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Human rights issues in insurance

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The Bates v. Zurich Decision

To date, one of the most influential rulings relating to insurance and the Code has been the Supreme Court of Canada’s majority ruling in Bates v. Zurich[3] with respect to the "reasonable and bona fide" test under section 22 of the Code (section 21 at the time of the complaint). This ruling is binding on all lower courts and tribunals and Boards of Inquiry have also applied the section 22 test in cases dealing with employment under section 25 of the Code[4].

The defence in section 22 of the Code allows insurance companies to make distinctions in individual insurance policies and (non-employment) group insurance policies based on age, sex, marital status, family status or handicap but only if those distinctions are made on reasonable and bona fide grounds.

At issue before the Court was whether Zurich Insurance discriminated against Michael Bates when they charged him higher premiums for automobile insurance because of his age, sex, and marital status.

The Majority Decision

The Court defined a practice as bona fide if it was adopted honestly, in the interests of sound and accepted business practice and not for the purpose of defeating the rights protected under the Code. It was not disputed that Zurich acted in good faith when setting its insurance premiums.

The judgement focused on the application of the "reasonableness" test to the facts of the case. The Court held that a discriminatory practice is "reasonable" if:

(I) It is based on a sound and accepted insurance practice; and
(II) There is no practical alternative.

In terms of the first part of the reasonableness test, a sound and accepted insurance practice was defined as one that is adopted "for the purpose of achieving the legitimate business objective of charging premiums that are commensurate with risk".

The majority of the Court found that Zurich's decision in setting the premiums was based on credible actuarial evidence available at the time of the complaint. That actuarial evidence consisted of a statistical correlation between age, sex and marital status and insurance losses which showed that young male drivers are involved in more accidents than other drivers.

The Court then considered whether a practical alternative existed at the time of the complaint. The Court found that, in 1983, there was no practical alternative for Zurich to setting premiums based on age, sex and marital status. The Court held it would be unreasonable to expect Zurich to guess at what level premiums should be set rather than relying on statistically valid, albeit discriminatory data.

The Court made it clear, however, that the insurance industry should not continue indefinitely to use discriminatory criteria for rate setting. The Court found that, according to the evidence, three years are required to obtain meaningful statistics. The Court also stated that "the industry must strive to avoid setting premiums based on enumerated grounds".

The Dissenting Judges

The two dissenting judges would have ruled in favour of the Commission. They made a number of persuasive arguments in keeping with a broad, liberal and purposive interpretation of human rights legislation:

  • The respondents should not be allowed to justify discriminatory practices on the basis of tradition. Fifty years of discriminatory rate classification is not an excuse.
  • A statistical correlation is not sufficient to justify the reasonableness of a discriminatory practice. There must be a causal connection.
  • A reasonable alternative existed. Premiums for drivers over 25 years of age are set according to distance driven and accident history. There was no evidence that these criteria could not be used for drivers under 25 years of age.
  • The absence of statistics on an alternative classification system does not establish that there is no alternative.


The Court's application of the reasonableness test reveals the majority's deference to established tradition of the insurance industry. Respondent insurance companies can easily argue that their practices are well established and accepted in the industry. This argument of tradition is not an accepted defence in other types of human rights complaints. And, one could argue that discriminatory attitudes and behaviours would not change if respondents could justify their actions based solely on tradition.

That being said, the Commission would have to consider the statistical evidence available to the insurance industry at the time of a complaint. However, as noted by the dissenting judges, simply because an insurance company does not have statistics developed for their own use does not mean that current, non-discriminatory statistics could not be made available.

The Court's comments regarding an available practical alternative imply that the insurance industry could have developed a new system for automobile insurance based on non-discriminatory criteria. To date, the industry has not developed a new system for automobile insurance. A similar automobile insurance complaint might now be decided quite differently. The Supreme Court clearly stated that the insurance industry should be actively working to develop non-discriminatory criteria for assessing risk. The existing discriminatory classification system may no longer meet the test of a sound and accepted insurance practice.

Auto Insurance

The Section 22 defence in the Code includes auto insurance where distinctions may be made based on age, sex, marital and family status, or handicap, but these distinctions must be made on reasonable and bona fide grounds.

Presently in Ontario, auto insurance risk assessment is in part based on family groupings, age and sex. As a result complaints of discrimination on the grounds of marital status, family status, age and sex are likely to continue.

A variety of scenarios based on marital or family status can appear to result in discriminatory treatment. For example, children of the principal driver in a family may be rated as occasional drivers. At one time, female children were included free of charge where as male children were not. Female children drivers are no longer included free of charge. There is an additional charge for both male and female occasional drivers, but the rate charged for males may be higher than that charged for females.

In the situation where one member of a household has his or her license suspended, the partner will likely have to pay a higher premium. The insurance company may feel that the suspended driver is a risk for driving without a license and may increase the partner's premium according to their risk assessment.

Under the Insurance Act, FSCO reviews all applications and the Superintendent will approve them if certain statutory standards related to risk classification and rates are met. Insurers have a right to request a hearing if approval is not given and the Superintendent holds a hearing if it is in the public interest to do so.

OIC (FSCO) Hearing

In 1997, the former Ontario Insurance Commission (OIC) received application from an insurer that proposed a new risk classification and rate system based on criteria not directly related to driving. A background paper prepared by OIC staff took the position that several elements of the proposed risk classification system were not just and reasonable and did not distinguish fairly between the risks due to their social policy implications. This position does not necessarily reflect the past or present position of the then OIC (now FSCO). The OIC did not approve the application and, as required by the Insurance Act, scheduled a hearing on the matter.

