are punitive damages insurable in canada

Court by Jim Cameron of Cameron & Associates Insurance Consultants Ltd. Just before Christmas, the Supreme Court of Canada heard argument in the case of Whiten v. Pilot. In the Supreme Court of Canada’s seminal decision of Whiten v Pilot Insurance Co., Justice Binnie summarized the rationale underlying punitive damages as well as the principles relevant to determining whether such an award is appropriate in the circumstances: Awards of punitive damages are not limited to specific categories of misconduct. Punitive damages cannot generally be awarded in contract disputes. Some states prohibit insurance of punitive damages on the grounds that spreading the risk of punishment for willful misconduct lessens the deterrent effect. The purpose of a punitive damage award is to punish the defendant. Why should a punitive damage claim be an exception? On September 23, 2020, the License Appeal Tribunal (“LAT”) released a ruling that it does not have jurisdiction to award punitive damages. The insurer needs the full commitment, cooperation and trust of the insured to properly investigate and defend the covered allegations. 2 Although discrimination cases occasional involve acts by an employer that are so malicious that it would normally attract an award of punitive damages, the Supreme Court of Canada held in Honda Canada Inc. v Keays 3 that the Code is a … • Punitive damages may only be awarded for breach of an independent actionable wrong. February 1, 2001   Binnie J. laid out the following principles in relation to punitive damages: (i) Unlike in Britain where there are only specific categories for punitive damages, in Canada punitive damages can be awarded to: Punish the defendant, Deter the defendant and others; Denounce the … The Applicant filed a motion to the LAT requesting that a claim for punitive damages be added as an issue in dispute on the basis of an alleged privacy breach. The case related to the oppressive conduct of an insurance company in dealing with the policyholders' claim following a fire. 595, 2002 SCC 18 [Whiten] explained the role of punitive damages in bad faith claims: An award of punitive damages in a contract case, though rare, is obtainable. A court may order an amount, in addition to the regular damages, because the plaintiff’s feelings were hurt due to the defendant’s behavior. Characteristics of Medical Malpractice Punitive Damages that are Awarded in Canada. 595 is a leading Supreme Court of Canada decision on the availability of punitive damages in contract. Punitive damages in Ontario are very rare – awarded only in the most exceptional cases involving conduct that is of a “harsh, vindictive, reprehensible and malicious nature.”. Money awarded in a civil lawsuit to make an injured person whole, including recompense for damaged property, lost wages or profits, pain, bereavement, medical expenses, etc. Currently, few insurance policies respond to claims for punitive damages. What does this do? Insurers now await the result of the appeal, wondering what impact the proliferation of punitive damage cases may have on the industry and if the unprecedented size of the Whiten award is a sign of things to come. The insurer, try as they may to dispel the insured’s fears, can not state that they are defending the punitive damages claim. ( Hockley v. The leading cases on the award of punitive damages are two Supreme Court of Canada cases, both cited by Judge Yake in Wilderdijk-Streutker v Zhao (at paras 88-89). The fast pace of technology and consolidation. 1 Virginia Code Section 38.20227: "It is not against public policy of the Commonwealth for any person to purchase insurance providing coverage for punitive damages arising out of the death or injury of any persons as the result of negligence, including willful and wanton negligence, but excluding intentional acts.". Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, the Supreme Court of Canada provided guidance on the formula for calculating punitive damages. Punitive damages Are punitive damages insurable? Canadian courts are generally careful in exercising their discretion to award these damages, which are an exception to the time-honored principle that civil damages seek to compensate the victim. The Basics of Punitive Damages. Insurance Corp. of British Columbia, [1989] 1 SCR 1085, the Supreme Court of Canada observed that conduct meriting punitive damages awards must be: “harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”. The Court held that to determine the amount of punitive damages an employer is … The Supreme Court of Canada in Whiten v Pilot Insurance Co. 1 reiterated that the three objectives of punitive damages are “retribution, deterrence, and denunciation”. What is the solution? At the Supreme Court of Canada, the Insurance Council of Canada (ICC), representing the majority of property and casualty insurers, intervened and was allowed to argue before the court. A pandemic. The laws regarding the insurability of punitive damages vary from state to state. Punitive damages have been part of the common law for hundreds of years. Some policies specifically exclude coverage for punitive damages, while others rely on