Canada Life loses appeal after court rules insurers can't impose arbitrary deadlines on policy conversions
The policy was in force for three years before anyone noticed. The employee's salary had climbed above the non-evidence limit, the threshold at which group life insurance requires medical underwriting, but HR never triggered the health forms. Premiums were collected on the higher amount. The file looked clean. Then the employee died, and Canada Life refused to pay the full benefit, arguing that the medical evidence had never been submitted. The beneficiary sued, claiming the insurer had waited too long to ask.
The Ontario Court of Appeal sided with Canada Life. The ruling, handed down in early 2025, eliminates what the lower court had tried to create: a "reasonable time" window within which insurers must request evidence of insurability. The appellate panel found no basis in contract law for imposing such a deadline. If the policy requires medical evidence for coverage above a certain amount, that requirement persists, even if the insurer is slow to enforce it, and even if premiums have been paid for years on the uncovered portion.
What the non-evidence limit actually protects
Most Canadian group life policies include a non-evidence limit, typically between $250,000 and $500,000, depending on the size of the employer. Below that threshold, employees are enrolled automatically. Above it, the insurer requires a Statement of Health. The distinction is administrative convenience, not a waiver of underwriting. The NEL exists so that baseline coverage can be issued quickly, not so that higher amounts can slip through unexamined.
When an employee's salary increases, say, from $85,000 to $140,000, pushing coverage from two times salary to a figure well above the NEL, the policy's terms require new paperwork. In theory, HR or the benefits administrator flags this and routes the employee to the insurer's portal. In practice, particularly at mid-sized firms during growth phases, that step gets missed. The employee assumes they are covered for the higher amount because premiums are being deducted. The insurer assumes the evidence will arrive eventually, or doesn't notice the discrepancy until a claim is filed.
Why this creates an HR liability, not just an insurer one
The immediate consequence of the ruling is that beneficiaries who believed their spouse was insured for $1 million may discover, at claim time, that the actual covered amount was $300,000, the NEL cap, because a form from 2021 was never completed. The refund they receive is three years of premiums on the uncovered difference, not the death benefit itself.
The less obvious consequence is that the lawsuit risk has shifted. If the insurer is not on the hook for administrative delays, then the entity that failed to request the medical evidence, typically the employer's benefits team or third-party administrator, becomes the defendant. The widow who expected $1 million and received $300,000 will sue someone. After this ruling, that someone is not the insurer.
What contract primacy actually means here
The Court of Appeal's reasoning rests on the principle that insurance policies are contracts, and courts do not rewrite them to fix inconvenient outcomes. The lower court's attempt to impose a one-year "reasonable time" rule was, in the appellate view, judicial legislation. The contract specified what evidence was required and when. It did not specify a deadline for the insurer to ask. Absent fraud or intentional waiver, both of which have high evidentiary bars, the insurer's delay does not void the requirement.
This is a rigorous, text-first approach to insurance law. It will be cited frequently in disputes over group benefits administration. Employers with sloppy tracking systems should treat it as expensive notice. The cost of missing a form is no longer just the awkward conversation with the employee. It is the full difference between the stated benefit and the covered amount, paid by the employer, after the claim is denied.
