LTD Insurer Ordered To Pay Punitive Damages

Another long term disability insurance company in Ontario has been ordered to pay punitive damages. This time the award was $150,000, plus $10,000 for mental distress and anxiety. The case is Fraser v. Fenchurch General Insurance Company, released on November 2, 2022.


The plaintiff, Mrs. Fraser, applied for long term disability benefits from the defendant, Fenchurch General Insurance Company, in 2017. Her doctor supported the claim.  The insurer arranged an independent medical assessor, who found there was nothing physically preventing a return to work, but recommended a psychiatric assessment.   The insurer ignored their own doctor’s recommendation, and denied the claim without assessing the psychological aspect of the claim.

A lawsuit was commenced.  The long term disability lawyer obtained a psychiatric assessment which supported the claim.  The defendant insurer then arranged an expert psychiatrist, who agreed Ms. Fraser could not work.  The insurer then reversed its decision, paid the disability benefits owing, and put the plaintiff on claim. Mrs. Fraser, however, continued with the lawsuit for punitive and other damages.

At trial, Justice Leibovich considered information contained in the Fenchurch procedure manual.   The manual included a provision that required claims handlers to take “…a more thorough and somewhat aggressive focus in order to determine eligibility and rule out secondary gain or malingering”  when considering claims for subjective medical conditions.  Many medical conditions can be considered subjective, including depression, anxiety, chronic pain, fibromyalgia, and chronic fatigue syndrome.  

Punitive Damages

The trial judge reviewed the law in Ontario as it relates to punitive damages and accepted the following principles:

  • Punitive damages are designed to address the objectives of retribution, deterrence and denunciation, not to compensate the plaintiff
  • They are awarded only where compensatory damages are insufficient to accomplish these objectives
  • They are the exception rather than the rule
  • The conduct must depart markedly from ordinary standards of decency; it is conduct that is malicious, oppressive or high-handed and that offends the court’s sense of decency
  • In addition to the breach of contract, there must be an independent actionable wrong
  • In a case of breach of an insurance contract for failure to pay insurance benefits, a breach by the insurer of its contractual duty to act in good faith will constitute an independent actionable wrong
  • Disputing or refusing a meritorious claim does not, in itself, constitute a breach of a duty to act in good faith.

Justice Leibovich then found that Fenchurch’s denial, in circumstances where its own doctor recommended a psychiatric assessment but failed to so, warranted punitive damages:

In my view the defendant’s denial of the claim was not a mistake based on a misreading of the medical information before them. Rather the decision was high handed, a marked departure from the conduct one would expect in the situation and designed to take advantage of Mrs. Fraser’s vulnerable state and to avoid paying the claim. I do not come to this conclusion lightly.

The judge goes on to raise specific concerns with the LTD insurer’s conduct, including:

  • No rational or logical explanation was provided which might explain why it did not to follow its own doctor’s recommendation for a psychological assessment
  • That decision is contrary to their own procedural manual which states that the assessor should seek out more medical evidence when there are informational gaps
  • The insurer’s attitude that because the disability was primarily for physical conditions, they had no responsibility to investigate the psychiatric concerns, despite the recommendation of their own doctor
  • There is no logical way to interpret their doctor’s report as supporting return to work
  • Internal log notes indicated a psychological assessment would be considered only in the event of an appeal, with the judge noting LTD claim should not be a contest between insurer and insured  to see who can out-maneuver who
  • Failure to follow their own claims manual, that required a more thorough approach
  • A preconceived view that those diagnosed with fibromyalgia are malingerers

Regarding the quantum of punitive damages, the trial judge considered numerous other cases where punitive damages were assessed in the range of $150,000 to $200,000 and concluded “In my view, given all the circumstances punitive damages in the amount of $150,000 is a reasonable and proportionable amount to denounce and deter the defendant’s behaviour.”

It is not yet known whether Fenchurch will appeal the decision, but regardless it should be a warning to long term disability insurers that they may be held to account for conduct that breaches the duty of good faith.

Learn more about punitive damages in long term disability claims with these blog posts: 

Michael Jordan - Long Term Disability Lawyer in Ontario

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

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Michael Jordan
Jordan Honickman Barristers

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