A quick recap:

Recently, Dave Patriarche, the captain of the CGIB ship, posted an interesting summary of a lawsuit in the benefits space. This lawsuit presents a lot of very useful information for the financial planning community.

I’m going to break my analysis of this lawsuit down into three articles. In the first, I described the parties to an LTD contract, and how they might incur liability. In this second instalment, I’ll explore relevant financial planning concerns. In the third, I’ll explore the composition of group benefits premiums.

The full text of the lawsuit can be accessed here.

The Issue

The facts of the case are as follows:

·        Mr. Soave stopped working for Stahle around 27 Jan 2014.

·        He was offered further employment, but turned it down to take time off to get surgery for a hernia.

·        A Record of Employment was issued soon after, indicating the reason for the termination of employment as a temporary medical leave.

·        Mr. Soave was in a serious car crash on 13 Mar 2024, before he had the scheduled hernia surgery.

·        He tried to use his benefits plan to pay for medication prescribed to deal with the effects of the accident.

·        The insurer contacted the employer, who stated that Mr. Soave was no longer an employee

·        The insurer denied both that claim and a subsequent claim made in Mary of 2016 for LTD benefits.

·        The LTD claim denial was due to not being ‘actively at work’, which is common language in benefits plans.

·        Mr. Soave sued Stahle.

·        He was successful in the Ontario Superior Court, where he won a judgment in Jan of 2022, allowing him to claim LTD benefits for the car crash. This case is not indexed on Canlii, and is unavailable to read as a public document.

·        Stahle successfully appealed this decision in February of 2023. The appeals court send the matter back to the original trial judge, indicating that she had made errors in interpreting the LTD language in the lawsuit.

·        The matter returned to the original trial judge in October of 2023. At that trial, the judge determined that the disability claim out to have started when Mr. Soave originally took medical leave in January of 2014. The damages were $250,000 related to the disability claim and $110,000 of legal fees. That’s a big hit for a small or medium business. In fact, Stahle doesn’t seem to have any sort of web presence any longer:

·        Finally(?), Stahle made a subsequent attempt to get this decision overturned at the Ontario Court of Appeal. The Court of Appeal sided with Mr. Soare in all matters, leaving Stahle on the hook for nearly $400,000 of total financial awards and fees, plus their own legal costs.

There are several lessons to be learned here for financial planners working with clients.

The Financial Planner Working with Mr. Soave

Imagine that Mr. Soave is your financial planning client. How could the financial planner have contributed to better outcomes for him?

First, you might suggest that his outcome was pretty good. He won, after all. Recall, though, that his original injury took place in 2014. His first judgment took place in 2022. That’s an 8-year gap where he was presumably relying on sources of income other than LTD benefits. Workers compensation benefits were almost certainly unavailable to him.

Even upon winning that judgment, it’s unlikely that he would be able to collect the full amount. Stahle seems to be no longer a going concern.

The very first opportunity for the financial planner to have some involvement here would have been exploring Mr. Soave’s preparedness for a loss of income. Did he have good emergency funds? What was the language in his benefits booklet concerning his disability coverage? Would he have been well-served by an individual disability contract? It sounds like he was at least something of a ‘gig’ worker, and maybe individual disability insurance to accommodate moves between jobs would have been appropriate for him.

The second opportunity would have been at the time of his need for the hernia surgery. Much of Stahle’s case here hinges on poor documentation and lack of doctor’s notes concerning his inability to work. The manager at Stahle did not recall Mr. Soave’s description of his inability to work. (Dear reader – I drove an armoured vehicle 30 years ago for a crew commander who had testicular torsion at the time, and I will never forget his descriptions of the pain.)

Had the financial planner been aware of Mr. Soare’s need for surgery, that likely would have triggered an application at that time for disability benefits. The financial planner would have been aware of the existence of an LTD plan. The financial planner likely would have asked for the Record of Employment to help establish entitlement to Employment Insurance, which would have caused a recognition that this might be a valid LTD claim.

Curiously, had Mr. Soave received good advice early on, it’s likely that his disability claim would have been paid from the insurer’s reserves, and there would have been virtually no adverse effect for Stahle.

The Financial Planner Working with Stahle

Now imagine that you’re the planner working with Stahle. Consider that one of the two major reasons for incorporation is liability protection (tax planning typically being the other).

You’re likely not the benefits rep, as that’s a separate, specialized role. But you might have a hand in Stahle’s selection of a good benefits rep. That person might be available to Stahle as a ready resource, and Stahle might know that its in their best interests to call that person when they have an employee being issued an ROE for medical reasons.

That well-qualified benefits rep might also recognize that Stahle should have plan administrator liability insurance. This is a common clause in commercial general liability policies. It is sometimes free, sometimes very inexpensive, sometimes automatically added, and sometimes only added if the insured requests it. Regardless, it is designed for exactly these circumstances, where an employer mis-administers what should have been a claim against their benefits plan.

If you’re the financial planner working with a business owner where you’re helping that person manage potential liabilities, it’s worth asking about their relationship with their benefits rep, and maybe taking that person for a coffee or setting up a Zoom meeting with them. It’s also worth a call with their commercial insurance broker and similar asking about their plan administrator liability coverage and any other concerns their commercial broker might have.

Summary

The financial planner might not have a direct role, but the big picture perspective that financial planning provides gives us the opportunity to have meaningful influence over our clients’ financial outcomes. In some cases, it can even be the thing that keeps their business alive.