The insurer subsequently withdrew its application before commencement of the hearing. However, it is worth noting that the Ontario Human Rights Commission submitted comments to the OIC (see Appendix). The Commission stated that certain risk classification factors under the insurer’s proposed system, namely: credit card ownership, bankruptcy status, employment status and stability, and residence status and stability, might be found to contravene Part I of the Code on the grounds of marital status. Also, the Commission had concern that such criteria might have an adverse impact on women, youth and recent immigrants.

The Commission then went on to say that it is unclear whether a Board of Inquiry or a Court would find that the insurer’s proposed risk classification system “is based on a sound and accepted insurance practice” as was found in Zurich. It is also questionable whether it would be found that “there is no practical alternative” to the insurer’s proposal.

The Commission further stated that the Zurich decision means on the one hand that the insurance industry can contravene certain grounds under Part I of the Code if it can show under section 22 that such a practice is adopted “for the purpose of achieving the legitimate business objective of charging premiums that are commensurate with risk”. At the same time, the Court made it clear that the insurance industry should not continue indefinitely to use discriminatory criteria for rate setting and stated that "the industry must strive to avoid setting premiums based on enumerated grounds". When these two aspects of the Zurich decision are read together, it might be argued that any newly proposed classification system, even if shown to be a better measure of risk, should at least not further contravene Part I of the Code any more than any current classification system does. And in fact, such a newly proposed system should strive to avoid determining risk based on enumerated grounds.

Irrespective of the majority decision in Zurich and the section 22 exception under the Code, the OIC appears to apply a different interpretation of what are “reasonable” and bona fide risk classification criteria. The OIC background paper argued a similar contention to the opinion of the two dissenting judges in the Zurich case. These judges found that a statistical correlation is not sufficient to justify the reasonableness of a discriminatory practice. There must be a causal connection.

In its Final Report response to the insurer’s application, the OIC stated that any new risk classification variable must pass all tests set out in the Insurance Act (section 412.1 in particular, see Appendix). It goes on to say that apart from a statistical relationship, risk classification criteria must also make a fair distinction. Furthermore:

One indicator of the reasonableness of a risk classification system is its causality, i.e. the insured should be able to logically deduce how they are being rated and see the effect that their driving characteristics has on their rate (OIC Final Report, p.7).

The majority decision in Zurich does not rely on a “causal connection” but simply a statistical correlation as sufficient to justify the reasonableness of a discriminatory business practice. The position articulated in the OIC’s background paper that an insured motorist should be able to see how their driving affects their insurance rate thus appears to be a more stringent test of “reasonableness” than found in the Zurich interpretation of section 22 of the Code.

An auto insurance complaint today might be decided differently than in Zurich in that a Board of Inquiry or Court might not only consider that the industry could have by now come up with alternatives to traditional discriminatory risk classification criteria, but might also take into account the position as articulated in OIC’s background paper that there should be a causal connection between risk classification and driving characteristics.

US Jurisdiction

It has been reported that some jurisdictions in the United States do not use age, sex & marital status in setting auto insurance rates. Massachusetts, for example, uses a "Safe Driver Insurance Plan" that is based on driving record and a points system and not upon age, sex or marital status, except that there is a discount for those aged over sixty-five.

Disability and Insurance

Baer’s Study Paper on the Legal Aspects of Long-Term Disability Insurance (supra) serves to clarify some definitions and concepts in the area of disability insurance. Baer states that in Ontario, “disability insurance refers to a rider written as part of a life insurance contract, and ‘accident and sickness insurance’ is the more generic term used in non-life insurance contracts.” Similarly, disability insurance is regulated by two different parts of the Insurance Act. Baer believes it no longer serves any functional purpose and recommends that “all disability insurance whether undertaken as part of a life insurance contract or not be subject to a single set of statutory rules.”

Moreover, Baer uses the term disability insurance to refer to insurance which is designed to replace lost income or to compensate for loss of enjoyment. He distinguishes this from insurance designed to cover medical expenses.

Baer points out that the Insurance Act does not distinguish between short and long-term disability, whereas the industry and the Canadian courts do. Short-term benefits are often provided as part of the employer’s sick leave policy and are not included under long-term disability. However, group disability insurance policies often combine short and long-term occupational coverage. “That is, to receive short-term benefits, claimants must be disabled from performing their usual occupation, but to receive long-term benefits they must be disabled from performing any occupation.”

Baer also stipulates that the Insurance Act distinguishes between individual and group disability insurance contracts, and that Statutory Conditions do not apply to group disability insurance. At the same time, most disability insurance is provided under group policies from employers or other organizations.

He goes on to say that, “Much disability insurance (particularly group insurance) is now sold with little if any rating. That is, all members of an organization may be accepted into a group plan with membership in the group (such as employment) used as a rough proxy for good health, and a limited enrolment period for participation in the plan used to guard against adverse risk selection. The risk may be further controlled by various policy exclusions (particularly an exclusion relating to a prior medical condition).”

Section 25(3) Defences

Section 25(3) offers two defences to insurance companies and employers who decline coverage to an employee because of a pre-existing handicap:

  • Section 25(3)(a) allows other employee disability or life insurance plans to make distinctions based on disability provided that the distinction is reasonable and bona fide, and provided that it is because of a pre-existing handicap and provided that the handicap substantially increases the risk.
  • In section 25(3)(b) group insurance policies for employee groups that are fewer than 25 in number, or that are employee-pay-all plans, can make distinctions based on disability provided that the distinction is reasonable and bona fide and provided that the distinction is made on the ground of a pre-existing handicap.

