This was an appeal of a decision granting the Respondent’s motion for summary judgment which dismissed the Appellant Insured’s action against an Insurer’s adjuster. The Court of Appeal granted the appeal holding that an adjuster may incur personal liability in tort if he or she engages in bad faith conduct that brings about the rejection of a valid claim for no-fault accident benefits under a standard contract of auto insurance.
In this case, the Appellant had originally been injured in a MVA accident and had submitted a claim to an Insurer for no-fault benefits. He was deemed to be a party to the policy of insurance. After receiving loss of income benefits for 126 weeks following the accident, his benefits were terminated. The Insured commenced an action against the Insurer and the adjuster for breach of the contract of insurance and for the tort of bad faith and unfair dealing.
In the bad faith claim the Plaintiff alleged among other things that the adjuster and the Insurer: failed to pay the benefits the Plaintiff was entitled to; failed to adequately investigate and review the claim; and terminated the Plaintiff’s benefits without sufficient evidence. In particular, the Plaintiff claimed he was told by the adjuster that he should "stop being a whiner" and that the only reason he had pain was because he had been "sitting on [his] butt for the past two years."
The motions judge granted the Respondent’s motion for summary judgment under Rule 22.01(3) of the Rules of Court which dismissed the Appellant insured’s action against the adjuster. The motions judge held that, if breach of the duty of good faith and fair dealing was indeed a tort, it was not one for which employees of the Insurer could be successfully sued because the adjuster was not a party to the contract of insurance.
The Court of Appeal found that the motions judge committed reversible error in dismissing the Insured’s claim in tort against the adjuster and granted the appeal. The motions judge was wrong in stating that the Insured was required to "prove" actionable bad faith on the part of the adjuster. Rather, the claim against the adjuster should not have been dismissed under Rule 22 (Summary Judgment) unless the Respondents had established that there was "no merit" to any of the claims or part thereof.
The motions judge dismissed the Plaintiff’s claim for the tort of bad faith on the basis that it arose out of the contract between the Insured and the Insurer, and was not a tort for which an employee of the Insurer can be sued. The Court of Appeal agreed with the motions judge on this point explaining that justice can be achieved without extending the tort of bad faith and unfair dealing to adjusters. As a result, there was no merit to this claim and it was dismissed.
However, the Court of Appeal did agree with the Plaintiff’s submissions on appeal that the traditional tort of intentional procurement of breach of contract is broad enough to capture bad faith actions by an adjuster that brings about the rejection of a meritorious claim for insurance benefits. The common law has long recognized that tort liability may be imposed for conduct by a stranger to a contract that, as he or she intended, procures a loss-producing breach of one of its terms. The objectives of tort law support expanding liability to insurance adjusters in order to discourage abuse of power on their part. As a result, the Court allowed the appeal holding that the Plaintiff’s Statement of Claim contained allegations that, if proven, would justify a finding that the adjuster procured, in bad faith, the Insurer to breach the policy.
Regarding bifurcation, the issue of breach of the policy was severed from all other issues in the Statement of Claim and ordered to be tried first. This was done in order to address concerns over the wide-ranging discovery rights that accompany the claims of bad faith against the adjuster and Insurer.
While costs usually follow the event, the Court of Appeal derogated from that general rule because of the Appellant’s reliance in the court below on Affidavit evidence by his own counsel that pertained to controversial matters of fact. The Appellant’s disregard for the courts’ repeated admonitions on the subject disentitled him to costs in first instance. Costs on appeal were allowed since the offending Affidavit was expunged from the evidential record at the request of Appellant’s counsel.