Law Times

PAGE 10 FOCUS January 9, 2012 • Law Times pressure on insurance companies Appeal court awards $25,000 in damages to plaintiff Claim for mental distress puts BY JUDY VAN RHIJN For Law Times policy despite the medical evidence by awarding damages for the loss of the policyholder's peace of mind. Defence lawyers hope the decision may bring some balance to what they say is the current arbitrary treatment of minor injury claims. In its judgment in McQueen v. Ech- T elon General Insurance Co. on Nov. 16, the Court of Appeal refused to overturn an award of $25,000 for mental distress caused by the denial of benefi ts. Th e case involved a plaintiff who had been in a mo- tor vehicle accident in which she sustained injuries. Prior to the accident, she was al- ready suff ering from bipolar disorder and upper back pain. After the incident, the defendant insur- er refused to pay for some of the benefi ts applied for and limited the plaintiff 's access to medical assessments. In fact, there were 21 denials of 16 separate benefi ts over a period of three years. As well as the bene- fi ts, the plaintiff claimed extra contractual damages, bad faith, mental distress, aggra- vated damages, and punitive damages. In supporting the trial court's fi nd- ing that the mental distress warranted compensation, the Court of Appeal de- clared: "People purchase motor vehicle liability policies to protect themselves from fi nancial and emotional stress and insecurity. An object of such contracts is to secure a psychological benefi t that brought the prospect of mental distress upon breach within the reasonable con- templation of the parties at the time the contract was made. As an insured per- son entitled to call on the policy, Ms. McQueen was entitled to that peace of mind and to damages when she suff ered mental distress on breach." Lou Ferro of Ferro and Co. in Hamil- ton, Ont., who represented the plaintiff , he Ontario Court of Appeal has sounded a warning to insur- ers who deny benefi ts under a notes that it has been easier to get dam- ages for mental distress since Fidler v. Sun Life Assurance Co. of Canada. As well, he says there are fi ve or six other Court of Appeal and Supreme Court cases that laid the foundation for this judgment. "It takes advantage of what's gone before," he says. Ferro argues that although the insur- ance industry is slow to change, it would be foolhardy not to take notice of the deci- sion. "Th is case points out that the claims process is now under scrutiny. Th e fairness component applies to the adjuster, and in- dividual decisions made by the adjuster are subject to review." Ferro believes the case also confi rms that insurance companies can't be adver- sarial to the policyholder. "Some insurers just throw their cases into litigation as a standard response. Th ey use the courts as a profi t centre. Th at's not wise. You can't dispute that you should treat the policy- holder fairly. It's like motherhood and apple pie. Th ey go together. If the ad- juster makes an arbitrary or unsupported decision or is derisive or adversarial, it's diffi cult to defend it. Th ere will be lots more cases like this to come." Laura Hillyer of Martin & Hillyer Associates sees a lot to like in this deci- sion as well. "Th e Court of Appeal af- fi rmed the messages that insurers use to sell insurance: slogans like, 'We've got you covered' and 'You're in good hands.' Th ey use peace of mind to sell the prod- uct. Th is decision confi rms that that is what they do. I think of that as obvious, but it's nice to hear the Court of Appeal saying it." Hillyer is happy to see the court hold- ing the insurer to the standard it advertises and not just with the person it contracts with. "Echelon's contract was not with Mrs. McQueen," she says. "It was her hus- band's policy. Th e court chose not to draw a line between people who actually entered into the policy and people covered by the policy. It's inclusive." Th e judgment criticizes a number of insurance industry practices, such as they should know is a short, perfunctory insurer examination. Often, the client says they sat in the waiting room for an hour, they saw the doctor for 10 min- utes, and he hadn't read the fi le yet." Hillyer also likes the fact that the Court of Appeal is sending those mes- sages in relation to a modest claim. "Of- ten, the denials aren't for a large amount and you wonder if it's cost-eff ective to proceed. Th is decision makes it cost- eff ective, assuming you have a true link between the insurer's behaviour and the claimant's mental state." Hillyer notes that while people who Laura Hillyer hopes the decision will change the use of the minor injury guidelines. giving a denial without a reason. "Since Sept. 1, 2010, we are seeing a lot more of that," says Hillyer. "Th e insurer says it is not reasonable or necessary with no expla- nation. Th is decision calls on insurers to give more details if the decision is contrary to medical recommendations, which is what the treatment plan really is." Another insurance industry practice that the judgment criticizes is choosing to rely on a particular report that sup- ports a denial of benefi ts. "If there are two reports and one says you should pay and one says you shouldn't, they will need to think twice before denying it," says Hillyer. "Th at's very, very help- ful, especially if they are relying on what have family and savings are less likely to suff er from mental distress, there are others who aren't as fortunate and don't have those fallbacks. "If insurers engage in these behaviours with them and it detrimentally aff ects them, they are on the hook," she says. Ferro attributes some of the success in the action to the fact that the application didn't go too far. "We asked the judge for $25,000. Th at's not a great deal, but it rep- resents the beginning of a process that has set the fl oor on damages." Hillyer also hopes the decision will change the use of the minor injury guidelines. "Th e [guideline] is very chal- lenging. It's very diffi cult to get someone out of [it] once they are in. It shouldn't be, but it is and our remedy is so far away. It's very frustrating. If you take no- tice of some of these comments, I'd say keep sending information to the insurer. Indicate that the medical background is there. If they persist with a blanket re- fusal, they may be in hot water." For his part, Ferro is astounded by the practices of insurers who tell their adjust- ers to throw everything into the minor in- jury guidelines and then hunker down. Ferro personally knows an adjuster who has resigned upon receiving that in- struction. 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