An insurer had to pay $500,000 in punitive damages for making unsupported allegations of arson against an insured homeowner
Punitive damages of $500,000 were awarded against Insurer who denied coverage to Homeowner whose home was destroyed by fire, where the Court found that the Insurer made unsupported allegations of arson against Homeowner. Interestingly, there were some factors that supported the insurer's suspicion of arson, including: a conclusion by the firemarshal that arson was likely, the fact that the family, maid and pet were not home, and the financial circumstances of the insured.
Here is the case citation: Sagl v. Cosburn, Griffiths & Brandham Insurance Brokers Ltd. [2007] O.J. No. 3311. Ontario Superior Court of Justice. B.P. Wright J. September 4, 2007.
Here is a link to the decision.
This case was orginally summarized by Jonathan Meadows and edited by David PIlley.
In December 1997, the home of an insured ("Sagl") was destroyed by fire. The Insurer refused to pay the losses, claiming the fire was deliberately set by someone acting on Sagl's behalf. The Insurer further claimed the policy was void because Sagl intentionally concealed or misrepresented the material facts before and after the loss. The Insurer submitted that the fire was staged, as Sagl's son was staying elsewhere for the night, Sagl was out for dinner, Sagl's dog was outside and the maid had the night off. The Insurer claimed that Sagl was in bad financial straits and would benefit from having insurance proceeds from the fire. Sagl had claimed that she had significant assets, including jewellery and art, and that her financial position was not dire. It was clear that significant personal assets were lost in the fire.
The Fire Marshall investigated the fire and concluded arson was the likely cause because of the absence of residents, windows were left open and there were no signs of forced entry. The Inspector did not consider statements by firefighters on the scene, who confirmed that the fire started in the basement, in concluding that fires were set in three places in the home. The Investigator did not discuss with Sagl what items in the basement could have started the fire and Sagl's evidence was that there were lamps in the basement which were known to have started fires in other circumstances.
Sagl had purchased insurance by inadequately completing an application form, but neither the brokers nor the Insurer had requested that she complete the form prior to issuing the insurance policy or collecting premiums. Sagl claimed that she lost personal property valued at over $2,200,000 in the fire, including jewellery valued at approximately $925,000. The Insurer offered no evidence to rebut this claim. Sagl provided an appraisal of her art collection, which valued it of over $9,000,000. The Insurer did not prepare a rebuttal report, but challenged many items as fraudulent where no purchase receipts were retained and no pictures of the work provided.
The Court awarded Sagl damages for full replacement cost of the home and the policy limits for contents, jewellery and art. The Court further awarded punitive damages of $500,000 against the Insurer.
The Court found that the Insurer had not established that there was a staging of arson, as all absences from the house on the night of the fire were reasonable. The Insurer did not establish that Sagl had a motive or opportunity to have someone set the fire to her house. The Court found that the Fire Marshall's investigation of the fire was flawed as the investigation proceeded on the assumption that the fire was incendiary. The Investigator did not keep an open mind until the investigation was complete. The Insurer had failed to prove on a balance of probabilities that Sagl was involved in the fire in any way.
The Court found that the Insurer was wrong to suggest that Sagl's claim for personal property losses was fraudulent where evidence showed value of the contents of the home greatly exceeded the policy coverage. The Insurer was faulted for poor business practices in failing to examine the art collection prior to providing coverage. The Insurer failed to show Sagl intentionally concealed or misrepresented material facts relating to the policy after the fire. The Court concluded that the Insurer breached its duty of good faith in failing to determine appropriate coverage for Sagl, then asserting her claims were fraudulent. The Insurer also breached its duty of good faith by failing to properly scrutinise the Fire Marshall's evidence. The Insurer's allegation that Sagl committed the criminal offence of arson without evidence to support the allegation was reprehensible. In denying coverage for ten years after the fire, the Insurer's conduct was malicious, oppressive and high-handed, meriting condemnation of the Court.
