If someone (a "third party") is at fault for your disability (for example, because of a motor vehicle accident or a slip and fall), the LTD Plan is "subrogated" to your claim against the third party.
Subrogation gives the LTD Plan certain rights to the conduct and proceeds of your claim against the third party, which rights are explained below. The LTD Plan's objective is to recover the LTD benefits paid to you from the income loss recovered by you from the third party and to minimize its liability to pay LTD benefits to you in the future through an offset of the future income loss recovered by you from the third party. If someone is at fault for your disability, you should have your lawyer contact the LTD Plan office.
The "subrogation provision" states:
16.(1)Where a long-term disability benefit is payable for an injury or illness for which any third party is, or may be, legally liable, the Trustees will be subrogated to all rights and remedies of the employee against the third party, to recover damages in respect of the injury or death, and may maintain an action in the name of such employee against any person against whom such action lies, and any amount recovered by the Trustees shall be applied to
a) payment of the costs actually incurred in respect of the action, and reimbursement to the Trustees of any disability benefits paid, and the balance, if any shall be paid to the employee whose rights were subrogated.
b) any settlement or release does not bar the rights of the Trustees under subsection (1) unless the Trustees have concurred therein.
c) an employee will fully cooperate with the Trustees in order to allow the Trustees to do what is reasonably necessary to assert the Trustees' rights to subrogation.
- The LTD Plan is entitled to control your action against the third party, including hiring its own lawyer to conduct the claim ? see Conduct of Your Claim Section below.
- You are required to cooperate with the LTD Plan in its conduct of the claim against the third party.
- The LTD Plan's consent is required in order for a settlement of the claim to be binding.
- When your claim is settled, or a verdict on your claim is obtained from the court, and proceeds are paid to you pursuant to that settlement or court verdict, the LTD Plan is entitled to be reimbursed from the income loss portion of those proceeds, the LTD benefits paid to you to that time, plus interest at the rate paid in the settlement or court verdict, net of the recovery (i.e. legal) costs.
- The LTD Plan is entitled to reduce any LTD payable to you in the future to the extent of the lost future income or loss of earnings capacity recovered by you in the settlement (or court verdict) of the claim, net of recovery costs.
The Conduct of Your Claim
Traditionally, rather than conduct your accident claim itself, the LTD Plan has found it works better for both you and the LTD Plan if you conduct the third party accident claim using your own lawyer, with your lawyer reporting on the progress of the claim to the LTD Plan from time to time, and reimbursing the LTD Plan from the settlement proceeds. However, this permission for you to conduct the claim comes with three express conditions:
The Settlement Process
As indicated, one of the conditions of you conducting the accident claim is that the LTD Plan's consent is to be obtained for any proposed settlement. The process usually followed to obtain this consent is as follows:
- When it is time to settle, your lawyer will contact the LTD Plan, or its lawyer, to advise of the proposed settlement, usually by providing a copy of the proposed settlement demand.
- The LTD Plan will review the settlement proposal, focusing primarily on the income loss portion of the proposed settlement. In cases where less than 100% of the income loss is being claimed, requests may be made for further information to explain why.
The LTD Plan will advise you of the reimbursement amount due before you settle your claim. If you do not agree with this amount, a settlement may still proceed. However, in this circumstance, the LTD Plan requires that the amount in dispute be held in trust until the issue is resolved. Any additional settlement amount can be paid to you without delay.
- Once consent to a proposed settlement is given, or a consent to a range of proposed settlements is given, you are then free to negotiate the settlement with the third party within the authority provided by the consent. When the claim is settled, your lawyer will repay the LTD Plan from the settlement proceeds (or keep that amount in trust if the amount of the reimbursement is in dispute), and pay the rest to you, after deducting legal fees. Confirmation of consent will be given to the third party, on request.
Please see Subrogation FAQ's for answers to commonly asked questions. Should you have additional questions, please contact our office.