Do I need to complete an internal appeal before suing my insurer?

Not necessarily in every case. Whether an internal appeal should be completed first depends on the policy, the insurer’s process, and the circumstances of the claim. That question should be reviewed on the specific file rather than answered with a universal rule.

What does it cost to sue an insurance company?

Litigation involves legal fees, disbursements such as expert reports and medical records, and the possibility of cost consequences if a party is unsuccessful. Those considerations are distinct from an internal appeal, which typically does not carry the same cost-consequence risk. Fee arrangements should be confirmed in writing before work begins.

Can I get damages beyond my unpaid benefits?

A lawsuit’s primary focus is typically the contractual benefits owed under the policy. Compensatory damages for proven mental distress, and in exceptional cases punitive damages, may be considered in some circumstances — but they are not routine or automatic, and a wrong benefit decision alone does not establish punitive damages.

What happens if I lose?

An unsuccessful lawsuit may leave the original denial or termination in place and can carry cost consequences. Ontario costs remain discretionary. Outcomes and cost exposure are file-specific and should be discussed before deciding how to proceed.

Ontario LTD · Litigation

What Happens When You Sue Your LTD Insurer in Ontario

Last updated July 2026

A lawsuit takes the dispute out of the insurer’s internal process and into court. That move introduces a different set of steps, evidence obligations, and strategic considerations than an internal appeal.

This page explains what litigation actually involves once it is under consideration — not whether litigation is the right choice in every case.

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What an LTD lawsuit is

An LTD lawsuit is a claim started against the insurer in court, seeking to enforce the benefits owed under the policy. It moves the dispute into an independent court process — outside the insurer’s own reconsideration pathway.

That is different from an internal appeal, which asks the same insurer to reconsider. This page assumes you already understand the basic appeal-versus-litigation choice; for that framework, see the denied LTD claim page.

When litigation may be considered

These are general factors, not a recommendation that litigation is the default or preferred path.

After an unsuccessful internal appeal
The insurer has already reconsidered and maintained its decision.
After a denial where further appeal seems unlikely to change the outcome
New responsive evidence is not realistically available, or the insurer’s position appears fixed.
In some cases without exhausting every internal step first
Whether that is appropriate depends on the policy and the circumstances — not a default preference for litigation.

Starting an action and pleadings

A civil action is ordinarily commenced through a statement of claim. The defendant may deliver a statement of defence. A reply may follow where the plaintiff needs to plead a formal response to matters raised in the defence. Counterclaims, crossclaims, or third-party claims may arise where the parties and issues require them — not every action includes every form of pleading.

A statement of claim sets out the material facts and the relief being sought. It is not intended to contain every medical record, document, witness statement or other piece of evidence that may later be used to prove the case.

A statement of defence responds to the allegations, identifies what is admitted or disputed, and may give the insurer’s version of the material facts.

Once the required pleadings have been delivered, or the applicable time for them has expired, the proceeding can move into later procedural stages. Closing the pleadings does not mean discovery is complete, that all evidence has been exchanged, that the case is ready for trial, or that settlement discussions have ended.

This is a conceptual overview of the ordinary pleading sequence — not procedural instruction for filing a claim yourself.

Documents and discovery

After pleadings, the parties generally exchange relevant documents and may examine one another under oath. The exact procedure depends on the issues, the court rules, the documents in dispute and any directions or orders made in the proceeding.

Litigation can make more of the insurer’s claim materials visible than an internal appeal. What any particular file will reveal still depends on the documents that exist and the issues in dispute.

Medical and vocational evidence in litigation

Litigation often involves more formal expert evidence than an internal appeal — including independent medical examinations arranged through the litigation process, expert reports, and vocational evidence presented in a more structured way.

The same evidence themes that matter elsewhere still apply: function over diagnosis alone, and whether work can be sustained over time. For how those themes fit a denial response, see the denied LTD claim page.

Mental health LTD claims →

Chronic pain and invisible disabilities →

Settlement discussions and Rule 49 offers

Many civil disputes involve some form of mediation or settlement discussion before trial. Settlement, if it happens, is a negotiated resolution — not an entitlement and not a predictable outcome.

This page does not describe typical settlement ranges, amounts, or results for LTD cases.

Formal offers to settle

A formal offer to settle can materially affect costs. Rule 49 creates specific potential costs consequences where a qualifying offer is not accepted and the eventual result meets the Rule’s requirements. The consequences differ depending on whether the offer was made by the plaintiff or the defendant, and the court retains discretion over costs.

