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Total Disability: Not So Total After All!

A version of this article by Duncan Macgillivray and Jeff Moorley originally appeared on the OTLA Blog.

Many Long-Term Disability (LTD) insurance policies state that the insured person will only qualify for benefits if they become “Totally Disabled” or suffer a “Complete Inability” to work. To avoid confusion, we will use these phrases interchangeably.

It is standard practice for insurance companies to write these strongly worded clauses into their No-Fault Auto Insurance and in Long-Term Disability policies. Insurance companies often argue that these phrases mean exactly what they say: that if a person can do part-time work, then they are not “Totally Disabled”. Or, that if a person can do some job tasks, then they are not “Totally Disabled”.

Not So Total After All

This makes sense on its face, so you may be surprised to learn that these arguments are wrong in law. Courts and Arbitrators have found that “Total Disability” and “Complete Inability” are legal terms of art and, as such, they should not be interpreted literally.

To qualify under a Total Disability policy, it is not the standard that you must be unable to perform any tasks of any job. Indeed, most people who qualify for disability benefits could not meet such a strict test! The legal standard is lower.

In Paul Revere Life Ins. Co. v Sucharov, Chief Justice Laskin explained that Total Disability should be not taken totally literally:

The test of total disability is satisfied when the circumstances are such that a reasonable [person] would recognize that he should not engage in certain activity even though he literally is not physically unable to do so. In other words, total disability does not mean absolute physical inability to transact any kind of business pertaining to one’s occupation, but rather that there is a total disability if the insured’s injuries are such that common care and prudence require him to desist from his business or occupation in order to effectuate a cure; hence, if the condition of the insured is such that in order to effect a cure or prolongation of life, common care and prudence will require that he cease all work, he is totally disabled within the meaning of health or accident insurance policies.

So, you can be able to perform some tasks of a job and still be Totally Disabled . You can work part-time and be Totally Disabled. Working does not, in and of itself, disqualify you from meeting the Total Disability test. On the contrary, the failure of an honest and sustained attempt to work can provide evidence (perhaps even the best evidence!) of Total Disability.

A Holistic Approach

Determining Total Disability requires a holistic approach. All aspects of disability must be considered. Alternative jobs must be considered as a whole, from the “real world” perspective of a normal employer with normal productivity expectations. It is not a “cookie cutter” approach of identifying a handful of “transferable skills” and then “matching” them into a job that supposedly fits. As one Arbitrator said:

“It is not appropriate to simply identify a discrete series of employment competencies that an individual may be able to demonstrate under artificial testing situations and then to cobble these together into a theorized ability to engage in any employment.”

When you look past the literal words on the policy, this all makes sense. Insurance exists to provide us with the peace of mind that it will be there to protect us when something unexpected happens. We pay for insurance so that it is there in our time of need.

Don’t let the literal interpretation of “Total Disability” discourage you from applying for disability benefits or from fighting an insurance company’s argument that you don’t qualify for benefits.  Many long-term disability insurance companies deny claims at the outset only to then want to settle them once you sue. Contact us today for more information.

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