Court of Appeal- Whether Signed Release bars an LTD claim requires a trial
April 15, 2019
The employee had worked for his employer for 14 years in a manual position in the mailroom. The benefit plan, including long term disability (“LTD”), was self-funded by the employer but administered, adjudicated and paid by Sun Life Assurance Company (“Sun Life”). The employee received 2 years of short term disability but his request for LTD was denied.
After LTD was denied, the employee’s employment was subsequently terminated. The employer provided a termination package which required the employee to sign a release of all claims, including a waiver of LTD entitlement. The employee sought legal advice in respect of the termination package but did not receive legal advice. The employee subsequently negotiated the termination package, without counsel, and obtained an improved package. The employee did not carefully review the release because he viewed it as legal jargon or “legalize”.
Despite signing a broad release, which contained a waiver of LTD entitlement, the employee continued with an appeal to Sun Life for LTD coverage. Following his unsuccessful appeal, the employee instituted a claim against his former employer and Sun Life for LTD coverage.
The employer and Sun Life brought a motion for summary judgment asserting that the employee’s execution of a comprehensive release barred his claim for LTD coverage. In this regard, the motion’s judge properly considered the following requisite factors to assess whether the release was unconscionable:
(a) a grossly unfair and improvident transaction;
(b) the victim’s lack of independent legal advice or other suitable advice;
(c) an overwhelming imbalance in bargaining power caused by the victim’s ignorance of business, illiteracy, ignorance of the language of the bargain, blindness, deafness, illness, senility, or similar disability; and
(d) the other party knowingly taking advantage of this vulnerability.
The motion’s judge concluded that it would be unconscionable and improvident to enforce the release. The Court dismissed the summary judgment and concluded that the release was not enforceable.
On appeal, the Court of Appeal allowed the appeal and unanimously concluded that the enforceability of the release raised genuine issues requiring a trial. Specifically, there was insufficient information before the lower court concerning the fairness of the release and the merits of the LTD claim in conjunction with the potential risk that the employee would be forfeiting a potential LTD claim of approximately $300,000.00. Furthermore, the motion’s judge omitted to consider to what extent the employee’s failure to closely read the release impacted the unconscionability analysis, which was fundamental to the dispute. The forfeiture of this claim and whether the disability payments are rendered unrecoverable will be a matter for trial.
This case is significant because it highlights the importance for employees to seek proper legal advice prior to accepting termination packages and the potentially significant detrimental and unintended consequences that can arise by signing a release.
Swampillai v. Royal & Sun Alliance Insurance Company of Canada, 2019 ONCA 201 (CanLII)