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Personal Injury

Significant jury awards likely to be appealed by insurers

Plaintiffs awarded punitive damages by a jury against their insurers should expect to face an appeal, Toronto personal injury lawyer Gary Will tells AdvocateDaily.com.

Will, the managing partner of Will Davidson LLP, argued the seminal case in the area at the Supreme Court of Canada, when the nation’s top court reinstated a jury award of $1 million to homeowners denied coverage following a 1994 fire that destroyed their home.

In the 24 years since, Will’s research has revealed an average of just one jury award for punitive damages per year. Barring a legal defect, he found insurers with cases involving awards under $100,000 were the most likely to avoid appealing or later abandon it, and those that reached hearings tended to be upheld.

“It was a little surprising that there haven’t been more awards over that period. And unless the size is relatively modest, an appeal by the insurer seems almost certain,” Will says.  

His case also remains the high mark for punitive damages, despite two plaintiffs initially passing the $1-million threshold at trial. One case saw a $4.5-million award reduced to just $675,000 on appeal, while another lost out on a $2.5-million jury award when the appeal court reversed the decision. The parties in that case settled before a new trial could start.

Some lawyers and judges have taken that to mean that $1 million is a hard cap on punitive damages in Canada, bolstered by former Supreme Court Justice Ian Binnie’s comments in his decision restoring the award in favour of Will’s client, in which he wrote: “An award of $1 million in punitive damages is certainly at the upper end of a sustainable award on these facts.”

The fire in the case destroyed a home and all of its contents, but when the homeowners claimed for the loss, the insurer refused to pay out on the basis that it suspected arson. That conclusion conflicted with the insurer’s own adjuster, an expert engineer, and the local fire chief that the cause was accidental.

The court decision says the company eventually conceded the evidence suggested the fire was started accidentally, but still disputed the $1-million punitive damage award.

However, Will says the assumption that future awards can go no higher is based on a misconception.   

“The key words in Justice Binnie’s decision are ‘on these facts,’” he says. “We are still waiting for the case where the conduct is more reprehensible and justifies a higher award, but I think one will come eventually.”  

For example, Will says he can envision higher punitive damages being reasonably awarded by a jury if the insurer was a repeat offender or if the case represented a pattern of corporate misconduct.   

“There are already some insurers that have been hit with two or three punitive damages awards. If it happens a fourth time, it suggests whatever was awarded before didn’t work. To send a message, the amount will have to be increased,” he says.

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