Long-term disability (LTD) insurance plans typically include an exclusionary provision that prevents a potential claimant from obtaining coverage for an illness or injury for a pre-existing condition, or for a condition for which they were treated within the specified exclusionary period. Exclusionary provisions or conditions can differ between insurance plans, both in the case of group plans (such as employer-provided plans) or independent plans. For example, a plan may specify that it will not cover claims for a pre-existing condition for which the insured person sought treatment within 90 days, one year, or another time period before the policy’s effective/start date. A plan may also state that the exclusionary condition applies to disability claims made after the policy took effect (such as in the first year after the plan commenced).
A pre-existing condition is any illness or injury for which you consulted with a physician, or were treated, within the exclusionary period. This means that your LTD insurance provider may deny long-term disability benefits if you made a claim for a condition that you had discussed with your family doctor, but for which you did not necessarily receive treatment, during the exclusionary period named in your LTD plan. The exclusionary condition can be applied to a broad variety of medical conditions for which a person may have consulted with their doctor, such as a back injury, a heart condition, arthritis and psychological conditions such as depression and anxiety.
When an LTD claim is denied for any reason, including a pre-existing condition, the insurance company must inform you in writing, of the reason your claim was denied. Of course, it is always a good idea to read the fine print (i.e. the ‘terms’) of your insurance policy upon issue, so that you are aware of potential exclusions that may affect your ability to obtain coverage so that there are, ideally, no surprises down the road. However, even when you carefully read your policy, you may find that the exclusionary conditions were written in ambiguous language, or it may be unclear whether the disability for which you wish to claim benefits is actually related to a health issue for which you sought treatment during the exclusionary period.
Insurance policy provisions should be clearly stated, and ambiguity in the terminology in your disability insurance policy — such as, with respect to whether the provision covers ‘related’ conditions and what constitutes ‘treatment’ for a particular condition – may provide grounds for effectively challenging the insurer’s denial of your claim.
A recent civil action, Tyson v Holloway, commenced after the plaintiff was treated for a brain tumour and was denied long-term disability coverage under her employee group benefit plan, the Alberta School Employee Benefit Plan. The key issue for the court to decide in this case was whether her disability was clearly excluded in the Plan’s wording for pre-existing condition provisions. When a claim is denied on the grounds of an exclusionary clause, the onus is on the insurance company to prove that the disability falls within the stated provision.
Background – Tyson v Holloway
The plaintiff/claimant experienced headaches in early 2010 and consulted with her doctor, who indicated that she was likely suffering from migraine headaches. The headaches worsened and in July 2012, she again sought advice from her doctor; he continued to diagnose her headaches as migraines and speculated that they arose from a previous concussion. The doctor provided no treatment for her headaches but scheduled several tests. A skull x-ray on July 23rd indicated no irregularities and the claimant was headache-free until August 26. On August 31, she consulted with another doctor at the clinic, who similarly diagnosed migraines and also scheduled a CT scan for September 13.
On September 10, 2012, the plaintiff became employed under a teaching contract with the Calgary Board of Education, at which point she was entitled to benefits under the group Plan. On September 13, she underwent a CT scan which identified a large mass in her brain. She had surgery to remove the mass on September 18, and the tissue was determined to be cancerous. The plaintiff subsequently realized that her previously-experienced headaches, nausea and dizziness were caused by the brain tumour. She continued to receive treatments for the tumour until December 31, 2012, and did not return to work as a substitute teacher until October 2014.
The plaintiff submitted a claim for disability benefits on November 27, 2012. In mid December, she was notified that her claim was denied on the grounds of a pre-existing condition, and her appeals under the Plan were unsuccessful.
Under the Plan’s exclusionary clause 1.15, a pre-existing condition is defined as an accidental injury or illness for which the employee received medical attention, diagnosis, consultation or treatment during the one year before the person was covered. Further, clause 6.4 in the Plan provides that, for any Employee commencing employment on or after August 15, 1990, no disability benefit is payable if their ‘total disability’ is related to a pre-existing condition and the disability begins within 26 weeks of the persons effective date of coverage.
