Fidler vs. Sun Life Assurance Co.
Background
In 1990 Ms. Fidler became ill with a liver infection and then developed ME/CFS and FMS. Ms. Fidler began receiving disability benefits from Sun Life Assurance Company in January 1991. Even though there was no new medical evidence indicating that Ms. Fidler was able to work, Sun Life informed Ms Fidler in a letter dated May 12, 1997 that her disability benefits were being terminated "as a result of a non medical investigation revealing that your activities are incompatible with your alleged disability".
Ms. Fidler commenced legal action against Sun Life in 1999. One week before the trial was to begin in April 2002, Sun Life "offered to reinstate Ms. Fidler's benefits and to pay all outstanding amounts along with pre-judgment interest." Therefore, the trail only dealt with entitlement to aggravated and punitive damages.
Trial Judgment
Ms. Fidler represented herself. The trail judge held that a disability insurance contract is a "peace of mind" contact and therefore damages can be awarded without separate actionable conduct (Warrington). The trial judge awarded Ms. Fidler $20,000 in aggravated damages for the mental distress caused by Sun Life's breach of contract resulting in the five year loss of disability benefits. The judge determined that there was insufficient evidence that Sun Life had acted in bad faith and dismissed Fidler's claim for further punitive damages.
Court of Appeal - B.C.
Sun Life appealed aggravated damages; Fidler cross-appealed denial of punitive damages. The Court of Appeal upheld that a disability insurance contract was a "peace of mind" contract (Warrington) and that additional compensation may be awarded if the insured establishes that the breach of such a contract caused mental distress. The appeal judges unanamously upheld the award of $20,000 to Ms. Fidler for mental distress.
The Court of Appeal judges were divided regarding whether or not Sun Life's conduct was severe enough to be considered as "bad faith". The majority held that denial of long-term disability benefits for more than five years was conduct that fell short of the duty of "good faith". The Court of Appeal awarded Ms. Fiddler punitive damages in the amount of $100,000.
Faith Hayman, Fidler's lawyer at the Court of Appeal, has kindly given up permission to post her article in which she discusses the punitive aspects of bad faith claims. I should be noted that this article was written prior to the Supreme Court trial.
Bad Faith 2006
Supreme Court of Canada Decision - June 29, 2006
Sun Life sought to have both the awards for mental distress and punitive damages set aside.
Mental Distress
Supreme Court of Canada Judgment upheld the $20,000 awarded to Ms. Fidler for mental distress due to being denied long-term disability benefits for five years by Sun Life Assurance Company. This establishes disability contracts as "peace of mind" contracts that, when inappropriately denied, can cause mental distress.
Punitive Damages
The Supreme Court dismissed the claim for $100,000 awarded Ms Fidler for punitive damages by the B.C. Court of Appeal. Because the trial judge did not find Sun Life's conduct punishable, the Supreme Court held that the grounds for bad faith were not strong enough to change the trial judge's decision. "Sun Life's conduct was troubling, but not sufficiently so as to justify interfering with the trail judge's conclusion that there was no bad faith."
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