policies are the most commonly sold policies and are often sold to employers for the benefit of a group of employees to insure them in case of the onset of disability. The employer is the policyholder and the employee is the plan member. The employee is a third party beneficiaries of group policy and may be subject to abuses by insurers. While the terms of these contracts may differ, the way information is communicated to the third party beneficiary, the employee, is the same.
ASO contacts are Administrative Services Only contracts. Under these contracts, the employer and the insurer enter into a business arrangement whereby the insurance company provides the administration of the contract. That is, it is the insurance company rather than the employer who will be involved in assessing the contract. The employer is liable for benefits to a group of employees who may have the responsibility to pay a portion of premiums.
While one would think that mental health conditions fall within the parameters of every disability policy, they do not. Policy exclusions, limitations or definitional terminology can be included in all types of policies limiting exposure to the insurer with respect to claimants seeking compensation for mental illness resulting in disability.
4. any period the Employee is not receiving the Appropriate Treatment.
The psychologist conducting an assessment on the issue of total disability should be aware of the nature of the disability policy in dispute so they have an understanding of the essence of the question being asked to answer.
As discussed in the previous section, disability insurance is based upon contract law. The vast majority of disputes arise out of a denial or termination under a group disability policy. The policy provisions in disability insurance are not standard in their language. A claimant eligible under a group disability policy may not be privy to the policy language contracted between the plan holder and insurer. That is the employee may not have any clue what the test is under the policy.
The burden of proving disability is with the claimant. Medical evidence will be required to establish a disability. Typically, in the course of a claim, a claimant will be submitting medical evidence and the insurer may be gathering specific information from the treating health provider, including psychologists and psychiatrists.
In the context of a disability claim, the medical or psychological examination derives its existence from the terms of the contract. In the individual policy of insurance, the insurer contracted for the rights to an examination. Those rights form part of the bargain between the insured and the insurer. In the group policy of insurance the claimant drives the benefit of the contracting parties. The claimant may have no idea that they may be required to attend a medical examination. The duty that the psychologist has to the claimant in a medical examination is arguably a lower standard. In the course of the assessment, the psychologist has no requirement to sign an acknowledgment of a duty to the claimant. The examiner is not bound by the traditional doctor-patient relationship or subject to the usual confidentiality requirements which is the essence of the normal doctor- patient relationship.
Once an insurer denies or terminates benefits, an insurer may use the opportunity of an appeal to compel the claimant to attend a medical examination. There is no obligation under a contract of disability insurance to attend a medical examination where benefits has been denied prior to the scheduled examination. An appeal process in a disputed disability claim is in essence an extra contractual process.
Once litigation is commenced, the nature and severity of the disability may be confirmed through a medical examination pursuant to the Rules of the Court. The Courts of Justice Act and the Rules of Civil Procedure have created a statutory regime to promote fairness in the litigation process. Section 105 of the Ontario Courts of Justice Act outlines the process for the court ordered medical examination. The purpose of the section is to level the playing field in the adversarial process. Courts have routinely ordered medical examinations in a disability insurance litigation since the plaintiff has put her mental condition at issue. Rule 53 came into effect in January of 2010. Previously an expert report had to be served 90 days prior to trial. The Rule now requires service of a report 90 days prior to the pre-trial. A responding report is to be served 60 days before the pre-trial. A supplementary report can still be served 30 days before trial. In addition Rule 53.03(2.1)7, states that the report must contain an acknowledgement, signed by the expert, of the expert’s duty to the court. The acknowledgement is to use Form 53, which describes the expert’s duty of fairness and impartiality.
(c) to provide such additional assistance as the court may reasonably require, to determine a matter in issue.
4. I acknowledge that the duty referred to above prevails over any obligation which I may owe to any party by whom or on whose behalf I am engaged.
Unlike a medical examination conducted in the course of a claimant’s disability claim, the requirement that the expert sign an acknowledgement in the context of the litigation, is acknowledgement that the expert is obligated to the court and expected to conduct themselves free of bias.
