Canada's Disability Denial Crisis: The System Is Broken

TORONTO, ON – December 05, 2025 – For countless Canadians, it’s a safety net they pay for but hope to never use: long-term disability (LTD) insurance. But when illness or injury strikes, a shocking number of them discover the net has gaping holes. A new national guide from disability law firm Share Lawyers, backed by decades of case data, confirms what many families learn at their most vulnerable moment: the system designed to support them is often engineered to deny them. With initial denial rates for LTD claims estimated to be as high as 60%, a growing crisis is unfolding in the shadows of Canada’s healthcare system.

This isn't a problem of fraudulent claims. Rather, it’s a systemic issue rooted in complex policy language, strategic insurer practices, and a widening gap in workplace protections. According to RBC Insurance survey data, the percentage of Canadian workers with any form of workplace disability coverage has fallen from 57% in 2015 to just 48% today. For the more than half of workers without this crucial coverage, a denial isn’t just an administrative hurdle; it’s the start of a financial and emotional freefall.

The Anatomy of a Denial

Insurance companies are not denying claims because the claimant’s illness isn’t real. Instead, the vast majority of denials hinge on technicalities and interpretations that favour the insurer. The most common reason cited is “insufficient medical evidence.” This hurdle is particularly high for those with “invisible illnesses” like depression, anxiety, fibromyalgia, and chronic pain—conditions that lack the “objective” proof of an X-ray or blood test, yet are profoundly debilitating. Insurers often dismiss reports from a claimant's long-term treating physician in favour of their own paper-based review by a medical consultant who has never met the patient.

Another critical tripwire is the “change of definition,” a clause buried in most LTD policies that activates after two years of receiving benefits. For the first two years, a claimant must prove they are unable to perform their “own occupation.” After that, the goalposts move dramatically. The standard becomes an inability to perform “any occupation” for which they are reasonably suited by education, training, or experience. This shift is a primary driver of benefit terminations, as insurers argue that a former construction manager could work as a parking lot attendant, or a teacher with chronic pain could handle a sedentary desk job, regardless of whether such jobs are available or medically feasible.

“Mia, facing PTSD after an assault, was denied despite several psychiatrist letters because the insurer felt her evidence ‘did not sufficiently prove total disability,’” the Share Lawyers guide notes. It took legal intervention to gather comprehensive records and secure her benefits, a common story for those with mental health conditions, which now account for 30-40% of all disability claims.

The Insurer's Playbook: Surveillance and Scrutiny

The business of disability insurance has evolved into a sophisticated game of risk management where the claimant is the primary variable to be controlled. Once a claim is filed, the individual is often placed under a microscope. Insurers routinely deploy private investigators to conduct surveillance, filming claimants as they run errands, attend family events, or walk their dog. These snippets of life, often captured on a “good day,” are then presented as evidence that the person is not as disabled as they claim.

Social media has become a new frontier for this scrutiny. Public posts on Facebook or Instagram are fair game, and even private accounts can become discoverable during litigation. A photo from a family vacation or a post about a short walk can be decontextualized and used to build a case for denial. While courts have acknowledged that individuals with chronic conditions have good and bad days, insurers often count on these isolated moments to discredit a long history of documented medical limitations.

Adding to the pressure are “Independent” Medical Examinations (IMEs), which are anything but. Arranged and paid for by the insurance company, these brief assessments with an insurer-selected doctor frequently produce reports that contradict the findings of the claimant’s entire medical team. This creates a classic “battle of the experts,” but one where the insurer holds most of the cards, leaving the disabled individual to prove their own reality.

The Human Cost of 'No'

Beyond the paperwork and legal tactics lies a devastating human toll. A denial letter triggers a cascade of crises that ripple through every aspect of a person’s life. The immediate loss of income—typically 60-70% of their salary—is just the beginning. Families are forced to drain retirement savings, accumulate crippling debt, and make impossible choices between paying the mortgage and buying medication. “I pawned my mother’s wedding ring to pay for groceries while waiting out the appeal,” one claimant told the law firm. “It felt like they were just waiting for us to give up.”

The psychological impact is equally severe. The stress of fighting an insurance company while managing a serious health condition exacerbates symptoms and often leads to secondary depression and anxiety. Relationships with spouses, children, and friends become strained under the immense financial and emotional pressure. The process forces people who are already suffering to constantly defend the legitimacy of their illness, a deeply demoralizing experience that can shatter their sense of self-worth.

The economic burden extends to society at large. With chronic diseases costing the Canadian economy over $200 billion annually in healthcare and lost productivity, a dysfunctional disability insurance system shifts the burden onto public resources, community services, and families who are ill-equipped to handle it.

Navigating the Labyrinth: From Appeal to Advocacy

Faced with a denial, most policies require claimants to go through one or two internal appeals. However, these are rarely successful, as the decision is simply reviewed by another employee at the same company. Insurers rely on the fact that many claimants, exhausted and overwhelmed, will abandon their claim at this stage. This is where the dynamic shifts. For those who persist, often with legal help, the odds change dramatically.

Firms like Share Lawyers, which operate on a no-win, no-fee basis, disrupt the insurer’s model by leveling the playing field. Legal experts report that over 90% of their contested LTD cases are resolved through negotiation or mediation, long before a trial is necessary. This statistic reveals a critical truth: the initial denial is often a strategic opening move, not a final decision.

Canadian courts have established legal principles to protect claimants, such as the insurer’s “duty of good faith” to assess claims fairly and the doctrine of contra proferentem, which states that any ambiguity in a policy must be interpreted in the claimant’s favour. Most importantly, courts tend to give more weight to the opinion of a treating physician who has a long-term relationship with the patient over a one-time IME report. By systematically gathering evidence, leveraging legal precedent, and demonstrating a willingness to litigate, advocates can force insurers to honour their contractual obligations. The fight is arduous, but for thousands of Canadians, it is the only path back to financial stability and personal dignity.