This month’s first case is an appeal of a decision reviewed in Foster & Company’s September 2011 newsletter concerning whether a person named as beneficiary in a life insurance policy is entitled to receive the proceeds of the policy in circumstances where the beneficiary caused the death of the insured, but was found not criminally responsible by reason of mental disorder.
Our second case this month deals with the limitation period for commencing an action against an insured’s own insurer under the inadequately insured motorist endorsement of an automobile insurance policy.
Our last case this month features a new high watermark for punitive damages awards against insurers from the Saskatchewan Court of Queen’s Bench.
Foster & Company is pleased to announce that Erika MacDonald has joined our litigation and insurance defence team as an associate.
Erika has worked with us since 2011 both as a law student as well as an articled clerk.
Erika graduated from Saint Mary’s University in 2009 with a Bachelor of Arts and the from the University of New Brunswick in 2012 with a Bachelor of Laws degree.
Erika was admitted to the New Brunswick Bar in 2013. She is a member of the Law Society of New Brunswick, the York Sunbury Law Society, and the Canadian Bar Association.
Erika is looking forward to working with you and can be reached by:
Telephone: (506) 462-4004
Fax: (506) 462-4001
Dhingra v Dhingra Estate, 2012 ONCA 261
The Dhingra family, consisting of the applicant, his wife, and their son and daughter, emigrated to Canada from India in 1973. In the 1980's, the applicant began to exhibit signs of mental illness which doctors later diagnosed as schizophrenia. His illness resulted in incidents of self-harm and public disturbances.
In 2006, the applicant assaulted his wife while she slept, striking her repeatedly with a marble statue and stabbing her with a large knife. She later died from her injuries. The Crown charged the applicant with second degree murder, but he was found not criminally responsible by reason of mental disorder.
At the time of the applicant’s assault on his wife, her life was insured for $51,000. Both the applicant and his son (as administrator of his mother’s estate) applied to claim the proceeds of the policy, which the insurer had deposited with the Ontario Superior Court of Justice.
At trial, the applicant argued that the Court should award him the money because the policy named him as the beneficiary. The applicant’s son countered that the money should instead go to his mother’s estate, citing the public policy rule that a criminal should not be permitted to profit from his crimes. The application judge ruled that the public policy rule precluded the applicant from collecting the insurance money , and dismissed his application. The applicant appealed, claiming the rule should not apply to him because he was found not criminally responsible for killing his wife.
The Court of Appeal found that previous decisions from Canadian courts established that the public policy rule does not apply where the person was insane during the commission of the crime. A person found not criminally responsible on account of mental disorder is not "morally responsible" for his or her act, so there is no rationale for applying the rule. The Court of Appeal reversed the application judge’s decision and ordered that the money be payable to the applicant.
In 2013, the Attorney-General of Ontario applied to the Superior Court of Justice to have the insurance proceeds in the Dhingra case forfeited to the Crown under the Civil Remedies Act, 2001 pursuant to the provisions concerning proceeds of unlawful activity. The Court ruled that it was “clearly not in the interests of justice to order the forfeiture to the Crown” and dismissed the application. See Attorney- General (Ontario) v $51,000 Cdn. (In Rem), 2013 ONSC 1321.]
Roque v. Pilot Insurance Company, 2012 ONCA 311
On December 5, 1996, a motorist struck a pedestrian with his car. The pedestrian commenced an action against the motorist on June 16, 1998, in which he claimed general damages of $1,000,000 and special damages of $750,000. The motorist was not adequately insured to cover such costly damages, having only the minimum coverage limit for motor vehicle liability insurance, $200,000. However, the pedestrian did not become aware of this until sometime in 2002.
In March 2002, the pedestrian began an action against his own insurer. By its policy, the insurer agreed to indemnify its insured for the amount that he could legally recover from an inadequately insured motorist. The insurer brought a motion for summary dismissal of the plaintiff’s claim on grounds that the limitation period set out in the policy had expired, and therefore the action was time-barred.
At the hearing, the insurer alleged that the limitation period on such an action starts to run when a plaintiff knows, or ought to know, that the claim will exceed the minimum coverage limits for motor vehicle liability insurance. For his part, the plaintiff argued that the limitation period only starts to run when a plaintiff knows of the tortfeasor's policy limits, and when he knows that his or her claims will exceed the tortfeasor's limits.