In order to be successful in its defence under section 25(3)(a) the respondent must show that:

  • The distinction addresses a pre-existing handicap;
  • The handicap excluded is one that substantially increases the risk; and,
  • The distinction is reasonable and bona fide.

Section 25(3)(b) is less onerous, as a respondent does not have to show that the handicap substantially increases the risk.

Employers and insurers who make distinctions based on handicap in group insurance contracts in employment situations which do not fall within the requirements of the section 25(3) exemptions, are not entitled to a special defence under the Code.

Pre-Existing Handicap

The insurance industry uses exclusion clauses in long-term disability contracts to restrict individuals from making claims for conditions that pre-existed the effective date of coverage. These exclusion clauses are apparently intended to protect the insurer from individuals who join an employer company primarily to obtain protection for an anticipated health problem that the insurer and employer are unaware of. The insurance industry calls this behaviour "adverse selection".

Pre-existing condition limitations may vary, but they all limit coverage for some period of time for any condition that the employee was diagnosed or treated for during some period of time prior to the effective date of coverage. The limitation in an exclusion clause is usually temporary. The employee will likely receive coverage for other conditions on the effective date and deferred coverage for the pre-existing condition.

In the case of Thornton v. North American Life Assurance Company et al.[5], the complainant alleged discrimination based on handicap as a result of an exclusion clause in a long-term disability plan offered by his employer. The exclusion clause in that plan prohibited employees from receiving long-term disability benefits if the employee received care or treatment by a physician in the 90 day period prior to the date the insurance became effective. The complainant had visited his physician twice in the first 90 days of his employment in order to discuss his HIV positive status. Eleven months into his employment Mr. Thornton applied for long-term disability benefits because of an illness related to his HIV status.

The Board of Inquiry dismissed the complaint. It accepted that “the practice of including exclusionary clauses in insurance contracts where there are fewer than 100 employees in the insured group to be reasonable. Where there are larger numbers of employees such clauses are not necessary because the risk is spread over a greater number” (see Appendix, Case Summaries). The Board also found that there was no practical alternative to this practice.

A problematic scenario arises when an individual visits a doctor during the exclusionary period prior to coverage for a minor ailment that is not yet diagnosed as a pre-existing handicap. That is, the ailment that shows up prior to coverage is deemed to be a symptom of a pre-existing condition only after the point coverage begins. It might be argued that given that the intent of exclusionary clauses for pre-existing handicap is to protect the insurer from adverse selection, the seriousness of a condition should be known or diagnosed during the exclusionary time period prior to coverage in order to deny benefits.

A related issue is the notion of the insured’s duty to disclose material facts such as a pre-existing condition. Baer explains that insurance contracts are considered to be contracts of utmost good faith where the insured is required to disclose to the insurer all material facts. A material fact is “any fact that would have influenced a reasonable insurer to decline the risk or to have stipulated for a higher premium.” However, Baer remarks that “the common law obligation of the utmost good faith is widely recognized to be too onerous and unfair.”

Baer finds that the Insurance Act has adopted modifications to the requirement of the utmost good faith, although the second is adopted by inference:

  • That after a two year incontestability period, a claim cannot be avoided on the basis of concealment and misrepresentation in the absence of fraud; and,
  • That the disclosure obligation is limited to information solicited in the application form or in any required medical examination.

Baer also recommends that the Insurance Act expressly provide that the insured’s duty to disclose be confined to answering all questions to the best of their knowledge and belief.

Substantially Increased Risk

Section 25(3)(a) presents a higher standard for employers and insurers due to the fact that the pre-existing handicap must substantially increase the risk. The Board of Inquiry in Thornton defined "risk" to refer to the chances of a claim being made for the insurance benefit which is the subject of the exclusion.

Under group disability insurance the insurer does not attempt to assess the degree of risk associated with individual employees. The insurer accepts that some members of the group will be at risk of making a claim.

Achieving a normal spread of risk in a group depends on the group being large enough to be statistically reliable. Very large groups of employees likely have a normal spread of risk. According to the insurance industry, groups of less than 100 employees are not expected to represent a normal spread of risk.

An insurance company may not actually assess whether a condition substantially increases the risk of claims being made. At the same time, in order to meet the requirements of section 25(3)(a) an insurance company should ensure that any distinction based on pre-existing handicap applies only to those handicaps that involve a high degree of risk. However, meeting this Code requirement itself raises concerns.

The exclusion of individuals who have a "pre-existing handicap that substantially increases the risk" results in unequal treatment in employment because of handicap. This denial of long-term disability coverage is a barrier for persons with disabilities who have not yet entered the work force and for persons who are employed but could not change employment without losing the coverage they have with their present employer.
Individuals who have HIV/AIDS are particularly vulnerable at present. Insurance representatives have used the expression "you can't insure a burning house" to illustrate the difficulty in insuring someone with HIV/AIDS. Some AIDS organizations have been unable to obtain group insurance plans for their employees because the insurance industry deems the entire employee pool present too high a risk.

Foster Higgins, a human resources consulting firm, published the results of a study that attempted to predict HIV-related costs in group insurance plans[6]. The results of the study indicate that costs from long-term disability claimants with AIDS or AIDS-related disorders were not as high as originally expected. The article suggests several reasons for lower than expected costs. One reason is that most long-term disability claims are offset by Canada Pension Plan disability payments. Hospital stays are also short and may not be billed to a company plan and there is assistance for out-of-hospital drug costs. The article concludes that "a typical claim may cost the benefit plan a total of $100,000, plus a death claim -- this is less than many LTD claims". The article ends by suggesting that employers can consider various measures to control the costs for life insurance and long-term disability programs.

