McGarry v. Co-operators Life Insurance Co., 2011 BCCA 214

In interpreting an insurance policy, the British Columbia Court of Appeal in McGarry v. Co-operators Life Insurance Co. treated employee beneficiaries of the policy as third-party beneficiaries who cannot intrude upon the privity to contract between the employer and insurance provider. McGarry, the appellant, was an employee suffering from a total occupational disability who was entitled to long term disability benefits under the employer's insurance policy provided by the respondent party. The respondent claimed that while the policy mandated payment of benefits up to 65 years, the payment was capped to 2 years per the employer's application form.

Hinkson J.A., writing for the majority, held that when language of the policy is unambiguous, the court should give effect to the clear language “reading the contract as a whole”. The dispute centred on what constituted as parts of the insurance contract in question and the significant aspect of the decision lies in the clarification that the contract as a whole includes both the benefit policy itself and the employer application form. Hinkson J.A. reasoned that the master group insurance policy allowed employers such as Five Star Paving Co. Ltd to select the particular type of insurance coverage they want to be available for their employees. Therefore, the employer’s application form for such coverage is instrumental in determining the terms of the insurance policy.

Mackenzie J.A. dissented by reasoning that since policy provisions state that applications cannot conflict with policy terms, the terms of the policy must prevail over the application. He further reasoned that since employees benefitting from the insurance plan are not directly involved in contract negotiations, they inadvertently rely on the clarity and transparency of the insurance policy. Consequently, Mackenzie J.A. found that the employer application cannot amend the policy itself without infringing upon employees' expectations.

April 28, 2011
http://www.courts.gov.bc.ca/jdb-txt/CA/11/02/2011BCCA0214cor1.htm

Jen-Yii Liew & Minsuk Kim