Negligent Misrepresentation on Qualification for Long-Term Disability Results in Employer Liability

In  Feldstein v 364 Northern Developments Corporation, an employer was ordered to pay a former employee $83,336.80 in lost long-term disability benefits and $10,000.00 in aggravated damages, totaling $93,336.80.

As part of an employment package, an employee wanted benefits up to a maximum of $5,000.00/month. To qualify for this rate, the employee was required to demonstrate “Proof of Good Health”  – also known as evidence of insurability – through an application/questionnaire process.  The employer wrongly advised the employee that “Proof of Good Health” would be provided solely through working for the company during the three month coverage waiting period without illness or injury.

When the employee became ill and applied for long-term benefits, he discovered that he only qualified for a non-evidence maximum benefit of $1,000.00/monthly (before CPP deduction), because he had not submitted the required evidence of insurability information to the insurer. The damage award addresses the shortfall between what the employee received from the insurer and what he would have received if the employer had given him correct information. The award covered a period of 40 months.

The Court’s decision is based on the finding that the employee would not have accepted the employment  if he had known the long-term disability benefit  would be at the lower rate. The employee had been diagnosed with Cystic Fibrosis as a child, and was aware that the illness could strike at any time making long-term disability coverage an important issue to him in considering employment.