In the course of the litigation expert reports will be canvassed. Inevitably, some form of negotiations will take place. In many jurisdictions throughout the country mandatory mediation is a requirement prior to having a Trial. Parties are required to attend a mandatory mediation with authority to attempt to resolve the dispute. Unlike personal injury litigation, the Court will not award a lump sum benefit with respect to a loss of a future income stream. In other words, the remedy in a disability insurance litigation is that the court can award past benefits, monthly benefit resumed so long as the plaintiff can continue to prove disability, emotional distress and legal costs. During negotiation/mediation the parties can create creative remedies. Negotiated solutions can include a lump sum settlement or reinstatement with terms.
The psychological report canvassed for the purposes of trial may only provide part of the picture. The psychologist is asked to provide an opinion on total disability as of the date of termination or denial and whether the claimant has been continuously totally disabled to the date of trial. An accurate history of the plaintiff’s symptoms, whether the plaintiff has had a recurrence of symptoms, whether s/he has risk factors for future deterioration, the likely prognosis and reason for prognosis and the challenges of or benefits to treatment in assisting a return to work are details that are essential for the majority of cases being negotiated or mediated.
Several courts have cited the rationale for not awarding lump-sum awards for future disability benefits. Given that the disability case is a contract case, courts cite uncertainty of the prognosis and the right of the insurer to compel the claimant during the claims process to ongoing medical examinations.
The rationale for not awarding a lump-sum award from a policy perspective is troubling. Typically, experts are frequently called upon, in a personal injury litigation to provide details about a party’s prognosis. Courts have accepted these opinions as a matter of course in order to award damages. There may be claimant who is of the age where treatment and recovery for return to work prior to the maximum benefit period of age 65 is unrealistic. By not agreeing to a lump-sum award of future disability benefits, the Courts have all too often positioned themselves as less relevant to the dispute. The Trial doesn’t give the parties any finality or certainty. Accordingly, the Court has created a negative incentive on the vast majority of disability cases involving mental illness to be tried.
Likewise, the right to compel ongoing medical examinations post-litigation creates the unfortunate situation where the plaintiff is told during the course of negotiations that if s/he wins at trial and gets reinstated s/he will be compelled to have further medical examinations during the post-litigation life time of the claim. Plaintiffs who suffer from severe anxiety, paranoia, suicidal ideations and depression are being asked to make a decision between finality through negotiation or the hammer approach of medical examination during post-litigation.
The ability of the psychologist to develop a rapport and to get an accurate history in the course of a medical examination may be tainted where the insurer has previously failed to extract a settlement during negotiation. How can the plaintiff truly believe that the medical examination is unbiased and fair, or not be fearful of the examination, where s/he has previously been told that if s/he does not come to finality by way of a lump sum settlement, the insurer will conduct multiple assessments throughout the lifetime of the claim. At the same time, the plaintiff is being told that you won’t get finality through the Courts. The dilemma for the plaintiff magnifies the true power imbalance between the parties and by in large fails to satisfy the needs of most claimants.
Disability policies frequently deal with two types of tests: (1) where the claimant is disabled from performing his regular/own occupation, and (2) where the claimant is disabled from performing any occupation by reason of his education, training or experience. Some policies have no “own occupation” test whereas other policies may extend this test for 24 months or 60 months followed by the “any occupation” test. The “any occupation” test may include some form of monetary level. In assessing a comparable occupation, the wage level is an important factor. Many individual policies for professionals are written exclusively as “own occupation” policies.
In defining the parameters of total disability, courts have consistently ruled that an occupation is not “any reasonable occupation” for which the insured is fitted by experience, training or education, unless that occupation is reasonably comparable to the occupation previously performed by the claimant.
The test of total disability is satisfied when the circumstances are such that a reasonable man would recognize that he should not engage in certain activities even though he literally is not physically unable to do so. In other words, total disability does not meant absolute physical inability to transact any kind of business pertaining to one’s occupation, but rather that there is a total disability if the insured’s injuries are such that common care and prudence require him to desist from his business or occupation in order to effectuate a cure, hence, if the condition of the insured is such that in order to effect a cure or prolongation of life, common care and prudence will require that he cease all work, he is totally disabled within the meaning of health or accident insurance policies.