Thus, in determining whether a pre-existing handicap substantially increases the risk, an insurer might have to apply an analytical model, such as the above comparative cost analysis, in order to claim a defence under 25(3)(a) of the Code.

Reasonable and Bona Fide

The exclusion, distinction, or preference in an insurance policy must be "reasonable and bona fide". The "reasonable and bona fide" test developed by the majority of the Supreme Court in Bates v. Zurich Insurance may also be applied in section 25(3). As in Zurich and Thornton, respondents are unlikely to be challenged on the bona fide part of the test.
Turning to the "reasonableness" test, a Board of Inquiry must examine whether:

  • The exclusion, distinction or preference is based on a sound and accepted insurance practice; and
  • There is no practical alternative.

In other words, a Board of Inquiry must assess whether there is enough statistical and actuarial evidence to support the practice that excludes employees from insurance benefits. In Thornton, for example, the respondent company asserted that the purpose of the exclusion clause was to prevent adverse selection. The Board of Inquiry found that the respondent had not made a viable statistical case for the necessity of such a clause. The Board, however, found that the exclusion clause was justified for other reasons.

Not only must an exclusion, distinction or preference be shown to be statistically valid, but there must also be no practical alternative available. In Thornton the Board did not accept the alternatives proposed by the complainant. The Canadian Life and Health Insurance Association has suggested that alternatives for group plans where there is a small risk pool are possible, such as applying a waiting period for all plan members and all conditions, or restricting the criteria under which group insurance would be available.

Section 22 Defence

The Section 22 defence in the Code includes individual accident, sickness or disability insurance or group insurance not part of an employment situation where distinctions may be made based on age, sex, marital and family status, or handicap, but these distinctions must be made on reasonable and bona fide grounds.

Underwriting Criteria

Baer, in his Study Paper on Disability Insurance (supra), explains that:

Underwriting is not an exact science. Underwriters rely both on actuarial evidence and experience. They base the likelihood of loss on both the physical and the moral hazard. In the life and health insurance field, the physical hazard includes all those medical, occupational and vocational factors which the underwriter decides would affect the risk. The moral hazard includes those factors associated with the individual insured’s personality which the underwriter decides would or might affect the risk.

He suggests that such insights gained from expert or professional underwriting experience “may be hard to distinguish from attitudes in society based on stereotype or prejudice.” He also notes that few Canadian courts have probed the evidence of whether “underwriting criteria are unreasonable because [they are] inconsistent with modern notions of human rights.”

Baer points out that the Ontario Insurance Act contains no specific control on the underwriting criteria that can be used in disability insurance.

As mentioned earlier under the discussion on auto insurance, the Act has a general prohibition against “unfair practices” under Part XVIII. Section 438 of the Insurance Act states that the phrase "Unfair practices" are ... “any unfair discrimination in any rate or schedule of rates between risks in Ontario of essentially the same physical hazards in the same territorial classification". Baer further states:

So far, the Superintendent (of Insurance) has exercised his authority with restraint. This restraint is consistent with a long tradition in Canada of treating rate setting as largely a private matter, not subject to public control. This tradition is in sharp contrast to that in most American jurisdictions where the determination of rates is seen to involve significant public issues of distributive justice and equity amongst insureds.

This lack of public control has extended to human rights legislation in most provinces...

With respect to Ontario, this last point means that the Human Rights Code provides exceptions or defences to discriminatory practices in the insurance industry, defences that arguably have not been as narrowly interpreted as human rights jurisprudence would require.

Although Baer believes that individual underwriting should still be allowed for persons insured under group disability plans, he outlines several questions on whether there should be public control on the underwriting criteria used:

  • Do the criteria require insurers to become too intrusive?
  • Are the criteria supported by scientific or actuarial evidence?
  • Do the criteria enforce systemic disadvantage in society?
  • Is it appropriate to use criteria that are beyond the control of individuals?
  • With respect to group plans controlled by employers, do the criteria frustrate the goals of employment equity?

Baer believes that several factors favour public intervention in setting criteria:

  • The co-operation necessary in the insurance industry for effective rate setting may discourage the use of innovative criteria;
  • The state of scientific knowledge may be such that insurers are left to grope and they use markers or character evidence that arouses serious public concerns about reliability and invasion of privacy. The industry’s attempt to identify groups that are at higher risk of acquiring AIDS is a good illustration;
  • Competitive pressure in the insurance industry may re-enforce systemic disadvantage.

Baer finds that the two existing mechanisms for challenging underwriting criteria, human rights legislation and the Charter and the Superintendent of Insurance’s authority to disallow discriminatory rates have been little used.

Baer places primary responsibility for controlling underwriting criteria from being discriminatory with the Commissioner or Superintendent of Insurance (now simply the Superintendent of Financial Services) because of their expertise. He recommends:

  • That the authority of the Superintendent or Commissioner to disallow discriminatory criteria be strengthened by clarifying the factors which should and should not be taken into account and by providing for a more formal public hearing
  • That additional public representatives be appointed to assist the Commissioner in making his or her decision

Finally, in order to avoid any adverse effect of health screening on employment Baer recommends:

  • Health screening for the purpose of group disability insurance underwriting should not be allowed to evade any human rights standards for access to medical information relating to restrictions in employment arising from a disability unless there is a bona fide reason to know more.

Mental Disability

When the insurance industry identified workplace stress as a major risk insurers began to limit long-term disability benefits, often to only 24 months unless the employee is hospitalized, for persons with disabilities caused by nervous and mental conditions. Employers and insurance companies do not have a special defence to this practice.