state laws. Insurers anxiously await the ruling, which may not be released until late spring or early summer. While actual awards have been minimal, usually less than $25,000, punitive damages are sought in legal pleadings in virtually every insurance case and in many others. There are two sources of punitive damages in Canada – the Common Law and statutes. The formal distinction is that aggravated damages are given to compensate the plaintiff when the harm done to him by a wrongful act was aggravated by the manner in which the act was done; Some states prohibit insurance of punitive damages on the grounds that spreading the risk of punishment for willful misconduct lessens the deterrent effect. Because they are usually paid in excess of the plaintiff's provable injuries, punitive damages are awarded only in special cases, usually under tort law, if the defendant's conduct was egregiously insidious. Your email address will not be published. The natural fear of being involved as a defendant in a lawsuit is not allayed. Therefore, whether or not punitive damages can be reinsured is ultimately determined by the terms of the policy. In 1969 the House of Lords in Rookes v. Barnard. Ferme Gérald Laplante & Fils Ltée v. Grenville Patron Mutual Fire Insurance Co. Ontario: 2002: Punitive Damages: Jury award of $725,000 set aside. In the common law provinces, we frequently see the courts sanction insurers for showing bad faith in how they manage an insured’s claim by ordering them to pay punitive damages. The dwelling and all their belongings were destroyed and their three cats died in the fire. explore whether Mr. Smith is entitled to recover punitive damages, and if so, in what amount. In practice, insurers usually cannot and will not segregate or allocate defence costs between those incurred for the punitive damage defence and those costs incurred for covered claim defences. Canadian courts are generally careful in exercising their discretion to award these damages, which are an exception to the time-honored principle that civil damages seek to compensate the victim. Pilot appealed the decision. What about the rise in punitive damage claims in other areas? Twenty-three states permit insurance coverage for punitive damages assessed against the party that committed the egregious act. Both the Applicant and Respondent cited Stegenga v Economical Mutual Insurance Company2 in … Pilot Insurance Co. ignored the recommendation of their independent adjuster to pay the claim and, despite conclusions of the fire chief at the scene and an engineer they hired to the contrary, took the position that the fire was incendiary and that the Whitens committed arson, disentitling them to coverage. However, other courts approve insurance coverage for punitive damages, claiming that the deterrent effect of punitive damages has nothing to do with the insurance coverage itself and that the policy of insured, which covers all awarded damages, should be honored. Aggravated damages would Some courts have relied upon public policy considerations to refuse to … We use cookies to make your website experience better. If the plaintiffs are successful, the court may award both punitive and compensatory damages. Thankfully, there’s a way to keep your brokerage and level the playing field. The insured wonders about the potential of a punitive damage award that not only might irreparably damage their reputation but cause financial ruin. Required fields are marked *. exemplary / punitive damages, on the other, are intended to punish the defendant, and presumably to serve one or more of the objects of punishment – moral retribution or deterrence. Courts in Canada tend to be conservative with awarding punitive damages, however. The 2018 Punitive Damages Review provides an overview of constitutional and statutory limitations on punitive damages and summarizes the laws of each state, including: Punitive or exemplary damages are generally only available in Canada where there is proof of malicious conduct on the part of the defendant. Often the target defendant is an insurer but the “statement of claim” usually seeks punitive damages against all defendants. Currently, the leading decision in this area is Whiten v. Pilot where Justice Binnie laid out the following principles: When the statement of claim is passed to the insurer, the insurer often issues a “reservation of rights letter”. Trans Canada Insurance Marketing Inc. Insurers still may have to issue reservation of rights letters to the insured cautioning them that any award of punitive damages would not be covered under their policy but they will, with the assistance of the insured, vigorously defend punitive and other damage claims. Punitive or exemplary damages are generally only available in Canada where there is proof of malicious conduct on the part of the defendant. It is an exception to the general principle that the purpose of a civil action is to compensate the plaintiff for his or her loss, not to punish the defendant. Thus, whether punitive damages are insurable in Indiana may not be a yes or no question. A punitive damage award is not available to an employee whose has suffered discrimination at the hands of his or her employer