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Applicant Awarded Continued LTD Benefits After Insurer and Employer Fails to Advise Him Appropriately - Swampillai v. Royal & Sun Alliance and Sun Life

July 17, 2018, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Swampillai v. Royal & Sun Alliance and Sun Life

Date of Decision: June 26, 2018
Heard Before: Cavanagh J.

LONG TERM DISABILITY: applicant is dismissed from employment while on LTD; employer fails to advise applicant that by accepting severance agreement and signing paperwork he would be foregoing ongoing LTD benefits; no question exists that the employer RSA and the insurer Sun Life acted in a coordinated manner to fail to advise applicant of his rights; court felt disability occurred during employment and therefore employee covered even though no longer employed at time of disability application.


Joe Swampillai brought the action for payment of long term disability benefits and related relief against his former employer, RSA and Sun Life which provides administrative services to RSA in respect of the long term disability benefits that RSA provides to employees.

RSA and Sun Life defended the action, including on the ground that Mr. Swampillai executed a full and final release in favour of RSA on July 14, 2015 which includes a release of any claim for long term disability benefits. As a result, RSA and Sun Life plead that Mr. Swampillai is not entitled to make any claim against RSA for disability benefits or against Sun Life for the administration of those benefits.

At the time that the decision was taken to dismiss Mr. Swampillai, RSA knew that he had been receiving LTD benefits under the benefit plan that was administered by Sun Life for almost two years. RSA knew that Mr. Swampillai had appealed the decision of Sun Life to end his LTD payments effective July 22, 2015. This means that RSA must have known that Sun Life’s decision was not final, because it was subject to appeal and the time to appeal would not expire until October 22, 2015.

RSA knew that unless Sun Life changed its mind before its decision became final, Mr. Swampillai would soon be without a source of income. Sun Life had advised RSA that it had decided to deny Mr. Swampillai’s LTD benefits after July 22, 2015 and because Mr. Swampillai’s LTD benefits were ending and RSA had no role for him to come back to, it decided to offer him a severance package.

In these circumstances, RSA offered Mr. Swampillai a severance package that provided only for payments for statutory termination and severance pay, payment in lieu of common law notice, and a small amount for the cost of benefits at the end of the statutory notice period, without alerting him to the fact that the release that he would be required to sign in favour of RSA called for him to release his claim based upon Sun Life’s denial of LTD benefits.

In respect of this element of unconscionability, Justice Cavanagh considered this as significant the answer given by RSA on cross-examination that it would have been important for RSA to ask Mr. Swampillai what his intentions were with regard to disputing the denial of his LTD benefits. RSA did not respond that there was no requirement for RSA to raise this, and that it was up to Mr. Swampillai carefully read the release and to protect his own interests. RSA responded that this was “something that Sun Like would deal with”. Cavangh J. regarded this answer as a reasonable acknowledgment that, in these circumstances, someone, either RSA or its agent, Sun Life, was required to raise with Mr. Swampillai that the release called for him to abandon his LTD claim and that, if he was medically unable to work again, his recourse against RSA for LTD benefits would be forever foreclosed.

It would have been clear to RSA that a release by Mr. Swampillai of his LTD claim would have significant consequences for him. RSA, nevertheless, did not inform Sun Life that it had decided to dismiss Mr. Swampillai and require a release that called for him to give up his appeal of Sun Life’s denial of his LTD claim under the “any occupation” definition of disability. Without this information, Sun Life could not act in the way that Ms. Velic suggested that it should, by asking Mr. Swampillai about his intentions concerning his LTD claim. RSA took no steps to determine from Sun Life whether it had done so, and Sun Life did not find out about the release until after this litigation commenced.

By failing to alert Mr. Swampillai, either directly or through Sun Life, that he was required to abandon his claim for LTD benefits as part of the severance package that it offered, RSA knowingly took advantage of Mr. Swampillai’s vulnerability.

Mr. Swampillai has satisfied the four elements that are necessary to establish that the release, as it relates to Mr. Swampillai’s LTD claim, is unconscionable.

For the forgoing reasons, the release as it relates to Mr. Swampillai’s LTD claim is set aside and declared unenforceable. The motions for summary judgment brought by RSA and by Sun Life are dismissed.

Posted under Accident Benefit News, Disability Insurance

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Deutschmann Law serves South-Western Ontario with offices in Kitchener-Waterloo, Cambridge, Woodstock, Brantford, Stratford and Ayr. The law practice of Robert Deutschmann focuses almost exclusively in personal injury and disability insurance matters. For more information, please visit www.deutschmannlaw.com or call us toll-free at 1-866-414-4878.

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