It could be argued that the differentiation in treatment results in discrimination based on mental handicap. That is, persons with mental disabilities are being treated differently than persons with physical disabilities. A common response from insurance companies is taken from a narrow interpretation of judicial comments in Andrews[7]. Respondent insurance companies have argued that the concept of equality rights involves a comparative approach. The proper approach is to compare the treatment of disabled individuals with people who are not disabled. And since non-disabled employees have no access to disability benefits, there is no discriminatory treatment by the employer in the provision of its disability benefits.

This argument was also made by a respondent employer in Gibbs before the Saskatchewan Court of Appeal[8]. In that case an employee who was suffering from a mental illness was denied benefits after a 24-month period. If she had been hospitalized she would have been entitled to benefits. Persons with physical disabilities were entitled to benefits until 65 years of age or retirement on pension.

The reasoning used by respondents in such circumstances is faulty in that it is not in keeping with the substantive equality approach developed in the Andrews case. After acknowledging equality rights involves a comparison of conditions of others, the Supreme Court in Andrews went on to emphasize that "the main consideration must be the impact of the law on the individual or group concerned".

The Saskatchewan Court of Appeal in Gibbs rejected the respondent's argument that the appropriate comparison is between persons with disabilities and persons without disabilities. The Court held that to determine the appropriate comparison one must begin the analysis with the person alleging discrimination and define the group to which she or he belongs.

Finally, the Supreme Court rejected an appeal in the Gibbs case[9] and found that “It is not fatal to a finding of discrimination that not all persons in the group bearing the relevant characteristic have been discriminated against. Discrimination against a sub-set of the group, in this case those with a mental disability, can be considered discrimination against persons with disabilities”.

The Canadian Life and Health Insurance Association (CLHIA) stated that the distinctions between physical and mental conditions, or between some mental conditions and others, "relate to the extreme difficulty in evaluating the degree of disability resulting from conditions, even with the best professional advice, and thus to the difficulty in determining when disability exists to the extent anticipated under the definition in the contract and when such degree of disability ceases to exist."

The CLHIA went on to say that the use of such distinctions between physical and mental conditions has declined in recent years. However, the CLHIA qualified this advance with the following comment: "these advances have been offset to some degree by major increases in stress-related conditions, and for some groups it is still deemed necessary to employ such distinctions to keep the overall risk within acceptable bounds so that full coverage can be provided for other conditions".

It appears clear from these comments that the insurance industry prefers to insure individuals with physical conditions over individuals with mental conditions. Interestingly, respondents have not argued that the risk associated with mental conditions is too high to insure. It could be argued that this differential treatment is based on assumptions and stereotypes surrounding mental illness. The Supreme Court Canada decision in Gibbs demonstrates that such differential treatment will not be tolerated.


The Commission’s Policy on HIV/AIDS-Related Discrimination states that all persons who have or have had, or who are believed to have or have had, or are perceived to have, AIDS or HIV-related medical conditions, including those who do not show symptoms of AIDS or AIDS-related illnesses, are deemed to have a “handicap” and are entitled to protection under the Code.

In the early 1990’s, two complaints were filed with the Commission by the same complainant against two different respondents on issues relating to discrimination in insurance because of HIV/AIDS status. The complaints did not result in a Board of Inquiry. Nonetheless, a discussion of the two cases serves to highlight issues of discrimination because of “perceived” or potential future handicap.

One complaint relates to a denial of individual life insurance and the other relates to a denial of group mortgage insurance. In both cases, the complainant was denied insurance because he was deemed to be in an uninsurable high-risk group by virtue of the fact he is married to a woman who is HIV+.

The CLHIA explained group mortgage insurance in the following manner. Because group mortgage insurance involves significant amounts of insurance and because it is almost always optional, unlike employment related group insurance, it is important to evaluate the risk of each applicant. Procedures for group mortgage insurance, therefore, more closely resemble individual insurance. The streamlined administrative system is unable to accommodate non-standard risks that are significantly above the norm, unlike individual insurance.

If we accept the above description as correct, the analysis of the HIV-insurance complaint would then have to focus on the assessment of risk accorded to the Complainant based upon the fact he is married to a woman who is HIV+. The respondents, two insurance companies in Ontario, assessed the risk of someone living in a conjugal relationship with someone who is HIV+ as being too great a risk. The two cases focus on the "reasonable and bona fide" analysis of this risk assessment.

There is no reason to believe the respondents were not acting in a manner that meets the bona fide test. That is, they adopted the practice honestly, in the interests of sound and accepted business practice and not for the purpose of defeating the rights protected under the Code. The main question is whether the respondents in the two cases met the reasonableness test. That is, is the assessment based on a sound and accepted insurance practice? And was there a practical alternative available?

If the complaints had been sent to a Board of Inquiry, the Commission would have had to present expert medical evidence to prove that the respondent's assessment of risk was not based on credible actuarial evidence. The respondents presume that two persons living together in a conjugal relationship will engage in sexual intercourse. They suggest there is a reasonable basis to conclude that the Complainant may be infected at present or within the term of the insurance contract.

As in most assessments of risk in the insurance industry, the assessment is based on broad generalizations rather than individual circumstances. The respondents assigned the Complainant to a high-risk group simply because of his association with his wife.
The case analyses in the two complaints detail the problems with the respondents' risk assessment of the Complainant. The officer's investigation revealed evidence that the complainant's chances of becoming infected from his wife are "very low to almost zero". There are two main reasons for this conclusion: first, the rate of transmission from female to male is very low and secondly, the complainant and his wife have abstained from sexual relations since January 1991. The officer summarizes by stating: "The fact of his being married to and living in a conjugal relationship with an HIV+ woman cannot be taken as an indicator of his "high risk status". The distinction is one between "risky behaviour" and "risky relationship"".

