Thanks to MLT Aikins LLP for your presentation with CPBI.
Often overlooked is the liability associated with the administration of an employee group benefit plan. Some basic duties of a plan administrator (who may or may not be the employer) include:
Contractual duties to comply with the terms of an employment and/or insurance contract and be liable for breach of contract if they fail to do so.
To act in good faith in administrating the contract.
Administrators owe a duty of care to competently administer group benefit plans and if they fail to do so, they can be liable for negligence
Cited case law to support the need for employers to protect against these liabilities include:
Duty to Adjudicate Claims in Good Faith:
A duty of good faith is foundational to nearly every contract of insurance, imposing on all parties a duty to act fairly and in good faith in their dealings with one another.
Greig v Desjardins Financial Security Life Assurance Company, 2019 BCSC 1758
- While employment contracts are not ‘peace of mind’ contracts, unlike insurance ones, the employment relationship is a special contractual relationship. The law inherently recognizes an imbalance of power between the employer and employee.
- The relationship between an administrator and employee is analogous to an insurer and an insured and the administrator owes employee a duty of good faith.
- The administrator should not impose duties with respect to proof of injury or treatment that are not provided for in the respective plan text.
- Good faith dealings from the plan administrator continues after termination.
Branco v American Home Assurance Co., 2013 SKQB 98
- An administrator of a benefit plan will be liable to an employee for improperly cancelling their benefits.
- Prior to cancelling benefits, an administrator should thoroughly investigate.
- One of the purposes of the insurance contract was the continued financial security in the event that the employee became injured and unable to work.
Duty to Maintain Proper Records:
Good information management is a prerequisite of good decision-making, good program, and service delivery and of accountability.
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