Punitive damages award a warning to insurers

By Patricia MacInnis, Senior Editor

Oakville insurance lawyer Weston Pollard tells Law Times that insurers need to tread carefully when denying policyholder claims following a judge’s decision to award punitive damages against a company for its handling of a case involving the loss of a $550,000 ring.

In the matter, the court ordered an insurer to pay out the full value of the family heirloom ring to a man who claimed it was stolen just weeks after it was added to his policy. The judge also ordered the company to pay the man an additional $50,000 in punitive damages for the way it handled the claim.

In his decision, the judge said that the insurer decided at a very early stage it would not pay the claim, but continued to hold out the prospect it could be paid if the man and members of his family provided material and submitted to examinations under oath.

“In my view, the conduct of the defendant can only be construed as being designed to put the plaintiff through his paces even after it had decided to deny the claim, and was with a view to setting up its case for litigation,” the judge wrote. “Furthermore, the defendant has attempted to surreptitiously put forward a case of fraud, even though it had disclaimed any reliance on fraud.”

Pollard, partner with Edwards Pollard LLP, acts for both plaintiffs and defendants in insurance disputes and says punitive damages awards are somewhat rare.

“I think it’s good to see the court taking action, and exercising its power to make an award in a case where the insurance company has obviously acted in a high-handed way,” he says. “$50,000 is a significant enough amount that it won’t just get swept under the rug, and, hopefully, it will cause them to rethink their practices, especially in the way that they treat their insured in cases like this.

“I would think that most insurers will be sitting back and looking at their internal policies for communicating a denial to a client, especially when litigation may be required,” Pollard adds.

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