OVERVIEW
Third party claims are intricately connected to allegations pleaded in the statement of claim. When a plaintiff does not claim damages from anyone other than the defendant, the defendant cannot pursue a claim for contribution and indemnity from anyone else. As is evident in the decision Mitchell v. Enertech Sheet Metal Inc. [2023] O.J. No. 5137 (“Mitchell”), contribution rights only arise where a defendant is compelled to pay more than its proportionate share of the plaintiff's damages. Recovery for disability benefits can become a critical issue for employers when the plaintiff alleges wrongful termination, and claims damages for the premature termination of group benefits coverage. In such cases, an employer may find themselves unable to pursue a third party claim for contribution and indemnity from the disability benefits provider.
In Mitchell, the plaintiff commenced an action for wrongful dismissal against her employers, Enertech Sheet Metal Inc. and Enertech Maintenance Contractor Inc. (“Enertech”). Among other things, the plaintiff alleged that she was wrongfully terminated on June 15, 2020 and sought damages for the loss of group benefits which she had access to while employed by Enertech. Group benefits were provided by Sun Life Financial Inc. and Sun Life Assurance Company of Canada (“Sun Life”).
In her amended statement of claim, the plaintiff pleaded, among other things, that she became disabled and was unable to work and that Enertech wrongfully terminated her group benefits coverage, which included disability benefits. She consequently sought entitlement to damages in the amount of the value of those group benefits from Enertech.
The plaintiff did not commence an action against Sun Life for disability benefits and, at no point in her pleadings did she make any claim against Sun Life. She also did not plead when she became disabled. However, the court in Mitchell did point out (in a footnote to the decision) that Sun Life pleaded in its third party defence that the plaintiff did submit a claim to Sun Life for disability benefits in February 2022, claiming that she was totally disabled and unable to work as of December 9, 2021, well after the coverage period had lapsed.
In its statement of defence, Enertech denied that the plaintiff was wrongfully terminated or disabled. Entertech subsequently issued a third party claim against Sun Life. In its third party claim, Enertech adopted an alternative position: if the plaintiff became totally disabled within the meaning of the policy, and she was entitled to disability benefits, then Sun Life was liable to the plaintiff.[1] When Enertech framed its third party claim against Sun Life as one of contribution and indemnity under the Negligence Act, Sun Life brought a motion to strike the third party claim on the basis that it disclosed no reasonable cause of action.
MOTIONS DECISION
In granting Sun Life’s motion to strike, the court held that Enertech’s claim against Sun Life could not succeed and the relief sought by Sun Life was warranted. The court accepted Sun Life’s argument that Enertech had no claim against the third parties for contribution because the plaintiff had limited her claim for damages. Contribution rights arise only where a defendant is compelled to pay more than its proportionate share of a plaintiff's damages. In Enertech, the plaintiff had limited her claim to damages flowing from her wrongful dismissal against her employer only and Sun Life had “nothing to do” with the plaintiff's dismissal, wrongful or otherwise.[2] The statement of claim was limited to the damages which could only be attributed to the fault of the defendant employer.
TAKEAWAYS
The defendant’s right to claim over against an alleged wrongdoer. The express language of the statement of claim plays a crucial role in determining the defendant’s right to claim over against an alleged wrongdoer. Careful review of the pleadings will ascertain whether or not the plaintiff has limited his/her claim for damages or seeks more than the defendant’s proportional share of damages. This will determine whether or not it is open to the defendant to claim over against another potential tortfeasor.
Crystallization of the plaintiff’s claim against her disability benefits provider. The court in Mitchell signaled to the plaintiff that her claim against her disability benefits provider had not yet “crystallized,”[3] because she had not made certain allegations against her disability benefits provider. Framing her claim for damages against her employer only in the context of a wrongful dismissal action prompts questions as to whether the plaintiff in any way affected her ability to pursue a claim against her disability benefits provider.
Premature termination of group benefit coverage exposes employers. Premature termination of group benefit coverage exposes employers to pay damages to the plaintiff in the amount of the value of group benefits. The possibility exists for plaintiffs who are found to be disabled within the meaning of the policy to recover disability benefits from their employer instead of the group benefits provider. The employer’s decision to terminate coverage prematurely could result in an employer being found liable to the plaintiff for payment of disability benefits, particularly where a court determines that a longer notice period is called for.
[1] Mitchell v. Enertech Sheet Metal Inc. [2023] O.J. No. 5137 at para 3.
[2] Mitchell v. Enertech Sheet Metal Inc. [2023] O.J. No. 5137 at para 14.
[3] Mitchell v. Enertech Sheet Metal Inc. [2023] O.J. No. 5137 at para 11.
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