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Insurer ordered to pay “mental distress damages” for terminating LTD benefits

Kardaras v. Sun Life Assurance Company of Canada, 2020 ONSC 3925

In September 2014, Voula Kardaras was diagnosed with major depressive disorder. She took a medical leave of absence from work and her disability insurer, the Defendant, Sun Life Assurance Company of Canada (“Sun Life”) granted her benefits up until December 2015 when she was to complete a gradual return to work.

While Ms. Kardaras was in the midst of her gradual return to work, her psychiatrist advised that she stay at 3-days per week instead of moving up to four-days due to a marked increase in her depressive disorder.

Regardless, Sun Life proceeded to terminate Ms. Kardaras’ benefits on the date her return to work was originally scheduled to be completed. They claimed that she was able to work full time but chose not to.

Ms. Kardaras brought an action against SunLife.

Most long-term disability policies have a two-tier test for providing benefits:
1. The “own occupation” period is the first two years where the employee is unable to perform the duties of their own occupation
2. The “any occupation” period begins after this, and it is when the employee is unable to perform the duties of any occupation for which they would be reasonably qualified.

This issue went before the Ontario Superior Court and the Court held that Sun Life had breached its duty of good faith to Ms. Kardaras by terminating her benefits during a gradual return to work. The Court found that Ms. Kardaras was still in the “own occupation” period, as she was not able to perform the full-time duties of her position. The Court agreed that Ms. Kardaras was not medically well enough to justify a return to full-time work, however, because she was able to return to part-time work, she would not qualify for further benefits under the subsequent “any occupation” period.

The Court ordered Sun Life to pay damages to Ms. Kardaras for the “own occupation” period in the amount of $12,037 as well as a lump sum benefit of $10,000 to Ms. Kardaras for mental distress.

You can read Kardaras v. Sun Life Assurance Company of Canada, 2020 ONSC 3925 in its entirety here.

At Foster & Company, we represent institutions and individuals looking for help understanding insurance coverages and responding to claims. Contact us by phone at 506-462-4000 or reach us online for advice.

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