Several courts have adopted this broader analysis to the test of total disability as it is defined under the contract of insurance.
In the case of Ferguson v. National Life Assurance Co. of Canada which involved a bus driver, the policy defined “total disability” as “such complete incapacity resulting from a medically determinable physical or mental impairment that prevented the employee from performing any and every duty of his occupation” for a period of up to 24 consecutive months. After 24 months, the test was defined as “such complete incapacity resulting from a medically determinable physical or mental impairment that prevented the employee form performing any and every duty of any occupation or employment for which he was reasonably qualified by education, training or experience.” The plaintiff began to suffer from various pressures on the job and ultimately applied for long-term disability benefits. His claim was approved, and benefits were paid for over four years. During this period, the plaintiff’s symptoms ebbed and flowed in their prominence and the doctors provided differing diagnoses. The insurance company ultimately advised the plaintiff that a second medical opinion was required, and they arranged for him to be assessed by a psychologist in Montreal who conducted psychological testing. The insurance company made no effort to obtain an appointment with a psychologist in the plaintiff’s area even though it was aware that the plaintiff had symptoms of agoraphobia and a morbid dislike of public places. The insurance company did not send the psychologist’s report to any of the psychiatrists for review and did not seek any fresh psychiatric opinion after receiving the report. The insurance company terminated the plaintiff’s benefit based solely on a psychologist’s report. At trial, the plaintiff’s treating psychiatrist and expert stated that the plaintiff had a deep rooted psychiatric problem. This rendered the plaintiff incapable of performing any form of remunerative employment. Under the circumstances, the plaintiff’s action was allowed.
A policy with the “any occupation” type of definition usually requires that total disability is that the insured person is prevented from engaging in any occupation or performing any work for compensation or profit.
Notwithstanding this all-embracing definition, this does not mean that the person is not entitled to the benefit if he is so sick that he can take on only trivial or inconsequential work, or work for which he is overqualified, or work for which he is completely unsuited by background.
A person is considered not to be totally disabled from engaging in “any” occupation if his condition would enable him to enter into an occupation reasonably comparable to his old occupation in status and reward, and reasonably suitable in work activity in light of his education, training and experience.
The insured will not be disqualified from receiving the benefit if he is able to perform some work of an insubstantial nature.
Nor will the insured be disqualified if he cannot do his own work, but could work at a job completely out of his own line. A professional concert violinist who suffered from a heart disease had no training or aptitude for work other than musical work and, although he is fit for an unrelated occupation not involving stress, he was held to be totally disabled from following “any gainful occupation”.
The test is, therefore, a subjective one, related to the background and education of the disabled person in question. If he is healthy enough to take up a reasonably related occupation, he is deemed not to be disabled. In a case where a teamster could not continue to drive a team of horses, but he was able to do lighter work adapted to his condition, it was held that he was not totally disabled from performing “any work for compensation”.
The plaintiff was awarded past benefits and entitled to a declaration that the insurance company be obliged to continue paying disability benefits to him in accordance with the terms of the insurance policy.
In cases involving mental illness, courts have often taken a step back from the insurers’ technical arguments to deny benefits and have looked at the historic or factual context that led to the claim being made in the first place. In Spring V. A. Saley & Associates, the issue for the court was whether the plaintiff was disabled under the term of the policy such that he was in a “state of complete and continuous incapacity, resulting from illness”. The plaintiff had been with his employer for 10 extremely successful years and had risen to the position of Vice President. In 1991, with the downturn in the employer’s business and reductions in his salary, the plaintiff began to abdicate responsibilities and absent himself from work. In July 1992 he left the company but his salary was continued with a reduced rate for a further year. In January 1993 he made an assignment in bankruptcy and in May 1993, he was diagnosed with HIV. Upon this diagnosis, he sought psychiatric help and was advised to apply for long term disability, as in the opinion of the psychiatrist, he was “non-functional”.
