The Supreme Court of Canada has dismissed the appeals in Bruce Brine v. Industrial Alliance Insurance and Financial Services Inc.¹ (with costs) and Luciano Branco, et al. v. Zurich Life Insurance Company Limited, et al.(without costs). Both of these cases dealt with large awards for punitive damages and mental distress damages which were substantially reduced at their respective Courts of Appeal.

The Courts of Appeal decisions therefore stand. In Brine, the Nova Scotia Court of Appeal reduced damages for mental distress from $180,000 to $90,000, and punitive damages were reduced from $500,000 to $60,000. In Branco, the Saskatchewan Court of Appeal reduced damages for mental distress from $450,000 to $45,000 and punitive damages were reduced from an unprecedented $4.5 million to $675,000.

Please see our previous Client Update on Brine, which set out the following lessons learned:

• The standard of good faith applies to discretionary services like rehabilitation once offered. In general, insurers must carefully consider how they are handling their files, be able to back up their conclusions with reasonable and rational evidence, and remain forthright in communications with the insured – especially in contracts meant to protect the insured’s “peace of mind.” Insurers will have to be cautious when deciding to commence rehabilitation benefits, as they will not be permitted to stop them even in the face of it appearing the insured will not return to work (without risking a finding of bad faith, and a corresponding award of damages). Insurers may need to consider more explicit provisions in the contract to mitigate what could be a significant change in the way rehabilitation benefits have been engaged in the past.
• Courts in Nova Scotia are not hesitating to award large damages awards against insurers, whether they are contractual damages for the insured’s mental distress, or punitive damages for particularly egregious conduct by the insurer. Further, if an insurer has a history of such awards imposed against them in other cases, this will likely increase the frequency and amount of punitive awards against the same insurer.

Although Stewart McKelvey was not involved in the Brine or Branco cases, if you would like to discuss the implications of these Court of Appeal decisions in greater detail, or would like advice on avoiding bad faith damages, please contact Patricia Mitchell, Michelle Chai or the other members of the Stewart McKelvey Life & Disability Insurance Practice Group.

¹ Interestingly, before the Supreme Court of Canada dismissed the appeal in Brine, the Court considered whether the Plaintiff Insured was allowed to file an affidavit from a professor which made a number of statements about misconduct by insurers being exacerbated by low punitive damages. The Court held the affidavit did not assist the Court in determining if the appeal dealt with matters of public importance, and commented the affidavit amounted to an “improper attack on the correctness of the Court of Appeal decision below”. The decision is not publicly available, but can be found on Westlaw at 2016 CarswellNS 205.