Jury award could be a positive sign for insurance claimants

By Tony Poland, LegalMatters Staff • Insurance providers would be wise to pay heed to a $1.5-million punitive damage award given to a long-term disability (LTD) claimant in her prolonged battle for benefits, says disability lawyer Leanne Goldstein.

Along with the punitive damages, a Toronto jury recently awarded full reinstatement of the woman’s LTD benefits as well as $40,000 in aggravated damages for mental distress. Goldstein, founder and senior lawyer at Leanne Goldstein Law Professional Corporation, says the case should serve as a wake-up call to insurance providers. 

“But my question is will it be enough?” she asks. “It is a very interesting case, and not only because of the $1.5-million in punitive damages against an insurance company, which is pretty impressive. Will insurance companies now reform their behaviour on an ongoing basis or is this another temporary swing of the pendulum before things return to the old ways? 

“The hope is that insurance companies will think carefully about how they are treating claimants and actually commit to change,” Goldstein tells LegalMattersCanada.ca.  “Ultimately, it will depend on how insurance providers choose to do business and whether this case acts as a financial disincentive. Higher punitive damages awards act as a deterrent as they impact the way insurers do business. It becomes less financially viable for insurance companies to carry on with their old behaviour if there is a probability that it will attract punitive damages awards. Awards such as these can provide an effective deterrent if the insurer perceives that there is a strong likelihood of a punitive damages award.”

Insurance coverage terminated after three years

The claimant in this case suffered a brain bleed/stroke in 2013 and received disability benefits. However, three years later the insurer terminated those benefits. The insurance provider decided that she was well enough to return to an alternative job, despite her doctors’ advice that her cognitive impairments left her unable to work. 

The case was set for trial in March 2021 but jury trials were suspended due to the pandemic. Goldstein explains that because of COVID, courts were closed for all but urgent criminal and family law matters so civil jury trials were put on hold. 

“The resulting delays can be an immense hardship for someone on LTD whose benefits have been terminated as they remain without a source of income. However, the delays can be beneficial to insurance companies, who may be able to persuade cash-strapped claimants to take a reduced settlement rather than wait for a trial,” Goldstein notes. 

In order to expedite access to a trial, the claimant brought a motion to the court to have the matter heard without a jury, but the insurance company objected and a judge ruled against her.

Goldstein, who was not involved in the case but comments generally, says certain long-term disability insurers insist on juries. 

“Ironically, insisting on a jury was likely this insurance company’s downfall,” she says, adding it appears juries have been more inclined to side with claimants in LTD cases. “If you do a comparative analysis of long-term disability cases where there have been large, punitive damages awards, jury trials seem to result in higher awards.”

Changing composition of juries

Goldstein theorizes that the changing composition of juries may be part of what is resulting in more favourable decisions for claimants in this area of the law.  

“If you think about who is entering the jury pool lately, there is a good chance they are predominantly Millennials. They might have a new philosophy or a different approach to the way that they see the world,” she says. “They may be more inclined to hold corporations accountable for their conduct and are less likely to feel a sense of reverence towards corporations.”

Goldstein says she also found it interesting that in trying to prove their case, the insurance company kept the woman under surveillance for 375 hours. 

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“I believe insurance providers overestimate the value of the surveillance. They think that it is their golden ticket,” she says. “The irony is that surveillance can ultimately cost more than reinstating the claim if you do it for hundreds of hours, especially where the surveillance yields nothing of value.”

What made this case especially interesting is that “awards for punitive damages are not the norm in disability cases,” Goldstein says. 

“Historically punitive and aggravated damages awards have been relatively nominal and not every case is going to result in an award of aggravated and punitive damages. You must be able to show that there is reprehensible conduct on the part of the insurance company,” she says. “An insurance company actually has to go above and beyond in an unconscionable or an egregious way in its treatment of a claimant.”

While aggravated damages are designed to compensate a claimant, punitive damages are meant to punish the insurance company for bad behaviour and the goal is to send a strong message to the insurer to encourage reform, says Goldstein. 

Supreme Court upheld $1-million damage award

She points to Whiten v. Pilot Insurance Co., a 2002 Supreme Court of Canada (SCC) case that upheld a $1-million damage award given to an Ontario couple who lost their house in a fire. 

The theory at the time was that the couple had set the fire. The insurer paid a nominal amount for living expenses to tide them over and denied further claims. The denial led to a lengthy trial where the arson theory was discredited and a jury, finding the insurance company had acted in bad faith, awarded compensatory damage totalling more than $318,000 and $1 million in punitive damages. The Ontario Court of Appeal reduced the punitive damages award to $100,000 but the SCC restored it.

“For a short time after that decision, insurance companies’ attitudes changed but then the pendulum swung back and insurers returned to their old habits,” Goldstein says. “It seems like things change only for a brief period of time.” 

She says time will tell if the most recent punitive damages award will have an impact on insurance providers’ conduct. “I would be interested to see if the pendulum is going to swing and whether it is going to stay there,” Goldstein says. “Fortunately, as people continue to take these cases all the way to trial and attain these kinds of awards against insurance companies, more precedents are set. Building up an extensive jurisprudence in this area is the only way to ensure that there will be a true deterrent for bad behaviour and a chance at levelling the playing field for insurance claimants.”