(b) Afterwards, any remuneration function or work for which he is reasonably fitted by training, education or experience.
Disability will only be recognized under (a) above if the participant is receiving no remuneration arising either directly or indirectly from any occupation, except under rehabilitation program approved by the insurer.
For the disability to be acknowledged the participant’s condition must require both regular and continuous medical care actually given by an appropriate specialist and appropriate therapy, considered satisfactory by the insurer.
The court was asked to determine whether the plaintiff was disabled between October 1991 and July 1992 even though he continued to report to work during this time. The court concluded that the plaintiff was clinically depressed but in a state of denial throughout this period.
While the total disability test is a subjective test, insurers often try to use global assessment of functioning (GAF) scores to provide an “objective” measure of the insured’s mental condition. Several courts have commented that the use of a GAF score by an insurance company to determine whether an insured is qualified for benefits has its inherent difficulties. Some courts have stressed that the GAF score is a very general guide, and is not a determining factor. In Fowler v. Maritime Life, the insured a successful self-employed real estate agent became disabled from work due to anxiety neurosis and hypertension. The insurer arranged for an independent medical examination by a psychiatrist who assigned a GAF score of 70. The psychiatrist report stated that it was “extremely unlikely” that the insured would return to work and that the panic disorder had taken him away from a successful life in the city to a much more secluded existence. Despite the GAF score which indicated minimal difficulty, the judge found overwhelming evidence of continuing disability. The judge found that the GAF score must be considered together with other available medical evidence and the insurer’s knowledge of the insured’s background and circumstances.
It has been argued that the case law on total disability regarding a mental illness is driven by how the trial judge feels about the plaintiff as a person. More likely, the court is assessing the credibility of the plaintiff, the medical evidence stemming from the doctor-patient history, the testimony of the people most exposed to the plaintiff, the plaintiff’s trouble with daily living activity and the expert medical reports. That being the case, the psychological opinions should establish the history, diagnosis, prognosis and functional limitation. Information that provides a realistic appreciation for the individual’s day- to-day vocational limitations can be most useful in providing a clear and concise picture for the court to consider.
In recent years, much has been written on disability insurance. Disability insurance litigation is a hybrid of contract law, employment law and insurance litigation. The disputes that arise in disability insurance cases involve parties who have unequal bargaining power. All too often, the dispute involves a claimant who is suffering from some sort of mental illness. Often the claimant and his treating physician have no knowledge of the contractual language and how the contract applies. Medical examinations may be conducted by the insurer during the claims process. These examinations differ from an examination conducted during the course of the litigation.
Once litigation is commenced, the psychologist conducting the medical examination has a duty to the court. In most cases these medical examination reports are used during negotiation to discuss resolution of the dispute. In effect the medical examination reports have a dual purpose; they provide evidence about whether the person is presently disabled and they provide some understanding for how long the condition will impede a return to work.
While contractual wording is important for the psychologist assessing the plaintiff, the courts have adopted a more “real life” approach to the determination of total disability under the policy. Less often are limited criteria, such as GAF scores relied upon by the court in assessing whether a mental illness meets the test of disability. More often, the court is looking at the entire picture and all underlying facts to properly assess the plaintiff. When did the plaintiff become sick? How did his family and friends react to his illness? Does he have a history of mental illness? Was the employer sympathetic and supportive? What are the daily functional restrictions? What is the treating psychologist views? In order to provide a complete picture of the claimant’s condition, circumstances and level of functioning, the psychologist’s evidence will be crucial and can provide a framework for the accurate determination of a disability claim.
1. Brad Fedorchuk, “Mental Illness: A growing cause of disability claims” Forum (July/August 2008) at 30.
2. J. Switzer, “Centre for Mental Health plans for future” National Post Thursday (12 May 2011) A13.
3. B.O’Brien, “Accident And Sickness Insurance” in Special Lectures, Law Society of Upper Canada (Toronto: Richard De Boo Ltd., 1962), p. 157-158.
4. See John Hewitt & Associates Inc., 2000 U.S. Group Disability Market Survey Summary Report on group disability sales growth.
