Reasonableness and common sense go a long way in preventing disputes and litigation.
Those are attributes we sometimes find in short supply at insurance companies.
Take the case of Grzegorz Zaprzala who was injured in July, 2009.
He had disability insurance through his employer, Hooper Welding Enterprises.
His disability application was approved with benefits of $3,000 per month commencing in November, 2009.
Every disability insurance policy has an offset provision. Certain
specified sources of income are required to be offset or deducted from
the disability benefits.
Among the many offsets are CPP disability benefits.
It is customary for disability insurance policies to require those
receiving disability benefits to apply for CPP disability benefits.
Any CPP disability benefits obtained are then deducted from the insurer’s disability payments.
If the person receiving benefits doesn’t apply for CPP disability
benefits, the insurance company is entitled to reduce its disability
benefits by the estimated amount of the CPP benefits that could have
been obtained.
In this case, Zaprzala’s application for CPP benefits was denied.
He requested reconsideration of the decision but once again his application was denied.
His insurance company, Manulife Financial, told him he had an
obligation to appeal the denial to the CPP Review Tribunal, even though
there wasn’t anything in the insurance policy that specifically spelled
out such an obligation.
Before the appeal was launched Manulife prepared a document and told Zaprzala to sign it.
The document stated Manulife would continue to pay the disability
benefits without deduction of any estimated CPP benefits, provided that
Zaprzala agreed to reimburse Manulife for any subsequent CPP benefits
award.
But Manulife had an obligation to continue making the disability payments pending the appeal.
They had no right to deduct estimated CPP disability benefits after his applications had been rejected.
Zaprzala hired a lawyer to handle the appeal to the CPP Review
Tribunal. The appeal was successful and Zaprzala was awarded about
$34,000 in retroactive CPP benefits.
But his lawyer charged him about half that amount, leaving Zaprzala with a net gain of about $17,000.
Zaprzala offered to pay the net amount of $17,000, to Manulife.
Sounds reasonable to me.
After all, Manulife told Zaprzala to appeal and they received the benefit of the legal work.
No one told him not to retain a lawyer and it was certainly foreseeable he would have to hire a lawyer.
But Manulife wanted the full benefit of the $34,000 CPP payment.
And since they controlled the disability benefit payments, they
stopped making payments to Zaprzala until they recovered the full
$34,000.
They say that was their contractual right because the insurance
policy didn’t say anything about allowing Zaprzala to hire a lawyer and
the offset provision of the policy allowed them to deduct the entire CPP
payment.
Zaprzala sued, seeking punitive damages, claiming Manulife shouldn’t have deducted the full CPP benefit.
Manulife responded to the lawsuit with a court motion seeking to
dismiss it prior to trial on a summary basis, arguing it was plain and
obvious the lawsuit could not succeed.
The motion was heard before a judge of the Ontario Superior Court of
Justice in February and a decision was released earlier this month
dismissing the motion.
Justice Theresa Maddalena ruled the lawsuit could continue, that it wasn’t plain and obvious the lawsuit couldn’t succeed.
A ruling on the amount of Zaprzala’s legal fees to be paid by Manulife has not yet been released.
Whether the lawsuit will continue or be settled remains to be seen,
but it is clear Manulife has or will soon have incurred expenses far in
excess of the initial amount in issue, $17,000.
A little dose of common sense or reasonableness could have avoided this legal mess.
But as has often been said, common sense isn’t so common.
source: By
Alan Shanoff
,Toronto Sun
CIN is a non-profit Advocate for Insurance and Health Care Reform. Postings are cut/paste from other sources. @Cinsurancenews #rally4accidentvictims #ABPetition #CPPbacklog
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