The Court of Queen’s Bench for Saskatchewan has sent a strong message to insurance companies in the recent Branco v American Home Assurance Co. decision by setting new high-water marks for punitive damage awards. After a comprehensive review of the jurisprudence on punitive damage awards and the specific behaviour of the insurers involved, Justice Acton held that insurance companies had not received the message sent by the Supreme Court of Canada in Whiten v. Pilot Insurance Co. Using very strong condemnatory language, Justice Acton stated the purpose of these higher awards was to “gain the attention of the insurance industry [so that it] … recognize the destruction and devastation that their actions cause in failing to honour their contractual policy commitments to the individuals insured.”
The plaintiff, Luciano Branco, was a 62 year old Canadian citizen who was employed as a welder in Kyrgyzstan with Kumtor Operating Company. In late 1999 and early 2000, Branco was injured at work. He advised his employer in June 2000. Kumtor put its’ WCB and disability insurers on notice of Branco’s claims.
Despite surgery, physiotherapy, and rehabilitation, Branco did not recover and was deemed unsuitable for vocational retraining. At the WCB insurer’s request, he traveled to Canada to undergo medical examinations. The insurer provided Branco with intermitted WCB benefits, ultimately discontinuing them and presenting Branco with a settlement offer. The disability insurer approved Branco’s claim in 2002, but no funds were paid until 2009.
Both insurers were held to be in breach of both their contractual obligations to Branco and their duty of good faith and fair dealing for which both aggravated and punitive damages were awarded. A $150,000 aggravated damages award was made to compensate Branco for the mental distress caused by the WCB insurer. Had the insurer had made the monthly payments, Branco would have been spared the mental distress and financial hardship that followed. He was only able to bring this case because of the financial support of family members and his lawyer’s agreement not to seek payment until the end of the case.
The fact that Branco was able to continue to withstand this pressure for so many years from two different fronts is truly remarkable and almost superhuman, even though his resistance may have resulted in irreparable mental distress which may last for the remainder of his lifetime. [The insurer’s] numerous lengthy and unexplained delays in payments [...] were malicious and designed and designed to leverage a reduced settlement of the claim.
An aggravated damages award of $300,000 was made against the disability insurer. The Court held that the nearly ten year delay in making payments (for which it had admitted liability) was “completely reprehensible” and “egregious action”.
In making the punitive damage award against the WCB insurer, Justice Acton was particularly persuaded by the existence of an earlier 2003 decision, which had levelled a $60,000 punitive damage against the same insurer for a claim handled by the same adjuster with a claimant in circumstances similar to that of Branco. That decision was rendered in May 2003. In July 2003, the same flawed techniques were applied to Branco, said Justice Acton, "Obviously the punitive damages award was not sufficient to prevent an immediate reoccurrence of the unacceptable technique”. The Court assessed punitive damages against the WCB insurer in the amount of $1,500,000.
In making the punitive damage award against the disability insurer, Justice Acton was particularly persuaded by its refusal to make any payments to Branco even after admitting liability. This pattern of conduct went on for approximately ten years, during which time they made two unconscionably low offers of settlement and brought continual court applications without reasonable justification. Citing Whiten, Justice Acton set the punitive damage award at $3 million:
…the more reprehensible the conduct, the higher the rational limits to the potential award. The need for denunciation is aggravated where, as in this case, the conduct is persisted in over a lengthy period of time … without any rational justification, and despite the defendants’ awareness of the hardship it knew it was inflicting (indeed, the respondent anticipated that the greater the hardship to the appellant, the lower the settlement she would ultimately be forced to accept).
Prior to this decision, the high-water mark for punitive damages was the $1 million award in Whiten. Justice Acton’s view was that this sum had proved deficient as the actions of the insurers in this case had taken place during the same time period as when the decision in Whiten was released. Justice Acton went on to note that while the punitive damage award may not be particularly significant to the financial bottom line of a successful worldwide insurance company, he hoped that it would gain the attention of the insurance industry.