5. R.V. Buller, ”The Rainmaker Revisited: Punitive and Aggravated Damages in Real World of Disability Insurance” (2000), 79 Can. Bar Rev. 201 at p.204.
6. Where an insured’s doctor opined that the claimant would suffer physical harm if she had to undergo a clinical psychologist assessment in the course of the claims adjudication, the Court has referred to contract wording and concluded that the examination is reasonable. See Paul Revere Life Insurance Co. v. Patterson (2002), 2002 CarswellBC 119(B.C.S.C.).
“health practitioner” means a person licensed to practice medicine or dentistry in Ontario or any other jurisdiction, a member of the College of Psychologists of Ontario or a person certified or registered as a psychologist by another jurisdiction.
(2) Where the physical or mental condition of a party to a proceeding is in question, the court, on motion, may order the party to undergo a physical or mental examination by one or more health practitioners.
(3) Where the question of a party’s physical or mental condition is first raised by another party, an order under this section shall not be made unless the allegation is relevant to a material issue in the proceeding and there is good reason to believe that there is substance to the allegation.
(4)The court may, on motion, order further physical or mental examinations. Examiners may ask questions.
(5) Where an order is made under this section, the party examined shall answer the questions of the examining health practitioner relevant to the examination and the answers given are admissible in evidence. R.S.O. 1990, c. C.43, s. 105(2-5).
Co. 2002 CarswellOnt 1351 (Ont.S.C.J.) See also Steven Rastin “Meds, Lies and Videotape: Are Defendants Allowed Multiple Examinations Under the Rules and the Contract and Can You Videotape Them?” OTLA 2011 LTD Conference.
9. See Anderson v. Great-West Life Assurance Co., 1988 CarswellOnt 334 (Ont. H.C.); Richardson v. Great West Life Assurance Co., 1996 CarswellAlta 648 (Alta.Q.B) and see Eric J. Schjerning and David Norwood “Disability Insurance Law In Canada” Carswell 2010 at 118. On a similar note one court has found that the risk of an insured’s suicide was nothing more than speculation and did not constitute irreparable harm that would arise from refusal of an injunction. See Dempster v. Mutual Life of Canada I-3748.
10. On a similar note where the plaintiff claims that a recurrence will occur if returned to the occupation, the court has not been overly sympathetic to the plaintiff and have found these arguments to be speculative. Rose v. Paul Revere Life Insurance Co. (1990), 45 C.C.L.I. 35 (B.C.S.C.) aff’d 85 D.L.R. (4th) 433 (B.C.C.A.) See McWilliam v. Mutual of Omaha Insurance Co., McWilliam v. Mutual of Omaha Insurance Co.,  I.L.R. 1-2377 (Ont. Dist.Ct.) the plaintiff claimed that he suffered from a recurrent depressive disorder. The plaintiff had a history of suffering from depression. The plaintiff claimed that if he returned to work at a mill, he would become seriously depressed and would not be able to function at any occupation. The court dismissed the action and held that the plaintiff did not satisfy the onus. He had been able to return to the mill on two separate occasions as a labourer following episodes of depression and was able to function as part-time university student while under treatment. The evidence did not indicate such a phobia or apprehension with respect to working in the mill rendering the plaintiff from carrying out his job function.
11. See Labelle v. Great-West Life Assurance Co.  B.C.J. No. 1771; Bacon v. Saskatchewan 1990 CarswellSask 130; and Lang v. Metropolitan Life Insurance Company 1937 ILR 4-302.
13. One commentator has since argued that the Supreme Court in Paul Revere Life Insurance Co. v. Sucharov did not establish a full framework for dealing with every type of disability case under every type of contract. Accordingly, the plain meaning of the disability test governs. The question of whether one is disabled under any test is a question of fact. See G. Jermane “Sucharov v. Paul Revere: Did it Define Total Disability?” (2005) 397 Advocate Quarterly 30 at 397.
19. B. A. McLaughlin, “Disability Claims and the Myth of Mental Illness” (1996), 14 Canadian Journal of Insurance Law 2 at 29.

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