If a plaintiff makes a qualifying Rule 49 offer and later obtains a judgment as favourable as or more favourable than that offer, the Rules provide for partial-indemnity costs up to the offer date and substantial-indemnity costs afterward, unless the court orders otherwise.

A qualifying defendant’s offer can also affect the allocation of costs where the plaintiff obtains a result that is no more favourable than the offer. The defendant-side consequences differ from those applying to a plaintiff’s offer.

A Rule 49 offer may be made during the proceeding. The automatic Rule 49.10 consequences generally require the offer to have been made at least seven days before the hearing begins, and to remain unwithdrawn and unexpired when the hearing begins. A written offer that does not satisfy those automatic requirements may still be considered under Rule 49.13. Not every settlement proposal is automatically a qualifying Rule 49 offer.

Trial

Most civil disputes, including LTD lawsuits, do not reach trial — most resolve before that stage. Trial is a hearing where a judge (or, in rare cases, a jury) decides the matter if it is not resolved earlier.

Legal fees, disbursements, and cost consequences

Litigation involves real cost considerations that typically do not arise in an internal appeal:

Legal fees — how counsel is paid for the work. Fee arrangements →
Disbursements — out-of-pocket costs such as expert reports and medical records.
Cost consequences — the general principle that an unsuccessful party may be ordered to pay some of the other side’s costs.

Public fee wording on this site follows the firm’s verified contingency arrangement: No fee unless we recover compensation for you. Our fee is up to 33% of the amount recovered, confirmed in writing before we begin work.

Ontario costs

Ontario uses a costs system under which an unsuccessful party may be ordered to contribute to the successful party’s legal costs. Costs remain subject to the court’s discretion and are not normally the same as full reimbursement of the successful party’s actual legal fees.

Whether costs are awarded, and in what amount, depends on the circumstances. Conduct and settlement offers may affect the result. Losing does not automatically mean paying every dollar of the opposing party’s fees, and winning does not guarantee complete reimbursement.

How long litigation may take

There is no universal timeline. Litigation can take significantly longer than an internal appeal. How long any particular matter takes depends on the issues, the evidence, scheduling, and whether the parties settle.

What happens to benefits while the lawsuit is ongoing

Starting a lawsuit does not by itself change whether the insurer is currently paying benefits.

If benefits were stopped, they generally remain stopped unless and until the matter is resolved by settlement, judgment, or another agreement.

What the lawsuit seeks to accomplish — enforcing benefits under the policy — is a distinct question from whether monthly payments continue while the case is ongoing.

Settlement structure, releases, and tax/benefit issues

How a settlement is structured, what a release covers, and how any payment may be treated for tax or other benefit purposes are important questions to raise directly in a case review before agreeing to any settlement.

Damages beyond unpaid benefits

A lawsuit’s primary focus is typically the contractual benefits owed under the policy — unpaid benefits, and related contractual entitlements where they apply.

Damages beyond unpaid benefits are not automatic. In some circumstances, a court may consider compensatory damages for proven mental distress, and in exceptional cases punitive damages. These are different concepts, and neither should be treated as a typical or expected feature of pursuing litigation.

Compensatory damages for mental distress

Compensatory damages for mental distress may be available where that type of loss was within the reasonable contemplation of the parties when the contract was made and the claimant proves mental suffering serious enough to warrant compensation.

Disability insurance can provide a peace-of-mind or psychological benefit, which can make mental distress from a breach reasonably foreseeable. That does not mean mental-distress damages automatically follow a wrongful denial, or that ordinary frustration, inconvenience, or disappointment is necessarily compensable.

Where older language refers to “aggravated damages” in this context, Fidler treated the award as compensatory damages for mental distress — not as a second, automatic award in addition to mental-distress compensation.

Punitive damages

Punitive damages may be considered only in exceptional circumstances involving independently actionable and highly reprehensible misconduct. A court does not award punitive damages merely because it concludes that the insurer’s benefit decision was wrong.

In a contract case, an independent actionable wrong is required. Breach of an insurer’s separate contractual duty of good faith may potentially supply that wrong, but the conduct must represent a marked departure from ordinary standards of decent behaviour. Poor claim handling, delay alone, carelessness, a mistaken interpretation of medical evidence, or aggressive defence of a claim does not by itself meet that threshold.

Damages beyond unpaid benefits are not automatic. In Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, the Supreme Court of Canada upheld compensation for proven mental distress arising from the breach of a disability-insurance contract — specifically a $20,000 compensatory award that was specific to that case and should not be treated as a usual, expected, or benchmark figure for another claim. The Court set aside a $100,000 punitive-damages award and restored the trial judge’s conclusion that Sun Life had not acted in bad faith. Punitive damages require a substantially higher, exceptional threshold than showing that the insurer’s decision was incorrect.