A strong argument could be made, supported by the necessary expert evidence, that the respondents' assessment of risk was not based on a sound and accepted business practice that was adopted for the purpose of achieving the legitimate business objective of charging premiums that are commensurate with risk.

With regard to the second part of the "reasonableness" test, the officer suggested that there was a practical alternative available at the time the coverage was denied. The officer stated there is no developed classification system to evaluate HIV-related risks as there was in the automobile insurance industry at issue in Bates v. Zurich case. The alternative that did exist was to assess the complainant's risk in terms of his behaviour rather than by group identification.


In two other complaints that have come before the Commission, a husband and wife applied for group mortgage insurance. The wife was denied because she has diabetes. Her husband's application was approved but the group insurance was denied. The wife alleges discrimination based on handicap. The husband claims he was denied a service because of his association with his wife.

The question in these complaints would again be whether the data used to assess the risk of a condition is accurate. That is, is the practice of categorizing diabetics as high risk based on a sound and accepted business practice that was adopted for the purpose of achieving the legitimate business objective of charging premiums that are commensurate with risk? Medical evidence is required to assess whether all diabetics are a high risk or if individual history and behaviour are important factors in the assessment of risk.

The Court of Appeal in Nova Scotia dismissed an appeal by the Nova Scotia Human Rights Commission and Mr. Scott Slipp on the grounds that Mr. Slipp's diabetes is highly relevant to the assessment of risk and that group mortgage insurance offered by a bank was not a service customarily available to the public.[10] Although respondents may rely on this decision it is not very helpful in relation to the Ontario Human Rights Code because service in the Nova Scotia legislation is narrowed to services "customarily available to the public" and there is no "reasonable and bona fide" exemption.

Risk Assessment

Insurance companies use actuarial data analysis for the purpose of setting premiums and disallowing coverage to individuals considered to be too high risk. Once an individual has coverage he or she is not necessarily guaranteed access to benefits. The author of an article entitled "The Industry of the Living Dead" studied reported court cases dealing with disability insurance. He observed that the cases "suggest an industry actively resisting claims which the courts later uphold"[11].

Of course, persons who are at a higher risk are the very individuals who need insurance coverage. There are no legal obligations directly relating to the assessment of risk. As noted earlier, the "unfair practices" provision under PART XVIII of the Insurance Act (see Appendix) is the only deterrent and the Superintendent of Insurance rarely takes action under the provision.

Insurance companies tend to use general medical information with regard to a particular condition without taking an individual's specific circumstances into consideration. The Canadian Life and Health Insurance Association (CLHIA) has stated that medical research is the key component in risk evaluation procedures.

Insurers often overlook both individual behaviour and social programs that provide financial and other support to persons with disabilities. It could be argued that if insurers considered such factors their assessment of risk would likely not be as high. This approach is supported by the Foster Higgins study[12].

It could also be argued that the industry's approach to risk assessment does not meet the Supreme Court test of a sound and accepted insurance practice. That is, this practice of making broad generalizations when assessing an individual's degree of risk does not achieve the legitimate business objective of charging premiums that are commensurate with risk.

Genetic Testing

Genetic testing may become a method of screening applicants for hereditary diseases. For example, Canadian scientists recently identified two genes that produce susceptibility to Type-One diabetes[13]. Genetic tests for breast cancer are also being developed. James Watson, a Nobel laureate in chemistry, has suggested that insurance companies be prohibited from conducting genetic tests on potential policyholders. He noted that there is not currently a law prohibiting such tests by insurance companies[14].

The ramifications of genetic testing could be immense for individuals showing a predisposition to a disease. The CLHIA has said that the likelihood of the insurance industry using genetic testing on a screening basis is very low. However, if an applicant has undergone genetic testing he or she would be obliged to disclose this information. Insurers would then consider the test results as part of their risk assessment. Insurers may decide not to assume the risk in such cases, especially with the increased risk of adverse selection.

The CLHIA believes that in a way the insurance industry already uses a form of "genetic testing" by considering an individual's family history. For example, someone with a history of Huntington’s disease may not be offered coverage. The individual would likely be given the opportunity to be tested to clarify whether or not he carried the gene.

Same-Sex Couples

As mentioned above, section 25(2) of the Code allows distinctions on the basis of marital status to be made in group insurance schemes as long as those schemes are in compliance with the Employment Standards Act. The Regulations of the Employment Standards Act also allow employers and insurance companies to discriminate on the basis of marital status in pension plans and group insurance contracts.

The combination of this defence and the definition of marital status in the Code result in differential treatment in employment benefits for gay and lesbian employees. The spouses of these employees are not entitled to the same benefits as are opposite sex spouses.

In Leshner v. Ontario[15], the Ontario government had refused to extend coverage to same-sex spouses in its pension plan because of the federal Income Tax Act. The Board of Inquiry in Leshner ordered the government to "read down" the definition of marital status in the Code to delete the opposite sex restriction. The Board also held that section 25(2) is of no force or effect to the extent of its inconsistency with the Charter. The Board ordered the provincial government to immediately provide equivalent survivor benefits to its gay and lesbian employees through an arrangement outside of the existing pension plan.

