It’s all about risk and risk mitigation

How about getting that new hire onto the benefit plan? A failure to properly advise a new employee regarding enrolment on the benefit plan can place the corporation in a liability situation. In Grams v. Maple Leaf Metal, an Alberta decision, the employee and the employer were found equally negligent for the employee’s failure to apply for benefits upon hiring.

The decision to terminate, be it on the part of the employer—for cause/without cause—or by the employee, regardless, the employer has an obligations to disclose benefit information. Reference the case of Prince v. T. Eaton & Co. or the Alberta decision Britov. Canac Kitchens. Here we have a long-serving employee who became totally disabled by cancer after his employer wrongfully terminated his employment and his disability insurance. The decision entitled the employee to 22-months notice (for the wrongful dismissal) and more than eight years of disability payments.

Don’t think this can’t happen…How about the liability of an employer for the cancellation of benefits where the employee resigns with a known medical issue? See the decision of Menard v. Royal Insurance Co. of Canada, 2000 CanLII 22596 (ON SC). Under the terms of the insurance policy, eligibility requires that the employee be actively at work full-time and for full pay, coverage will cease on the date an employee is discharged without notice: Pioro v. Calian Technology Services Ltd., 2000 CanLII 22362 (ON SC), [2000] O.J. No. 1749 (QL) (S.C.J.). See also Prince v. T. Eaton Co., 1992 CanLII 5968 (BC CA), 91 D.L.R. (4th) 509 (B.C.C.A.) in which case eligibility was not linked to active employment and the employee was awarded LTD benefits during the notice period.

Further, an employer MUST disclose Group Life (Disability, where applicable) conversion to terminated employees. This is one of the most overlooked/misunderstood administrative requirements under the benefit plan. Typically, under most contracts, an employee has 31-days after the date of termination to convert the life/disability benefits to an individual policy without having to provide medical evidence. Failure by an employer to provide the necessary information can result significant financial consequences.

Take the case of Erwood v. Life Ins. Co of N. Am., 2017 U.S. Dist. LEXIS 56348 (W.D. Pa 2017) where a federal court ordered WellStar Health Systems Inc. to pay $750,000 to a form employee’s widow for breaching its fiduciary duty in administering the group benefit plan.

Is your plan administrator covered? Obtain Plan/Benefits Administrator liability coverage. This is typically available as a ride to most general business liability policies from your Property & Casualty/General/Business Insurance broker.

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