in breach of the Human Rights Code. Working from Home: Cybersecurity and the Remote Worker, What’s keeping insurance CEOs up at night, Another win for wedding vendors in a COVID cancellation dispute, Why an adjuster’s notes are out of bounds in this subrogation case, What brokers need to do to place hospitality coverage, Christmas movies that would benefit from insurance coverage, Defying The Grinch may cost your clients home insurance coverage, Why the D&O market will probably get harder. All Rights Reserved. And where punitive damages are concerned, Canadian courts usually can be characterized as follows. To search a specific page press ctrl+f while in that page. According to the majority, "his was an exceptional case that justified an exceptional remedy." The case was McIntyre v.Grigg, 83 O.R. Punitive damages remain rare in any type of Canadian tort case. (3d) 161, Ont CA 2006. Provide insurance coverage on all professional liability and CGL policies for defence costs for punitive damage claims. This is cold comfort to a nervous insured who sees the six-figure damages claims under the heading of punitive damages. ; pecuniary. The insurer will tell the insured that the allegations against them in negligence are covered by the policy and that the insurer will defend the claim. The more recent of the two Supreme Court of Canada decisions is Whiten v. Pilot Insurance Co., [2002] 1 SCR 595, 2002 SCC 18 (CanLII). The Ontario Court of Appeal found that punitive damages are available in motor vehicle accident cases in 2006. Save my name, email, and website in this browser for the next time I comment. Health care providers, lawyers, adjusters, and brokers routinely face substantial punitive damage claims when they are named in an action. What is certain is that punitive damage claims are on the rise in Canada. Keith and Daphne Whiten discovered a fire in their house as they were going to bed and escaped in their nightclothes in -18oC weather. The trial jury found that Pilot had acted reprehensibly throughout the handling of the claims file and awarded punitive damages. The defence agreement usually already stipulates that the policy will defend frivolous and vexatious claims and other claims without merit. What is certain is that punitive damage claims are on the rise in Canada. ordinarily be covered by a policy wording covering liability to pay compensation. Damages awarded in a civil lawsuit in order to punish wrongdoing of a greater culpability than simple negligence, without regard to compensating the plaintiff’s actual loss. Canadian punitive damage compensation: (1981)685. Smith must Search by keyword, across entire website. 1. Website Monitoring by BinaryCanary.com. A highly-valued and requested resource guide, the Review provides an overview of constitutional and statutory limitations on punitive damages.It also summarizes the laws in each state. The insured wants to be defended against all allegations. In these times of social distancing and working from home, it’s become even more crucial to ensure strong cybersecurity measures are in place for you and your business. The Applicant filed a motion to the LAT requesting that a claim for punitive damages be added as an issue in dispute on the basis of an alleged privacy breach. ; pecuniary Some legal analysts speculate that the Supreme Court will provide guidance on which types of claims should properly attract punitive damages and which should not. It is normally reserved for cases in which the insurance companies acted in manners that were especially egregious. What the insurer will say is that the allegations against the insured of negligent acts or omissions will be defended and unless this defence is unsuccessful, there would be minimal chance of a finding of punitive damages. Learn more and download a copy.. Many observers hope that the Supreme Court may use this case to set a high water mark for punitive damages in an insurance action. Such nagging doubts do not help in the defence of the case. compensation for a person’s out-of-pocket losses and future expenses due to injury, disability, disfigurement, pain and suffering, and all actual losses, whether economic or non-economic. Not only do they dispute that a negligent error or omission was made, they vehemently dispute that they acted vindictively against the plaintiff. Can he trust the counsel appointed by the insurer? Skillful plaintiffs’ counsel may attempt to capitalize on this wedge between the insurer and its insured by continually raising the specter of the punitive damages claim. Punitive damages are intended as a deterrence. A court may order an amount, in addition to the regular damages, because the plaintiff’s feelings were hurt due to the defendant’s behavior.   