An insurer may be orderd to pay aggravated damages if recommended benefits are refused without sufficient evidence supporting the denial.
The defendant insurer, was obliged to pay housekeeping and transportation benefits that it had unreasonably withheld from the plaintiff insured. The insurer’s refusal to pay benefits had caused intangible injuries and mental distress that were reasonably foreseeable and the insured was accordingly awarded $25,000 for mental distress.
McQueen v. Echelon General Insurance Co., [2009] O.J. No. 3965, September 28, 2009, Ontario Superior Court of Justice, C.R. Harris J.
The plaintiff insured Janey McQueen (“McQueen”) was injured in a rollover motor vehicle accident in January 2004. At the time of the accident, McQueen was not employed and had been receiving disability benefits for 10 years, primarily due to manic depression. She was 35 years old and resided with her husband and 14 year old daughter. Following the accident, the defendant insurer, Echelon General (“Echelon”), paid some benefits but eventually terminated housekeeping benefits, refused to pay transportation benefits, and refused to fund a psychological assessment. McQueen experienced 21 denials of 16 separate benefits over a period of three years and after two failed mediations, brought a suit seeking certain statutory benefits pursuant to the Statutory Accident Benefits Schedule and alleging that Echelon had breached its obligation to act in good faith in handling her claims.
McQueen’s evidence was that prior to the accident, she did the cooking, cleaning, shopping, etc. but that after the accident, she was bedridden for two months and her husband was obliged to leave his job to take care of her and take on the household responsibilities. McQueen obtained a certificate from her family doctor and an occupational therapy assessment which both supported her entitlement to housekeeping benefits. Echelon paid housekeeping benefits until the end of July 2004 and then ceased payments based on a medical report completed by Dr. Kwok, following a half-hour examination of McQueen and without the benefit of seeing the occupational therapy assessment. Echelon also denied McQueen funding for an in-home assessment for housekeeping benefits that was recommended by the occupational therapist, saying it was not “reasonable and necessary.”
The Court found that the onus was on Echelon to provide reasons for the assessment being unreasonable and unnecessary, which it did not do. It further found that McQueen had a substantial inability to carry out housekeeping activities without assistance during the relevant time and that she had established her entitlement to housekeeping benefits on a balance of probabilities. She was awarded benefits of $100 per week for the relevant period.
With regard to McQueen’s claim for transportation benefits, the Court found that these benefits had been denied in spite of the occupational assessment indicating that she required taxi transportation. Dr. Kwok’s report stated that McQueen was not disabled from operating a motor vehicle and Echelon incorrectly assumed that McQueen had a vehicle, though hers had been destroyed in the motor vehicle accident, and denied the benefit. The Court awarded McQueen a transportation allowance of $7,500.
The Court also awarded McQueen the cost of a number of psychological, neurological and occupational therapy assessments that had been recommended but not carried out.
The Court reviewed the law regarding awarding damages for mental distress, citing the BC Court of Appeal and the Supreme Court of Canada decisions in Fidler v. Sun Life Assurance, 2004 Carswell BC 1086 and [2006] 2 SCR 3. The Court held that for an award of damages for mental distress to be appropriate, it must be satisfied that:
a) An object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and,
b) The degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation.
The Court found that Echelon’s file notes were evidence of an adversarial approach to McQueen ab initio and that in behaving in that manner, Echelon had breached its contract of insurance with McQueen. Echelon adopted this adversarial approach early on, in spite of file notes indicating that McQueen had serious injuries that required treatment and notwithstanding the duty of good faith it owed to McQueen throughout. The Court held that the object of the contract of insurance was to secure psychological benefits to McQueen in the form of peace of mind and that the nature of the contract was such that its breach would bring about mental distress and that this was within reasonable contemplation of the parties. McQueen had endured mental suffering as a result of the breach, which was of a sufficient character to warrant compensation. McQueen was accordingly awarded $25,000 in damages for mental distress.
This case was originally summarized by Emily M. Williamson and originally edited by David W. Pilley.
