To Insure or Not to Insure: Employment Group Benefits

17 août 2016 | Jeff N. Grubb, K.C.

( Disponible en anglais seulement )

Employers in a unionized setting often believe that having insurance in place to cover group benefits to which employees may be entitled pursuant to the collective bargaining agreement (CBA) insulates them from grievances relating to disputes over entitlement to those benefits. That can be the case, but sometimes isn’t.

In a recent decision (names of parties withheld for confidentiality), arbitrator Allen Ponak held that even though it was reasonable for the employer to have insurance in place to assess and provide weekly indemnity group benefits to its employees, the employer was nonetheless liable for benefits that the insurer had denied the grievor.

The facts were straight forward. After having elective eye surgery, the grievor was advised by his treating physician to take 2 weeks off work to recover. The grievor filed a claim with the company’s insurance provider for weekly indemnity benefits for the 2 weeks. There was no dispute about the grievor’s medical condition and the fact that he was unable to work for the 2 weeks. The insurer, however, denied the insurance claim and explained:

The laser surgery is deemed elective as it was not as a result of an illness or injury.  The plan member wanted to have this corrective surgery which was not absolutely necessary or did not result from illness.

This is similar to when plan members who have abdominal surgery for weight reduction.

The applicable weekly indemnity provisions in the CBA stated as follows:



(a) The Company shall provide a Weekly Indemnity Insurance Plan for all employees covered by this Agreement. The benefits commence on the first day of continuous absence due to ill health or injury and shall extend to a maximum of twenty-six (26) weeks. The benefit payment shall be equal to seventy (70) percent of the employee’s hourly rate as per Article 17.01 at time of absence times the number of regularly scheduled hours in the work week exclusive of overtime hours.


(c) The cost of the weekly indemnity plan as described in Article 9.03 (a) above shall be one hundred (100) percent « Company paid ».
[underlining added]

The arbitrator accepted that the CBA specifically contemplated that the company could contract with an insurance company to provide the weekly indemnity group benefits and that by doing so the company had met its obligations pursuant to the CBA. The arbitrator further accepted that it was not the company’s responsibility to assess claims submitted by its employees to the insurer and that any challenge to the insurer’s decision to deny a claim should generally be made to the insurer and could not be the subject of a grievance against the company under the CBA. The arbitrator, however, also held that if the insurance coverage obtained by the company was less than the benefits provided for in the CBA that the company would remain liable for such “under insured” benefits.

The arbitrator concluded that while it may be common for insurers to deny claims arising from elective surgery, the CBA in this case did not include such an exclusion. The CBA required the company to provide weekly indemnity benefits for absences from work “due to ill health or injury”. The arbitrator held that being absent from work “due to ill health or injury” included absences arising from elective surgery and was not limited to absences arising only from other causes. The arbitrator determined that “illness” or “sickness” for the purposes of qualifying for weekly indemnity benefits only requires one to look at the medical incapacity of the employee and not the cause of the medical incapacity. Pursuant to the CBA employees were entitled to weekly indemnity benefits regardless of the cause of their illness of injury. As a consequence, the company was held liable for the benefits that had been denied the grievor by the insurer.

The lesson for unionized employers from this decision is that they may still be liable for group benefits for which they have insurance coverage, unless they ensure the following:

  1. That the CBA specifically provides that the employer can supply group benefits through insurance; and
  2. That the nature and amount of any group benefits identified in the CBA are specifically covered in the insurance policy. Any exclusion in the insurance policy that is inconsistent with the benefits to be provided in the CBA will result in the employer remaining on the hook for the “under insured” portion.

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