Court of Appeal Denies Disability Benefits to an Employee who was in an Accident while on Temporary Leave.

In Soave v. Stahle Construction Inc., 2023 ONCA 265, the Employer, (“Stahle”) appealed a judgment requiring Stahle to pay damages to an employee after they terminated his long-term disability benefits coverage.

Stahle, a general contractor in the construction industry, implemented a company-wide benefits plan, which included long-term disability coverage. The employee (“employee” or “Respondent”), a construction supervisor for the employer, was covered under the benefits plan.

Due to a medical condition which required surgery, the employee took a leave of absence from work. Stahle issued the employee a Record of Employment indicating that the Respondent was on medical leave.

While on leave, but prior to his surgery, the employee was involved in a serious motor vehicle accident. The employee suffered serious injuries. When the employee went to pay for medication for his injuries, the insurance company informed him that he no longer had coverage, as he was no longer an “active employee”.

The Respondent brought an action against the employer. The trial judge concluded that an employee on “temporary medical leave” was still employed with the employer and was entitled to long-term benefits.  The trial judge awarded the Respondent, approximately $250,000 in general and special damages.

On appeal, Stahle challenged the trial judge’s findings. Specifically, Stahle challenged the judge’s interpretation of Stahle’s insurance booklet (“booklet”) which set out the eligibility terms for long-term disability benefits.  The Ontario Court of Appeal agreed with Stahle.

Stahle’s booklet addressed the instances under which an employee could be eligible for benefits, if their employment was temporarily interrupted. In addition, the booklet contained specific eligibility requirements for long-term disability coverage, including the requirement that an employee must be “actively at work” and the requirement that there must be a “qualifying period of 120 days of disability”.  Further, the booklet specified that an employee is not eligible for long-term disability coverage when on a leave of absence.

The Court of Appeal found that the trial judge’s reasoning constituted a “fundamental misreading” of the insurance booklet’s eligibility requirements, and granted Stahle’s appeal.

This decision demonstrates why it is important to review the language of insurance policies to ensure that they are clear and concise for employers to protect themselves from lengthy and costly claims. In addition, this decision provides an example of how important it is for employers to properly assess an employee’s entitlement to insurance benefits when the employee’s work is interrupted due to a leave of absence. An improper termination that negatively impacts the employee’s entitlement to benefits may result in potential liability for the employer.