Clarification of contract

By reviewing ones policy with the insurance company, should one be able to determine clearly what the contract states and what a potential violation of that contract would be.

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Some things. Some things are assumed (like the mutual duty of good faith). Some things have developed in court cases. And some things they will have tried to write clearly but failed…


Thanks Caro

I guess I am maybe looking for a black and white answer that is not possible, for example, is it a given (even law) with any insurance company that one should disclose any income or are there exceptions. (not including of course unionized agreements). I think severances are tricky because if it is normally given when a company closes off with someone to help them financially in their job finding etc (part of their employment income) then that makes sense but if it is given to someone who is disabled and on LTD re: termination then it seems to me that takes on a different flavour especially when they are not in a position to return to work. I just think this should be clear in a contractual policy (a mutual duty should be clearly written in a legal agreement so that one can read it and say okay I have to do this re: the contract. I hate grey because it can leave one at risk if you make the wrong honest decision based on what you know but it is fuzzy at best. Do you know what I mean. I believe it should be written clearly - pretty basic so one is not guessing especially if there is significant income at stake.

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Yeah that level of certainty would be nice but it is a literal impossibility because things change in ways that nobody anticipated, people interpret things in a different way, or two things that did get thought of and written down actually contradict each other in some circumstances. So we have to muddle through the mess that is life. Usually contract clauses get added to deal with problems that weren’t anticipated, and contracts get longer and longer. :slight_smile:

There is also a rule that ambiguities get interpreted in favour of the insured person so there’s that too. There are also sources of income that aren’t from employment that wouldn’t have to be disclosed, like income from investments in the stock market or rent from your roommate.

In the circumstances you describe, where you are getting paid in a work-related context but aren’t actually performing work to get the payment, I would check my policy to see what things are listed as allowable deductions/direct deductions from benefits or not included in calculating the all-source maximum payments (your policy might use different words!). My LTD specifically excludes severance pay. CPP Disability might deduct it in some circumstances.

Speaking strategically, I would always err on the side of over-disclosure. Check your policy, see if there’s a clear exclusion, if there is then send a brief written note to your case manager telling them that you’re receiving the payment and quoting the language in your policy that excludes it.

The reason I would over-disclose is because if I’m wrong about whether or not the insurance company is entitled to my severance payment, then disclosing it won’t cost me anything more than I was supposed to pay anyway. But if I don’t disclose it and I’m wrong, then that turns into fraud, and the insurance company can get the money back from you and then stop paying you entirely for the future even though you are still disabled. It’s way lower risk to be up front about it and if necessary fight about whether or not it was covered in the contract language.


Thanks Caro
You seem to be very knowledgeable about all of this. Thank you! I certainly would not want to do anything that would be deemed fraudulent. I guess that is why I am trying to sort all of this out. I just wish things could be laid out more black and white. I can retire early and then this muddled mess goes away and I think I am leaning on that idea.


my 2 cents.

  1. I worked for XYZ for ten years then I was off on STD then LTD. After 28 months my employer terminated me. I was paid vacation pay which I reported to my case manager as per my policy. My employer also reported it to my case manager. My LTD for the following months was reduced by the vacation pay amount.

  2. I never received severance pay so I cannot comment on it.

I hope this helps.

All people receiving LTD payments have a good faith obligation to tell the insurance company about any new information that can affect the claim. Reporting income, and what income needs to be reported, is very close to being black and white. Each policy sets out the type of income that is deductible, and so that is your guide on what needs to be disclosed. There is still some grey area here in terms of how some of the income clauses have been interpreted by courts, but you can get a pretty good idea.

My general advice is – when in doubt – just report it to the insurer. Much better to be up front with them as they will always come down much harder if they think a person has lied or hidden things from them.

David Brannen

Disability Lawyer with Resolute Legal

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