Award of punitive damages upheld but award of mental distress damages was reduced on appeal from judgment against insurer for failure to pay disability benefits.
Fernandes v. Penncorp Life Insurance Co.,  O.J. No. 4039, September 2, 2014, Ontario Court of Appeal, R.B. Juriansz, S.E. Pepall and K.M. van Rensburg JJ.A.
The insurer appealed an award of punitive damages in the amount of $200,000 and an award of aggravated damages for mental distress in the amount of $100,000 both arising out of a claim against it by the insured for failure to pay disability benefits.
The insured was a bricklayer who operated a bricklaying business. After two workplace accidents the insured was unable to work, his company ceased operating, and his employees departed. The insured had disability insurance. The insurer initially paid disability benefits but terminated payment after surveillance showed the insured performing yardwork. The insurer had been provided medical opinions that the insured could not return to bricklaying. The insured then brought a claim against the insurer and succeeded at trial.
The Court of Appeal held that the evidence at trial supported the conclusion that the insurer had not dealt with the plaintiff in a fair and balanced manner and that its representative took an adversarial approach to the claim. The insurer had no medical evidence that the insured was disabled from working in his occupation. The award for mental distress damages was reduced to $25,000 on the basis that mental distress damages are compensatory not punitive and the insured had only sought an award of $25,000.
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