Disputing when critical illness insurance is payable

John Manley is a prominent businessman and former federal politician. He was also the plaintiff in Manley v the Manufacturers Life Insurance Company, 2020 ONSC 399, an Ontario Superior Court of Justice case released last week. Apart from the familiar name, the most remarkable part of the ruling is just how unremarkable it is, in that it simply came down to fundamental insurance contract principles.

Despite its complexities, the insurance proposition is quite simple: once you have qualified for the insurance, as long as you pay your premiums on time, the insurer will be bound to pay out following a triggering event.

The element under contention in this case was what constituted the triggering event.

The undisputed facts

From 2009 Manley had critical illness insurance rider coverage in the amount of $500,000 with Manulife through the Canadian Bar Insurance Association (CBIA). On March 13, 2017, he sent a letter to the CBIA directing the policy’s cancellation, effective April 1, 2017. With the last monthly premium payment on March 1, Manulife cancelled the policy on April 1.

In May 2017 Manley was diagnosed with kidney cancer, a covered condition under the policy. In June he submitted documentation to Manulife, including the required attending physician’s statement. The doctor gave details about the diagnosis, including that the cancer “was certainly in existence for months to a year prior to detection on May 1, 2017.”

Manulife responded by letter on July 2017, referring to Manley’s March letter cancelling the policy effective April 1. Based on the policy no longer being in force at the date of the diagnosis, Manulife denied the claim. After proceeding with Manulife’s internal complaint resolution process, Manley commenced court action in 2018.

Disputing the triggering event

The action proceeded by way of a motion for summary judgment with only sworn affidavits, the insurance policy documents and a summary of events.

Manley’s main argument was that he was entitled to the proceeds because the cancer had arisen when he was covered under the policy. He submitted that “suffers a diagnosis” — Manulife’s definition of a triggering event for critical insurance entitlement — is an “odd expression.” A reasonable person, he argued, would conclude that the triggering event would not be the diagnosis but rather the sickness or disability itself.

Manulife relied directly on the policy language to counter that the diagnosis is the triggering event.

It all turns on the diagnosis

After going through the arguments, the judge found that diagnosis “is the organizing principle for entitlement to critical illness insurance.” Furthermore, the policy wording in the case was unambiguous.

This provides certainty and predictability for both the insured person and for the insurance provider. The making of the diagnosis by the doctor, and its delivery to the insured person/patient, is an undisputable event.

There was one more argument relating to the timing of lodging the claim, which was also rejected based on the coverage no longer being in force. In the analysis, the judge emphasized the importance of Manley’s “unilateral and deliberate decision” to terminate the rider effective March 31, 2017.

“In making this decision, Manley took the risk that he would, subsequent to that date, receive a diagnosis of an illness that would otherwise be considered a Critical Condition, but would not be entitled to the Insurance,” the judge wrote.

Manley survived the cancer, which obviously is the most important result. Still, it was determined that even though the diagnosis closely followed the policy cancellation, Manley had indeed cancelled the coverage and Manulife was under no obligation to pay.

Doug Carroll is a tax and estate consultant in Toronto.

Doug Carroll

Tax & Estate

Doug Carroll, JD, LLM (Tax), CFP, TEP, is a tax and estate consultant in Toronto.