Punishing Insurers with Punitive Damages

A Saskatchewan court recently ordered $3 million in punitive damages against Zurich Insurance and also awarded $1.5M in punitives against another insurer, AIG, in same case. The court expressly referred to the Witten v Pilot case in which the Supreme Court of Canada ordered the insurer to pay $1M in punitive damages for deliberately trying to avoid payment on a policy of insurance by alleging fraud against the insured when there was no evidence or reasonable basis for such an allegation.

In the current Saskatchewan case, Branco v American Home Assurance Company, 2013 SKQB 98 (CanLII), the two multinational insurance behemoths were found to have deliberately either delayed or avoided paying benefits to which the insured was entitled through a pattern of delay, deception, unreasonable prerequisites, unreasonable technical interpretations of the contracts of insurance, and a complete lack of good faith in dealing with the terms of insurance policies for disability payments to a worker injured in his welding job in a gold mine.

The court also found as a fact that the insurers had used the delay in payments, which caused deleterious financial and psychological consequences to the employee, to try to coerce him into accepting a low ball settlement offer.

The plaintiff’s personal injury Bar in Ontario needs to be more aggressive in using these precedents to advance claims for punitive damages against Accident Benefit insurers for what now appears to be a routine matter of doing business in soft tissue or WAD cases. The insurers now routinely determine based on one time independent assessments, and often even only with paper review assessments, that the insured falls within the MIG despite reasonable evidence proffered by the applicant’s treatment providers that he or she has soft tissue injuries which fall within the exceptions to the MIG, as set out in the SABs. The first FSCO decision on point, while not determining a special award against the insurer, made it clear that this sort of behaviour was highly inappropriate, prejudicial to claimants, and not in keeping with the aims of the SABs. The Commission, in Scarlett and Belair, found in favour of the applicant and awarded costs against the insurer. Sadly, that case was overturned on appeal to the FSCO Director and will now be pronounced upon by the Divisional Court sometime this year or next. It may be that it is necessary in these types of cases to routinely indicate the seeking of a special award on the Application for Arbitration or Statement of Claim for punitive damages in the based on the insurers conduct.

Unless the plaintiff’s Bar routinely begins to seek punitive damages and special awards against insurers, there will be no incentive on insurers to operate in accordance with either the intentions of the SABs or the public philosophies of their own companies. It will be cheaper for them to continue to use their clout to deny payment of benefits and then force unconscionable settlements when the claimants reach a desperation or frustration point.