Arguments and Findings
The plaintiff asserted that the definition of ‘pre-existing condition’ clearly states that the condition must have been diagnosed in the 12 months before she commenced coverage under the Plan. She stated that her brain tumour led to her disability and, if one were to replace the words ‘brain tumour’ in the Plan’s exclusionary clause, the clause would not apply in her situation since she never received a diagnosis, consultation or treatment for a brain tumour during the exclusionary period. Alternatively, the plaintiff argued that if there is another possible interpretation of clause 1.15, this clause is ambiguous and therefore, the benefit of the interpretation must go to her.
The defendants took the opposite view, arguing that the wording of clause 1.15 is unambiguous and clearly means that the pre-existing provision is applicable when a diagnostic process was commenced for the illness in the 12 months prior to coverage. The defendants argued that the plaintiff was ultimately diagnosed with a brain tumour and because the diagnostic process for that condition began during the exclusionary period before she was employed, it is irrelevant that brain cancer was not specifically diagnosed during this time.
The opposing counsels both cited several cases in support of their arguments, each of which had limited application. Justice Graesser referred, at length, to one case cited by the plaintiff: Lawson v. Fortis Insurance Company. This trial involved a plaintiff who was mistakenly diagnosed and treated for a respiratory tract infection during the exclusionary period but was later diagnosed with leukemia. The insurer denied the disability benefits claim on the basis of a pre-existing condition. Justice Graesser agreed with the Court’s conclusion in Lawson, where the Court found that it doesn’t make sense to say that the claimant received treatment for leukemia when leukemia was never diagnosed or suspected. However, Justice Graesser noted, when assessing a pre-existing condition, a ‘suspected’ condition without a confirming diagnosis is not the same as a misdiagnosis or an unsuspected illness that manifests non-specific symptoms, as in the current case.
Justice Graesser noted his concern that, if treatment for symptoms caused by an undiagnosed condition are viewed as equivalent to treatment for an underlying condition that is eventually diagnosed, this approach may open the door for denial of coverage for any illness whose symptoms were treated during the exclusionary period. The judge noted that “a backward-looking reinterpretation of symptoms” to legitimize a denied claim would substantially expand the meaning of pre-existing condition such that any prior symptom that is not inconsistent with the final diagnosis would serve as a basis for the insurer to deny a claim. It was concluded that the language pertaining to a pre-existing condition in Lawson was susceptible to multiple interpretations and thus, ambiguous.
In the current case, Justice Graesser found that the medical evidence did not suggest that the insured’s physicians were concerned that she was suffering from brain cancer or that her doctors suggested this possibility when they ordered further tests. The judge used the term, ‘non-specific’ to describe her symptoms. Also, the insured’s physicians did not document what they were thinking when they order the x-ray or CT scan. Justice Graesser concluded that it appears that the doctors were attempting to rule out possibilities rather than prove a potential diagnosis. Since the onus is on the insurer in proving that the exclusion is applicable, a ‘possibility’ of a brain tumour diagnosis does not meet the standard of proof.
The plaintiff referred to the definition of ‘diagnosis’ in the online Merriam-Webster Dictionary, while the defendant pointed to the definition from the Shorter Oxford English Dictionary — the first of these essentially defines diagnosis as ‘the act of definitively identifying an illness’ and the second, as ‘the identification of a disease through investigation of symptoms and history. Justice Graesser concluded that the ambiguity of the exclusionary clause in the Plan is proven by the fact that there are opposing arguments based on the two definitions. And, if the plaintiff’s argument is correct, there was no definitive determination of brain cancer prior to the effective date of her long-term disability coverage and she did not undergo medical consultation or treatment for brain cancer before her diagnosis for this condition. On the other hand, if the defendant’s argument is correct, the insured had brain cancer and there were diagnostic steps in response to her reported symptoms before the effective date, regardless of the fact that the tumour had not been diagnosed and she was unaware of the cancer.
Insurers have the freedom to exclude any condition they wish to exclude and also, to offer any coverage they choose — disability insurance is not governed by statutory conditions. This fact, as well as a review of court decisions (including multiple American cases), led Justice Graesser to conclude that the language in the insurance policy must determine his finding. In this case, the Plan used ambiguous language, rather than using precise wording to exclude coverage for conditions that existed before the start date, regardless whether the condition had been diagnosed. On this basis, the judge reached the same conclusion as in Lawson, which is that standard insurance practice and contra proferentum (or, interpretation “against the draftsman”) requires an ambiguity to be resolved against the insurer. Accordingly, Justice Graesser ruled that the exclusionary clause does not apply to the plaintiff and she is therefore entitled to coverage.