You know things haven’t gone well for the insurers when the judge describes them as ‘two major worldwide insurance compies who were determined to apply sufficient pressure to [the plaintiff] to force him into acceptance of a ridiculouslw settlement of this otherwise justifia claim.’ Or, indeed, when the judge makes the highest punitive damages award so far in Canada, a total of $4.5 million: Branco v American Home Assurance Co, 2013 SKQB 98.

Branco, a 62-year-old welder, was injured while working for Kumtor, a Saskatchewan mining company, in Kyrgyzstan in 1999. He was permanently disabled. AIG, his insurer, made a cash settlement offer of US$25,000, which Branco rejected. He provided medical reports confirming the extent of his injuries but at first received no benefits, and then only intermittent payments. AIG insisted on rehab in Portugal (where Branco had resettled) and retraining in a job that was unsuitable in light of Branco’s injuries. Branco’s disability payments were then terminated because he refused to travel three hours from his home to the rehab facility in Lisbon. The Saskatchewan Workers’ Compensation Board informed the insurer that Branco was too old for retraining and that they wouldn’t have advised accepting a lump sum payment. AIG ignored this and stopped paying disability for four years, up to the eve of the trial of Branco’s action against the insurer and his former employer. Branco fared little better with Zurich, his LTD provider (also a defendant in the Saskatchewan action), which approved his claim in 2002 but made no disability payments until 2009. Branco and his family were essentially without income for many years, and he was forced to survive on loans from his family and through remortgaging his house. His marriage broke down for almost a year. Once the Saskatchewan action was initiated, there were ‘numerous and constant court delays’ which the judge attributed to the two insurers.

Acton J held that AIG had clearly breached its contract to provide disability benefits and acted in bad faith in doing so. Zurich was also in breach of its obligations and didn’t just drop the ball in failing to make the payments required under its policy. The judge, concluding that AIG’s workers’ comp coverage and Zurich’s LTD policy were ‘peace of mind’ contracts, awarded aggravated damages for the mental distress which breach of them had caused and which was within the reasonable expectation of the parties. The judge didn’t stop there: this was also a case for punitive damages, assessed (after a review of the leading cases and the seven factors enumerated in Whiten v PilotInsurance, 2002 SCC 18) at $3 million against Zurich and $1.5 million against AIG. The $1 million damages award in Whiten (decided at a time when AIG and Zurich were dealing with Branco’s claim) was not, in the judge’s view enough to ‘catch the attention of the insurance industry’.