The motion judge held that a limitation period starts to run when the plaintiff has a body of evidence accumulated that would give him a 'reasonable chance' of persuading a judge that his claim would exceed $200,000. He stated that a plaintiff’s knowledge of the tortfeasor’s policy limits is irrelevant. In the case before him, the motion judge found that the plaintiff knew or ought to have known by September 1999 that his claim would exceed $200,000, and dismissed his action against the insurer. The plaintiff appealed.
The Ontario Court of Appeal upheld the decision that the plaintiff did not bring the action in time and affirmed that a plaintiff’s knowledge of the tortfeasor’s policy limits is irrelevant to a limitation period. The appeal was dismissed.
The Court added that the Insurance Act obligates a defendant’s insurer, once it receives notice of a claim, to inform the claimant promptly of the defendant’s policy and its limits. In a case where a defendant’s insurer fails to comply, a plaintiff should commence an action against his own insurer as a precaution and discontinue it later if necessary.
Branco v. American Home Assurance Company, 2013 SKQB 98
In 1997 the plaintiff, a Canadian citizen who immigrated from Portugal at age 24, began work for a mining company at a mine in the remote mountains of Kyrgyzstan. The plaintiff was an experienced welder with a perfect attendance record. In December of 1999, the plaintiff injured his foot when he dropped a steel plate on it. Although injured, he continued to work to the end of his 28-day shift. He then went home to Portugal to recuperate.
The plaintiff saw a doctor in Portugal during his time-off period. At the start of his next work shift in Kyrgyzstan, he went to see a company doctor and did not return to work after that. The mining company informed American Home Assurance Company (AIG), which insured the company’s employees for work-related injuries, of the plaintiff’s injury. AIG arranged for Mr. Branco to another doctor in Portugal, Dr. Amado. On Dr. Amado’s order, Mr. Branco underwent surgery in January of 2001 followed by physiotherapy and rehabilitation. Unfortunately, the treatments were unsuccessful and Dr. Amado reported to AIG that the plaintiff was permanently disabled.
In May of 2001, AIG stopped paying disability benefits to the plaintiff because Dr. Amado had not sent them the proper medical documents. AIG offered $22,500 to settle the claim, but the plaintiff refused. On AIG’s demand, the plaintiff traveled to Canada to be examined by two more doctors of AIG’s choosing. Both doctors confirmed the plaintiff’s disability. AIG resumed paying benefits to the plaintiff, although inadequately and infrequently. In 2004 AIG demanded that the plaintiff be re-trained as a gardener at a facility they selected. The plaintiff disagreed with this because he could not physically do gardening work, gardening paid far less than welding, and he was unlikely to find employment gardening in his town because he was almost 60 years old. AIG stopped paying him benefits.
The plaintiff also applied to Zurich Life Insurance Company who provide long-term disability benefits for the mining company’s employees. In 2003 Zurich offered the plaintiff $62,600 to settle the claim, but he refused. Zurich did not pay the plaintiff anything until 2009, nine years after the first payment was due. At this point, they paid the plaintiff the payments he was due plus interest and began making regular payments.
AIG and Zurich’s decision to withhold payments from the plaintiff caused him considerable hardship and distress. He lost the power to support his family and himself. He was forced to move in with his mother, and borrow money from his daughter and other family members in order to survive. His marriage broke drown.
The Saskatchewan Court of Queen’s Bench ruled that AIG breached their policy by failing to pay benefits to the plaintiff. AIG also breached their duty of good faith and fair dealing by failing to make payments in a prompt and reasonable manner. AIG withheld payment in order to create undue hardship on the plaintiff to force him into accepting an extremely low offer of settlement. The Court ordered that AIG: (1) pay the plaintiff neglected benefit payments, (2) pay him continuing benefit payments, (3) reimburse him for medical expenses, (4) pay him $150,000 in aggravated damages, and (5) pay him $1,500,000 in punitive damages.
As for Zurich, the Court stated that its delay in paying benefits was egregious and reprehensible. The Court ordered that Zurich: (1) continue to pay the plaintiff benefit payments, (2) pay him $300,000 in aggravated damages, and (3) pay him $3,000,000 in punitive damages.