Court of Appeal for Ontario upholds $1.5 million punitive damages award against disability insurer
February 23, 2024
The Court of Appeal for Ontario has upheld a record $1.5-million punitive damages award against a disability insurer that repeatedly cut off the benefits of a plaintiff who suffered a stroke in 2013. At the time, she was a director of Food Services, Environmental, and Porter or Transport Services at a hospital.
Over the course of the next three years following her claim for benefits, both her short-term and long-term disability benefits were terminated and subsequently reinstated, before the insurance company cut her off for good, concluding that she did not meet the test for further benefits, which required “totally disability” preventing her from working in “any occupation” for which she was qualified or might become so and in which she would earn at least 60% of her pre-disability earnings.
Following a 22-day trial, a jury sided with the plaintiff and found that she was totally disabled, awarding her $220,000 in retroactive benefits, plus a further $40,000 in aggravated damages for mental distress, as well as $1.5 million in punitive damages. She was also awarded full indemnity costs of $1 million.
On appeal, the insurer challenged the punitive damages award, arguing that it had handled her claim fairly, as well as the costs award. However, the unanimous three-judge panel dismissed the appeal, concluding that the punitive damages award was justified by the evidence presented at trial, which, at its best, demonstrated the insurer had shown “reckless indifference” to its duty to consider the woman’s claim in good faith “and at worst, a deliberate strategy to wrongfully deny her benefits.” Furthermore, it was found that the insurer’s conduct and its decision to turn down a generous offer to settle justified an award of full indemnity costs.
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