Furthermore, the Board of Inquiry directed the Ontario government to make representations to the Federal government within three years to persuade the Federal government to amend the Income Tax Act to permit the registration of pension plans which offer benefits to same-sex spouses. The Board also directed the Commission to monitor the province's efforts. In March 1997, the Chief Commissioner sent a letter to the Minister of National Revenue urging him to remove the barrier created by the Income Tax Act.

Since then, the Ontario Court of Appeal recently heard the case of Rosenberg and CUPE v. Revenue Canada, which argued that the federal Income Tax Act definition of spouse as a member of the opposite sex is contrary to Charter guarantees of equal treatment.[16] The Court allowed the appeal and required that the words “and same sex” be read into the Act.

In a 1995 landmark case, the Supreme Court of Canada heard an appeal in Egan v. Canada[17] on the definition of spouse. In this case, the same-sex spouse of a pensioner was denied a spousal allowance because he did not meet the definition of spouse in the Old Age Security Act. The Court ruled that differential treatment of persons in same-sex relationships, as compared with persons in opposite sex relationships, is discrimination on the basis of sexual orientation.

In September 1996, the Ontario Board of Inquiry released a crucial decision dealing with two complaints on the issue of sexual orientation. In Dwyer and Simms v. Municipality of Metropolitan Toronto & Attorney General of Ontario, the two complainants, a gay man and a lesbian, challenged their exclusion from the spousal benefits provisions of their respective employers' pension benefits, insured health benefits and uninsured employment benefits plans.[18] The legal issues raised in this hearing relied on the Supreme Court of Canada's earlier decision in Egan v. Canada, as well as a challenge to the constitutionality of certain provisions in the Code.

The Board of Inquiry found in Dwyer and Simms that the respondents had discriminated against the complainants because of their sexual orientation. The Board further ruled that the Code must be read as a whole and consideration must be made of the opposite sex definitions of spouse and marital status found in the Code. The Board applied a Charter analysis to the opposite sex definitions of spouse and marital status and concluded that these definitions contravened the equality rights guaranteed by s. 15 of the Charter and were not reasonable or democratic limits under s. 1 of the Charter. The Board decision required municipalities to extend insured health benefits and uninsured benefits to the same-sex spouses of employees.

It should be noted that the Dwyer and Simms case is currently under appeal. Also, the more recent decision of the Supreme Court of Canada in Bell and Cooper[19] held that a body such as the Canadian Human Rights Commission, as well as tribunals appointed pursuant to a referral by the Commission, have no jurisdiction to find that a provision in their enabling legislation is unconstitutional.

In a more recent case on the issue of spousal benefits and discrimination against same-sex couples, the Ontario Court General Division in Kane v. Axa Insurance ruled in October 1997 (see Appendix), that the company’s refusal to pay a spousal benefit after the accidental death of Kane’s lesbian partner, violated her rights under the Charter.[20] The Court found Ontario’s Insurance Act to be discriminatory and ordered the Act to be changed to include members of same-sex couples in the definition of spouse. The case is under appeal.

In another case, the Ontario Court General Division decision of December 1998 in OPSEU Pension Plan Trust Fund v Ontario ordered the Ontario government to change the Pension Benefits Act definition of spouse to include same-sex couples.[21] The Court had found that the Act’s current definition of spouse as a relationship between a man and a woman is unconstitutional. The Act sets minimum standards for all pension plans in the province.

Most recently, the Supreme Court of Canada rendered its decision in Attorney General of Ontario v. M. and. H., where it ruled that the opposite-sex definition of "spouse" in Part III of Ontario’s Family Law Act is unconstitutional.[22] Although this case is unrelated to employment benefits and insurance, it is once again affirmation by higher courts that definitions of spouse and marital status that exclude same-sex couples from enjoying the same rights and responsibilities as other couples are discriminatory.

Finally, in June 1997 and again in July 1999 of this year, the Chief Commissioner wrote to the Attorney General of Ontario stating his concern with respect to exclusionary definitions of “spouse” and “marital status” in Ontario statutes, and their discriminatory effect on same-sex couples.


The Commission’s Policy on Discrimination Because of Pregnancy states that subject to bona fide requirements, denying or restricting sick leave benefits to a woman while on maternity leave may constitute a violation of the Code.

Section 25(2) offers respondent employers and insurance companies a defence to discrimination based on sex, marital status, age or family status. Distinctions in employee pension plans or employee group insurance plans based on age, sex, marital status or family status do not offend the Code if they comply with the regulations under the Employment Standards Act.

Section 33(2) of the Employment Standards Act prohibits employers from arranging benefit plans that make a distinction, preference or exclusion because of age, sex or marital status of the employees except as provided for in the Regulations. Regulation 321 permits differentiation between employees on the basis of age, sex and marital status in the provision of pension, life insurance, disability and health insurance benefits (see Appendix).

Sub-section 8(c) of Regulation 321 permits the exclusion of women from benefits under a short or long-term disability plan during the period of absence she is entitled to under Part XI of the Employment Standards Act. Part XI of the Act entitles women to pregnancy leave and both men and women to parental leave. The result of subsection 8(c) is that women can be excluded from benefits under a disability plan during parental leave while a male employee cannot be excluded.

Regulation 321(8)(c) still stands even though it would likely be found to be unconstitutional given the Supreme Court of Canada decision in Brooks v. Canada Safeway[23]. The Court found that pregnancy provides a perfectly legitimate health-related reason for not working and as such, women should be entitled to sick or disability benefits during that portion of the pregnancy leave that they are unable to work for valid health reasons.

