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
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
The applicable weekly indemnity provisions in the CBA stated as
(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
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
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
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:
That the CBA specifically provides
that the employer can supply group benefits through insurance;
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
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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