What a lawyer reviews

A free case review looks at whether litigation is a realistic path for the file — including evidence strength, timing, and cost tradeoffs — without treating a lawsuit as the automatic next step.

The claim file and denial or termination history
The strength of available medical and vocational evidence
The applicable limitation period, reviewed from the actual documents
The practical costs and timeline tradeoffs of litigation versus other options

For limitation and deadline framing, see the appeal page’s deadline discussion and the denied claim page’s dates checklist, rather than repeating those sections here. Back to the LTD claims guide →

Insurer-specific guidance

When insurer pages are published, they will appear here.

Frequently asked questions

Do I need to complete an internal appeal before suing my insurer?: Not necessarily in every case. Whether an internal appeal should be completed first depends on the policy, the insurer’s process, and the circumstances of the claim. That question should be reviewed on the specific file rather than answered with a universal rule.
Will filing a lawsuit restart my monthly benefit payments?: No. Starting a lawsuit does not by itself change whether the insurer is currently paying benefits. If benefits were stopped, they generally remain stopped unless and until the matter is resolved by settlement, judgment, or another agreement.
How long does an LTD lawsuit typically take?: There is no universal timeline. Litigation can take significantly longer than an internal appeal. How long any particular matter takes depends on the issues, the evidence, the court’s schedule, and whether the parties settle.
What does it cost to sue an insurance company?: Litigation involves legal fees, disbursements such as expert reports and medical records, and the possibility of cost consequences if a party is unsuccessful. Those considerations are distinct from an internal appeal, which typically does not carry the same cost-consequence risk. Fee arrangements should be confirmed in writing before work begins.
Can I get damages beyond my unpaid benefits?: A lawsuit’s primary focus is typically the contractual benefits owed under the policy. Compensatory damages for proven mental distress, and in exceptional cases punitive damages, may be considered in some circumstances — but they are not routine or automatic, and a wrong benefit decision alone does not establish punitive damages.
What happens if I lose?: An unsuccessful lawsuit may leave the original denial or termination in place and can carry cost consequences. Ontario costs remain discretionary. Outcomes and cost exposure are file-specific and should be discussed before deciding how to proceed.

Sources & citations

[1]Limitations Act, 2002 — Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, ss. 4, 5, 15 and 22 (basic limitation period, discoverability, ultimate limitation, and agreements). View source
General Ontario statutory framework. Application to a particular LTD file is fact-specific.
[2]Kassburg v. Sun Life Assurance Company of Canada — 2014 ONCA 922 (Court of Appeal for Ontario). Appeal and cross-appeal dismissed; contractual one-year provision not enforceable on the wording and documents before the Court; ambiguity and s. 22 business-agreement analysis addressed. View source
Does not establish current insurer forms or a universal contractual rule.
[3]Thompson v. Sun Life Assurance Company of Canada — 2015 ONCA 162 (Court of Appeal for Ontario). Appeal dismissed; motion judge had not completed the s. 22 analysis required to enforce a contractual one-year provision; appeal dismissed on a separate policy-eligibility ground. View source
Not a claimant victory on limitation; not a universal start-date rule.
[4]Clarke v. Sun Life Assurance Co. of Canada — 2020 ONCA 11 (Court of Appeal for Ontario). Appeal allowed in part; summary-judgment determination set aside; fuller factual record required for appropriate-means discoverability and the informal appeal process; remitted rather than finally decided on limitation. View source
Does not mean an informal appeal always suspends a limitation period.
[5]Rules of Civil Procedure — Rule 25 (Pleadings) — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 25 — ordinary pleading sequence and concise statement of material facts (Rule 25.06), rather than all of the evidence by which those facts will later be proved. View source
Orientation only; not a filing checklist or deadline chart.
[6]Rules of Civil Procedure — Rule 49 (Offers to Settle) — Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49, including Rules 49.03, 49.10 and 49.13 — formal offers to settle and potential costs consequences; plaintiff- and defendant-side consequences differ; court retains discretion. View source
[7]Fidler v. Sun Life Assurance Co. of Canada — 2006 SCC 30 (Supreme Court of Canada). Upheld compensatory damages for proven mental distress arising from breach of a disability-insurance contract; set aside punitive damages and restored the finding that the insurer had not acted in bad faith. View source
Dollar amounts in Fidler were case-specific. Punitive damages were not upheld.
[8]Contingency fee disclosure — No fee unless we recover compensation for you. Our fee is up to 33% of the amount recovered, confirmed in writing before we begin work. A written contingency fee agreement is required under Ontario rules before work begins.