An Alberta court decision in Alberta Hospital Association v. Parcels endorsed the Brooks principle that a health-related reason for absence from the workplace by a pregnant employee is not to be treated differently from other health-related absences.[24] This applies generally where the woman is pregnant and where the condition which requires time off is associated with pregnancy.

More recently in March 1998, the Ontario Divisional Court ruled on an appeal from a Board of Inquiry decision in Crook v. Ontario Cancer Treatment and Research Foundation & Ottawa Regional Cancer Centre.[25] Crook alleged that the respondent had denied her the use of sick leave benefits during a period after she had given birth.

The employer’s appeal is argued on two bases: first, that there is no discrimination within Section 5 of the Code in barring women on unpaid leave of absence from the sick leave plan after childbirth, and second, that the combined effect of Section 25(2) of the Code, with the Employment Standards Act and its regulations regarding benefit plans, provides a defence to any discrimination.

The Court found that the defence in section 25(2) of the Code was not available to the respondent because vacation leave is not a form of leave in accordance with the Employment Standards Act where the exclusion of women from benefits under a disability plan is permitted. Furthermore, the sick benefits plan was self-funded and not a contract of group insurance as stipulated under section 25(2) of the Code. The Court relied on the Brooks decision and ruled that the Board of Inquiry in Crook correctly found that the application of the employer’s sick leave policy constituted direct discrimination on the bases of pregnancy and sex by denying benefits to the complainant and those like her seeking benefits after childbirth for the period of personal recovery.

In Ontario, Brooks and Parcels have not been fully integrated into the legal protections available to women who are absent for pregnancy-related health reasons.

Practically speaking, this means that the right to receive benefits under disability plans ends when a woman chooses to go on to a Part XI leave under the Employment Standards Act (pregnancy or parental leave). But if an employer offers disability benefits to other employees who are off on other kinds of leave such as educational leaves or sabbaticals, then the Employment Standards Act provides that benefits should also be paid to women on pregnancy leave and parental leave.

Finally, a woman may have health problems related to her pregnancy that forces her to be away from work before or after her pregnancy leave or parental leave. She can access health benefits under a workplace sick or disability plan in this situation.

Regardless of whether or not a sick-leave plan is based on a contract of group insurance, women on maternity leave continue to be entitled to other benefits under employment-related benefit plans including pension plans, life insurance plans, accidental death plans, extended health plans and dental plans.[26] Employers are also required to continue to make contributions to such plans.[27]

[3]Zurich Insurance Co. v. Ontario (Human Rights Comm.) (1992), 16 C.H.R.R. D/255 (S.C.C.)
[4]For example, Thornton v. North American Life Assurance Company et al.
[5]Supra, note 2.
[6]Foster Higgins Bulletin, "The Impact of AIDS on Benefit Programs" (Toronto: Foster Higgins, 1994)
[7]Andrews v. Law Society of British Columbia (1989), 10 C.H.R.R. D/5719 (S.C.C.)
[8]Battlefords and District Co-operative Ltd. v. Gibbs and Saskatchewan Human Rights Commission (unreported decision, June 14, 1994, Saskatchewan Court of Appeal).
[9]Gibbs v. Battlefords and Dist. Co-operative Ltd. (1996), 27 C.H.R.R. D/87 (S.C.C.)
[10]Nova Scotia (Human Rights Comm.) v. Canada Life Assurance Co. (1992), 88 D.L.R. (4th) 100 (N.S.C.A.).
[11]David Schulze, "The Industry of the Living Dead: A Critical Look at Disability Insurance" (1993) 9 Journal of Law and Social Policy 192
[12]Supra, Note 6
[13]Barbara Wickens, "On the Leading Edge: Canadians are at the Forefront of Diabetes Research" (1994) 107(4) Macleans 58.
[14]Stephen Strauss, "Bar Genetic Tests on Policyholders, Nobel Laureate Says" Nov. 4, 1994 Globe and Mail 7.
[15]Leshner v. Ontario (No. 2) (1992), 16 C.H.R.R. D/184 (Ont. Bd.Inq.)
[16]Rosenberg v. Canada (Attorney General) (1998), 38 O.R. (3d) 577 (Ont. Court of Appeal).
[17]Egan v. Canada (1995), 124 D.L.R. (4th) 609 (S.C.C.).
[18]Dwyer v Toronto (Metro) (No.3) (1996), 27 C.H.R.R. D/108.
[19]Copper v. Canada (Human Rights Comm.) (1997), 27 C.H.R.R. D/173 (S.C.C.)
[20]Kane v. Ontario (Attorney General) (1997), 152 D.L.R. (4th) 738.
[21]Ontario Public Service Employees Union Pension Plan Trust Fund (Trustees of) v. Ontario (Management Board of Cabinet) (1998) 20 C.C.P.B. 38
[22]Attorney General of Ontario v. M. and. H, Unreported decision of the Supreme Court of Canada released on May 20, 1999.
[23]Brooks v. Canada Safeway Ltd. (1989), 10 C.H.R.R. D/6183 (S.C.C.)
[24]Alberta Hospital Association v. Parcels (1992), 17 C.H.R.R. D/167 (Alta. Q.B.).
[25]Ontario Cancer Treatment & Research Foundation v. Ontario (Human Rights Commission) (1998), 34 C.C.E.L. (2d) 56, 108 O.A.C. 289 (Ont. Div. Ct.); upholding Crook v. Ontario Cancer Treatment & Research Foundation (No.3) (1996), 30 C.H.R.R. D/104 (Ont. Bd. of Inquiry).
[26]Subsections 42(1) and (2) of the Employment Standards Act.
[27]Subsection 42(3) of the Employment Standards Act.


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