The insurer was found to have failed to act in good faith in the handling of the insured’s disability claim and the insured was awarded mental distress and punitive damages.
Insurance law – Disability insurance – Punitive damages – Mental distress – Medical examination – Good faith
Godwin v. Desjardins Financial Security Investments Inc.,  B.C.J. No. 96, 2018 BCSC 99, British Columbia Supreme Court, January 23, 2018, A. Saunders J.
The insured was unable to work in her employment as a paralegal due to disability due to psychiatric illness.
The insured applied for disability insurance coverage under the Own Occupation coverage which provides 24 months income payments for a continuous period of total disability, defined as the inability as a result of sickness or injury to perform substantially the whole of the duties of the insured’s regular occupation. The claims examiner denied coverage in the first instance and initially on appeal. The Court found that the claims examiner applied a test for total disability which was not founded in the policy wording, the decision was contrary to the express statements by the insured’s physicians’ statements that the insured was unable to work, and relied on a conclusion that the insured’s situation was dominated by occupational and motivational factors which was completely unfounded.
Nearing the end of the Own Occupation coverage, the insurer denied coverage in the first instance and on appeal under the Any Occupation coverage (which provides coverage after the Own Occupation coverage to insureds who are unable to engage in any gainful occupation for which the insured is qualified or may reasonably become qualified by reason of training, education, or experience). The insurer sent the insured for an independent medical examination with a psychiatrist who opined that the insured’s disability had resolved and that she could return to gainful employment. The insured was dissatisfied with the examination and expressed her concerns to the insurer. In the meantime, the insurer received confirmation of the insured’s CPP entitlement. The claims examiner denied coverage. The Court found that the claims examiner had preferred the opinion of the independent medical examination psychiatrist over the treating psychiatrist without making full investigation into the discrepancy of opinion. Mere days before trial, the insurer re-instated coverage but the trial proceeded with the insured’s claim for damages for mental distress and punitive damages.
The Court found that the insurer breached its duty of good faith because the claims examiner repeatedly failed to analyze and weigh the evidence placed before her, imported or applied tests for disability beyond those set out in the Policy, and made findings not supported, or not adequately supported, by the evidence. The failure to act in good faith caused a delay in the payment of Any Occupation coverage benefits by 34 to 40 months. The Court awarded $30,000 in mental distress damages, finding that the mental distress suffered by the insured as a result of the delays in payment of her claims was sufficient to warrant compensation.
The Court awarded $30,000 in punitive damages. The Court found that the claims examiner’s rejection of the Own Occupation coverage was severely flawed, imported improper considerations, and concluded without any foundation that motivational factors were dominating the claim. The denial of the claim was characterized as arbitrary. In addition, the Court found that the insurer’s failure to investigate the existence of the audio recording for the insured’s independent assessment with the insurer-appointed psychiatrist was a complete dereliction of duty.
This case was digested by Dionne H. Liu, and first published in the LexisNexis® Harper Grey Insurance Law Netletter and the Harper Grey Insurance Law Newsletter. If you would like to discuss this case further, please contact Dionne H. Liu at email@example.com.