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LTD Benefits and Damages: Defining “Reasonable”: 4.5 million dollar punitive damages award
When venturing into the disability benefits area of law, what is “reasonable” in terms of punitive and aggravated damages can be a grey area. Different factors, including the organization’s size and the effect of its actions on the claimant can result in varying damage awards.
In Branco v American Home Assurance Co.  SKQB 98, $4.5 million in punitive damages was awarded for two insurance companies’ actions in failing to pay out benefits on a legitimate claim, which resulted in significant mental distress for the claimant. The Plaintiff, Branco, had initially immigrated to Canada at the age of 24 and after numerous courses, earned his red seal welding certificate. When his family moved back to Portugal, he took a job with a Saskatchewan company in Kyrgyzstan as a mine worker, but left the company a couple years after to work as a miner for the Kumtor Operating Company, located in the Kyrgyzstan mountains, due to preferable work rotations (28 days, with lodging at a campsite).
Two years after he began working for Kumtor, Branco dropped a steel plate on his foot, but continued working, despite severe swelling. Branco did a “quick fix” on his foot, packing his shoe with snow, and finished the 28 day rotation, returning to Portugal in between that rotation and his next to recover. However, on the 26th day of his next rotation, he re-injured his foot. Branco again finished the rotation and went back to Portugal, this time visiting his family doctor. After this visit, Branco informed Kumtor that he was ill and would not be attending work for his next rotation. Two rotations thereafter, after his injury showed no signs of improvement, Branco returned to Kumtor’s premises and visited the company doctor. He filed a claim for the injury with American Home Assurance Company, and they arranged for him to have surgery in Portugal. However, the surgery was not effective, even with physiotherapy sessions. Branco was declared permanently disabled and AIG was made aware.
Branco began receiving disability benefits in March 2001, and- notwithstanding his declaration of permanent disability-with the expectation that he would return to work shortly. AIG advised Branco that it would require regular updates from his surgical doctor if this was not the case. However, a couple of months later, after AIG had not heard from Branco’s surgical doctor, it suspended his benefits. Branco decided to visit his family doctor in Portugal and obtained a note indicating that he was still permanently disabled. The note was sent to AIG and it subsequently made an offer to settle the claim for $22,500 USD. Branco did not accept and advised AIG that he would be retaining legal counsel. The note which AIG’s representative left on Branco’s file following this conversation snidely remarked that Branco would “have to go to back to Canada to get an attorney and this whole process is going to take years to settle” followed by an excited, “Here we go CANADA!!!!!”. This particular representative had a reputation for dealing with claims inappropriately and her actions in another claim had resulted in a $60,000.00 punitive damage award against AIG.
Branco visited AIG’s physicians in Saskatoon at their request. One of AIG’s doctors had diagnosed Branco with Reflex Sympathetic Dystrophy, a rare but serious condition which is medically acknowledged as having an extremely poor success rate in rehabilitation. The other doctor stated that Branco may be able to return to work. Thereafter, AIG made a couple of sporadic payments to Branco but did not fully reinstate his benefits. Instead, it made his reinstatement conditional upon a rehabilitation program, which included having Branco re-train to be a gardener, which was hardly comparable work to his previous employment, and was difficult given his permanently disabled status. After Branco could not satisfy AIG’s requirements, AIG cut off benefits completely. There was another policy which Branco participated in through Kumtor, held by Zurich Life Insurance Company Ltd., which provided long term disability benefits to Kumtor employees in the event of a non-work related disability. However, Kumtor did not understand that it was obliged to submit the claim forms on behalf of Branco and did not do so. Branco eventually filed a disability claim with Zurich in 2003, and later found out that Zurich had allegedly approved his claim in 2002. Despite this, Zurich did not make any payments until 2009. By the time Branco finally received the funds from Zurich, he had effectively been without an income from 2001 to 2009. This naturally resulted in significant economic and personal issues for Branco.
As a result of the hardships which he had faced because of AIG and Zurich’s actions, Branco commenced a legal action against Kumtor, its parent company, Cameco Corporation, and the two insurance companies. While no damages were awarded against Kumtor and its parent company, the court found that the actions of the two insurance companies were reprehensible, malicious, and worthy of significant punitive damages (1.5 million against AIG, and 3 million against Zurich). The court also ordered $150,000.00 in aggravated damages against AIG and $300,000.00 in aggravated damages against Zurich. The court justified the substantial damages award by noting that,
“The court is cognizant of the fact that a punitive damages award of $3 million may not be particularly significant to the financial bottom line of a successful worldwide insurance company. It is hoped that this award will gain the attention of the insurance industry. The industry must recognize the destruction and devastation that their actions cause in failing to honor their contractual policy commitments to the individuals insured.”
The judgment was issued on March 21, 2013 and has not been appealed.
Trends in Disability Cases
Branco is not the only case where significant punitive damages have been awarded against insurance companies. The case of Whiten v. Pilot Insurance Company  1 S.C.R. 595 is infamous for the court’s high $1,000,000.00 punitive damages award. While other cases, such as Pereira v. Hamilton Township Farmers’ Mutual Fire Insurance Co.  O.J. No. 1508 have obtained success at the trial level ($2.5 million was awarded by a jury in Pereira), the awards have been reduced or set aside on appeal. If Branco is appealed and the damages remain intact, it will undoubtedly supersede Whiten as a landmark punitive damages disability case.
While punitive damages are still fairly rare awards like this will force insurance companies to take claims seriously and show that the larger the company is, and the more legal firepower they have, the higher the expectations judges have for their behaviour.
If you have been denied LTD coverage and require a lawyer to fight for you claim make sure to contact Monkhouse Law today.