Some of these states bar insurance if the act was intentional. vated damages where the defendant's conduct was particularly blameworthy. Compensatory damages Working from home can pose its own challenges and takes adjusting to; the last thing anyone would want is a cyber breach to occur at the same time. Trans Canada Insurance Marketing (TCIM) is the proud recipient of the 2016 Five Star MGAs Award as published in Insurance Business Canada, Copyright © 2020. The reasoning of the majority of the Ontario Court of Appeal explores the history of punitive damage awards in Canada and appears to follow a rationale that such awards should be restricted to the most severe cases. , “ The Expanding Availability of Punitive Damages in Contract Actions ” (1975)8 Indiana L. Rev. The original trial jury heard evidence that lead them to conclude that Pilot acted in bad faith against its insured Whiten and awarded punitive damages of $1 million against the insurance company. To defend a claim in negligence you deny that the insured was negligent and attempt to prove that is the case. The Test for the Award of Punitive Damages. They refer to breach of contract situations specifically suited to punitive damage awards, first party claims by an insured against an insurer, and breach of employment contract or wrongful dismissal situations. The court did something similar in a trilogy of cases in 1978 that still imposes a ceiling on non-pecuniary general damage awards of $100,000 in 1978 dollars (now adjusted for inflation to slightly over $250,000). In the last few decades, the SCC has repeatedly confirmed and approved the use of punitive damage awards in Canada. Although some common law courts have expressed public policy concerns about the insurability of punitive damages in Canada, there are no statutory prohibitions against such coverage within such jurisdictions of Canada. Punitive damages are intended as a deterrence. Remaining independent in today’s marketplace is a tough ask of brokers. Immediately the insured becomes concerned that the insurance policy does not provide him or her with adequate protection for this lawsuit. The Attorney General of Canada and two RCMP officers were ordered by the Quebec Court of Appeal to pay $400,000 in punitive damages after they published and disseminated false information about a Laval couple who were wrongly charged in Canada’s first human trafficking case. By accepting this notice and continuing to browse our website you confirm you accept our Terms of Use & Privacy Policy. Although no rule prohibits punitive damag-es in negligence, the authorities are few and cautious. The plaintiff appealed from that decision. It requires an “actionable wrong” in addition to the breach of contract. As the term implies, “punitive” damages are meant to punish the offending party rather than to compensate the plaintiff. (i.e. For example, in Georgia 75 percent of any punitive award is to be paid to the Georgia State Treasury. Like so many other states, the issue may be more complex and less clear than it is sometimes portrayed. The allegations of intentional conduct seeking punitive damages, however, are not covered and there is no obligation on the part of the insurer to defend. A hard market. Your email address will not be published. Canadian courts are generally careful in exercising their discretion to award these damages, which are an exception to the time-honored principle that civil damages seek to compensate the victim. Historically, punitive damages were not available in Quebec civil law but are now provided for in certain legislation. Damages awarded in a civil lawsuit in order to punish wrongdoing of a greater culpability than simple negligence, without regard to compensating the plaintiff’s actual loss. The Whitens rented a nearby cottage and Pilot paid the rent for a few months and then stopped without giving notice to the Whitens or the adjuster. Wawanesa Mutual Insurance Co.2 and moving on to more recent decisions in which claims for aggravated or punitive damages were made, a review of the caselaw reveals that the courts remain fairly conservative in their approach to such claims, and that the upper end of punitive damages established in Whiten v. This is an unsettled area of law in Canada. The Ontario Court of Appeal, with Justice Laskin dissenting, allowed the appeal in part by substituting the sum of $100,000 for the punitive damages award. The claim for punitive damages was advanced on the basis that Canada Life acted so inappropriately punitive damages were required. As the term implies, “punitive” damages are meant to punish the offending party rather than to compensate the plaintiff. As an adjunct to the fundamental compensatory basis of personal injury damages awards, Canadian courts can also make non-compensatory awards in the form of exemplary or punitive damages in circumstances warranting censure and punishment of the defendant.2 Insureds may even be willing to pay a small additional premium for this added protection and peace of mind. Punitive damages Allianz Global Corporate & Specialty launches U.S. cyber unit, Exclusion clause for ‘conversion’ in comprehensive auto policy ‘does not come close’ to being easily intelligible: Court, Aspen reports net income of US$76.8 million for Q2 2017, How the pieces of the puzzle fit together during a catastrophe. The table below shows the insurability of punitive damages by state. Stipulates that the Supreme Court of Canada decision on the grounds that spreading the risk of punishment for misconduct. Term implies, “ punitive ” damages are concerned, Canadian courts usually be! 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