‘Although Bell has contracted with Manulife to manage STD claims, it remains responsible for payment'
A Bell Aliant/Bell Canada employee who alleged his disability insurer deliberately cut off his short-term benefits to prevent him from qualifying for long-term coverage has had his bad faith lawsuit dismissed.
The Nova Scotia Court of Appeal ruled on January 29, 2026, that such disputes fall within the exclusive jurisdiction of labour arbitrators when benefits arise from a collective agreement.
Justice Bourgeois, writing for the unanimous panel, found the employee should have filed a grievance rather than launching civil litigation, and dismissed his claim entirely.
When the administrator is also the insurer
Terrence Joseph Carter, a unionized Bell Aliant/Bell Canada employee since 1998, sustained a back injury in 2018 and was approved for short-term disability benefits in October 2021. Three months later, Manulife suspended those benefits citing a "lack of objective medical evidence" that he couldn't return to work part-time. When Carter applied for long-term disability in April 2022, he was initially told he couldn't apply "while on short term disability and/or if you do not qualify for short term disability."
His LTD claim was denied in June 2022 because he had "not exhausted the maximum duration" of his STD benefits, a qualifying period requirement in the group policy. The case revealed a potential conflict: Manulife both administered Bell's STD program and provided LTD insurance through a separate policy contracted between itself and Bell.
In his affidavit, Carter stated: "Manulife terminated my STD when there was no change in my condition since the date I had been approved for STD. It is my belief that I was being terminated prior to the LTD eligibility date so Manulife could deny me LTD based on a technicality."
STD appealed multiple times
Carter appealed the STD denial multiple times over 15 months. In his affidavit, he stated: "It was roughly 15 months before the decision to terminate my STD was overturned. During this period, I was selling personal belongings to pay bills and stay afloat."
During his second appeal in December 2022, he alleged Manulife faced a conflict of interest adjudicating his STD claim while defending his civil lawsuit. Carter testified: "I was pressured and coerced to take a position that I did not believe, in order to have my second STD appeal heard. The pressure to agree that Manulife was not in a conflict position to adjudicate my STD appeal was unbearable."
His benefits were finally restored in July 2023, retroactive to cover the maximum STD period. The following month, his LTD claim was approved retroactively to October 2022.
Collective agreement governs disability claims
The Court of Appeal found the dispute's essential character concerned the management of STD benefits provided under the collective agreement. The court noted: "Bell has agreed to provide its employees with STD benefits in the collective agreement. The evidence further establishes that although Bell has contracted with Manulife to manage STD claims, it remains responsible for payment."
The court found the appellant's evidence demonstrated "his union was aware of his difficulties regarding the administration of his STD claim, provided advice in that regard, and noted a grievance could be taken following the outcome of his final appeal." Instead, Carter chose to commence a civil action.
The court concluded: "This dispute rests with a labour arbitrator. There is no justification for the exercise of residual jurisdiction." His lawsuit seeking punitive and aggravated damages for bad faith was dismissed.
See Carter v. Manufacturers Life Insurance Company, 2026 NSCA 6
