$1.3 M Reasons Not to Trust an Insurance Denial

When D.C. required an expensive drug (Solaris – costing around $25,000.00 per month) she turned to her group benefits carrier, Industrial Alliance (IA) for coverage. Her IA policy provided for reimbursement of 90% of certain drug costs. However, Industrial Alliance denied coverage, initially relying on an inapplicable policy exclusion. D.C. then submitted her claim to her husband’s benefits carrier Great West Life (which provided benefits for employees of Arcelormittal Dofasco), who began to make inquiries as to why Solaris wasn’t covered under D.C.’s IA policy. Discussions between IA and Great West Life went nowhere, at which point her husband’s employer (which paid for the secondary insurance that covered the cost of Solaris) brought suit in Arcelormittal Dofasco Inc. v. Industrial Alliance Insurance and Financial Inc., 2016 ONCA 224.

In reviewing the conduct of Industrial Alliance, the Court of Appeal held that “Industrial Alliance ‘stonewalled’ Great West Life’s efforts to understand the basis for the coverage denial, including by refusing to promptly disclose the group benefits policy.”

By January 13, 2011, Industrial Alliance knew that its denial of coverage was ‘inappropriate’ yet it refused to provide its policy to D.C. for another eight months. It’s internal correspondence provided:

Sheila came to me in regards to a claim for Soliris which will be approximately $470,000/year (and ongoing). We had originally denied it and GW picked it up under their plan as the claimant is the spouse of a member covered by GW. After paying for a year GW has now come back to us on our denial and which we have now determined was inappropriate. Therefore Sheila was [sic] asked me to look at and to see if there were was [sic] a way to continue the denial under the terms of the contract (same [as] I did last year with the $600,000 drug claim).
[…]
Since we are paying this drug in Montreal it is possibly going to create difficulty for us in Toronto in regards to finding a way if possible to deny it (and leave it with GW). Please note that failure to do so could possibly result in GW coming back against us in regards to the $ they have paid out for the drug on the claimant.

It later argued (with success in the trial Court), that certain claims for reimbursement were time barred, which thankfully, was appealed.

In a well thought out and important decision, the Ontario Court of Appeal found that Industrial Alliance was responsible for reimbursing 90% of the costs Solaris, dating back to the initial application, and that Industrial Alliance would not be shielded by the Statute of Limitations, where its conduct had frustrated D.C.’s ability to ‘know’ of her claim. As a result, Industrial Alliance was ordered to pay close to $1.3M to cover the costs of Solaris.

D.C. was lucky, in that she had secondary insurance coverage to fall back upon, when her primary insurer wrongly denied coverage. However, her case illustrates the importance of having any insurance policy denial reviewed by an insurance lawyer, to determine whether the denial is supported by the terms of the policy. As the Arcelormittal Dofasco Inc. case illustrates, sometimes, denials are based on nothing more than the insurance company’s desire to minimize expenses.

If your insurance claim has been denied, visit the Insurance practice areas or our site, or call the law office of Michael Lesage at 647-495-8995 for a free consultation with an experienced Toronto and Hamilton insurance lawyer today.

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