Another long term disability insurance company has been ordered to pay punitive damages. This time a Toronto jury found the conduct of Blue Cross warranted a staggering 1.5 million dollar award, on top of the payment of past LTD benefits owing that Blue Cross had refused to pay.
About The Case
The case is Baker v. Blue Cross Life Insurance Company of Canada.
The plaintiff, Sara Baker, suffered a stroke in 2013. Blue Cross initially honoured its obligation to pay long term disability benefits, but later denied the claim after concluding Ms. Baker could work in an alternate occupation that paid at least 60% of her pre-disability earnings. Ms. Baker’s treatment providers, however, were of the opinion she could not return to work.
The plaintiff retained a long term disability lawyer to take legal action. A lawsuit was commenced seeking payment of past benefits owed, in addition to punitive and aggravated damages. The case dragged on for years, in part because Blue Cross insisted that a jury decide the case. The COVID-19 pandemic caused delays in the court system, especially for jury trials.
It is unusual for a long term disability insurer to require trial by jury. Most cases are decided by a judge. It is also unusual for a long term disability claim to proceed to trial. The vast majority, more than 97%, settle without going to court.
In this case, Blue Cross mounted a vigorous defence. It conducted 375 hours of surveillance, in an attempt to attack Ms. Baker’s credibility before the jury. While it is fairly common for insurers to conduct background checks and perform a few days of surveillance, the amount of surveillance done here is almost unheard of.
The insurer’s strategy of requiring a jury and conducting so much surveillance appears to have backfired, given the result at trial. Cleary the jury was not impressed with Blue Cross, given the size of the punitive damages award.
Blue Cross has indicated it will appeal the decision. Whether the Ontario Court of Appeal reduces the punitive damages award, or otherwise interferes with the jury verdict, remains to be seen.
What Are Punitive Damages?
Punitive damages are awarded to punish a defendant for particularly bad behaviour. Punitive damages are not meant to compensate, but rather to punish and deter. In Canada, punitive damages are the exception, not the norm. Punitive damages are reserved for rare cases to address retribution, deterrence, and denunciation.
Punitive Damages in Long Term Disability Lawsuits
Lawsuits for payment of long term disability benefits commonly seek payment of past benefits owing, a declaration that benefits be reinstated, and extracontractual damages for the manner in which the claim was denied, and the impact of the denial on the individual. These extracontractual claims are usually framed as punitive, aggravated, and general damages. Although extracontractual damages awards at trial are uncommon, these claims should be advanced when there is evidence of bad faith on the part of the insurer.
Read more about punitive and other damages in the long term disability context:
- Punitive & Aggravated Damages In Long Term Disability Claims
- Sun Life Ordered To Pay General Damages For Causing Mental Distress In LTD Claim
Why Was The Plaintiff Awarded So Much In This Case?
Canadian trial outcomes tend to be conservative compared to some of the headline grabbing verdicts from the United States (such as $2.7 million awarded for hot coffee that was too hot and $5 million to Johnny Depp in the Depp v. Heard saga). The previous high water mark for a punitive damages award against a Canadian long term disability insurer was $500,000 in a Saskatchewan case from 2015. There are several other cases where $50,000 to $200,000 was awarded.
Because the Baker v. Blue Cross case was decided by a jury, there are no written reasons of a judge to explain the basis of the award. However, if Blue Cross proceeds with the appeal, the Ontario Court of Appeal may provide written reasons outlining some of the evidence regarding punitive damages.
One can only assume that the jury was not impressed with Blue Cross’ conduct throughout the course of the claim, the denial, and possibly at trial. It is also possible the jury thought it was unfair to conduct 375 hours of covert surveillance, essentially spying, none of which apparently proved any wrongdoing on the part of the plaintiff.
How Will This Case Affect Other Claims?
It is impossible to know whether Blue Cross or other insurers will alter their conduct to avoid another similar result. However, one can speculate that insurance companies will be more cautious when deciding which cases to take to trial. LTD insurers may also be less likely to spend so much time and effort on surveillance. It is also likely that insurers will avoid jury trials, and instead opt for judge alone.
Long term disability claim lawyers will rely on this case when seeking punitive damages. Even though LTD cases rarely go to trial, insurers must now carefully consider the risk of a seven figure punitive damages award, which potentially provides plaintiffs added leverage when negotiating a settlement.
How Can I Find Out More About Long Term Disability Claims?
Contact Michael Jordan directly for fast free legal advice regarding any and all long term disability insurance questions.
About The Author
Michael Jordan is a long term disability lawyer with more than 17 years experience litigating all types of insurance claims. He is a founding partner of the Bay Street firm Jordan Honickman Barristers. Michael represents clients across all of Ontario, with satellite offices in Ottawa and London.
Direct Cell: 416-460-6823