A unionized employee who has been denied benefits or coverage under an employer-sponsored plan may face a deceptively difficult decision: whether to grieve the denial against the employer, or to sue the insurance company.

In many cases the employee’s only option will be to sue the insurance company. The insurance company is not a party to the collective agreement, so grievance arbitration is not available. Usually, this means that the employee is on their own, without direct representation from the union.

Sometimes, though, an employee does have the option to grieve. If an employer is self-insured – that is, the employer itself pays the insured members’ claims – then denial of coverage is arbitrable, because the employer itself denied the coverage.

Where this gets tricky is when the employer hires an insurance company to process claims and determine eligibility, known as an “administrative services only” (“ASO”) arrangement, but continues to pay the benefit itself. In these circumstances, the communication members receive will be from the insurance company, and members may mistakenly believe that their claim is against that company and not the employer.

That was the case in Cargill Ltd. v. Grain Workers’ Union Local 333 (Ronson Grievance) [2016] C.L.A.D. No. 43. In that case, Arbitrator McPhillips clarified that where an employer chooses an ASO arrangement with an insurance company, the dispute is arbitrable, unless the collective agreement says otherwise.

Unions will not always know what contractual arrangement the employer has with the insurance company. If a dispute of this kind arises, the union should look at the group benefit booklet and the plan document to see exactly how the employer is meeting its obligation under the collective agreement. And don’t assume that things haven’t changed: in Cargill, the arrangement with Sun Life Insurance started out as a true insurance contract and later turned into a ASO contract.

The content of this article is intended to provide a general guide on the subject matter. Specialist advice should be sought about your specific circumstances.