The Court of Appeal upheld the appeal of a jury trial judgment awarding punitive damages of $525,000 against an Insurer who alleged arson against the Insureds. The award of $175,000 for aggravated damages against one Insured was reduced to $50,000.

Plester v. Wawanesa Mutual Insurance Co., [2006] O.J. No. 2139, Ontario Court of Appeal

This was an appeal from a judgment by a jury against the Insurer, Wawanesa for damages totalling $1,000,000 which included an award for aggravated damages of $175,000 and an award for punitive damages of $525,000. The Insureds, Terry and Cecile Plester, owned and operated a furniture store. Terry Plester’s father, Norman Plester, operated an antique furniture business from the premises of the furniture store. The Plesters insured the building and the business with Wawanesa. When the building and much of its contents were severely damaged in a fire, Wawanesa denied the claim by the Insureds on the grounds that they had set the fire themselves. The Insureds were successful at trial in their action against Wawanesa.

Wawanesa brought the appeal, alleging that the trial judge erred in the following ways: in ruling that a pre-trial settlement offer by Wawanesa was admissible; in permitting the Plesters to call evidence of good character; in ruling that the evidence of the financial status of Wawanesa was admissible; in refusing to bifurcate the trial in respect of liability and punitive damages; and in leaving the issue of aggravated damages to the jury when there was no evidence to substantiate such an award. Wawanesa also alleged that the amount of punitive damages awarded to the Insureds by the jury was wholly unreasonable.

The appeal was allowed in part on the issue of aggravated damages and dismissed in all other respects. The Court of Appeal found that while the trial judge erred when he admitted the evidence of the pre-trial settlement offer and the evidence of Wawanesa’s financial status, these did not result in any substantial wrong or miscarriage of justice. As for the punitive damages, there was no evidence to establish arson on the part of Norman Plester, and only suspicion on the part of Terry and Cecile Plester. Under these circumstances, punitive damages were warranted. In the case of the Estate of Norman Plester, s. 38 of the Trustee Act permitted an award of punitive damages. While the award as to punitive damages was fairly high, it was not so exorbitant or grossly disproportionate as to warrant being overturned or reduced. As to the issue of aggravated damages, while there was a case for the jury based upon the allegation of arson and the ultimate finding of bad faith on the part of Wawanesa by the jury, the award of $175,000 was grossly excessive. The Court reduced the award to $50,000.

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