Can I make my disability insurer pay for the way they treated me?
When somebody comes to see me after an insurer has mistreated them, the first question is almost never about the benefits. It is some version of “can anything be done about the way they treated me?” It is a fair question and people deserve a straight answer, so here it is, along with the two things that get mixed up every single time.
Damages for mental distress
The first thing you might be owed is compensation for what the whole ordeal did to you, over and above the benefits themselves. These are usually called damages for mental distress, or sometimes aggravated damages, and the thinking behind them is fairly simple once somebody explains it.
You did not buy a disability policy as an investment. You bought it so that if the worst happened you would not have to worry about money on top of everything else. Peace of mind is the actual product. So when an insurer takes that away, the anxiety and the sleepless nights are not some unforeseeable side effect of a broken contract. They are the very thing you paid to avoid.
That is more or less what the Supreme Court of Canada said in a case called Fidler and Sun Life back in 2006, and it is the reason this door is open at all. The court upheld an award of $20,000 for mental distress against a disability insurer. It is not a fortune, and I would not want anybody reading this to think it is, but it is real and it is recoverable.
Punitive damages, which are a different animal
The second thing people are asking about, usually without knowing the name for it, is punitive damages. These have nothing whatsoever to do with your losses. They are not there to compensate you. They are there to punish the company and to make the next company think twice.
Because of that, the courts keep them for conduct that is genuinely beyond the pale, not merely for a claim that was handled badly. The case most people have heard of is an Ontario one, Whiten and Pilot, which went all the way up to the Supreme Court of Canada. A lot of people treat it as setting a one million dollar ceiling. The court never actually said that, although I understand why it gets read that way.
Being wrong is not the same as acting badly
Here is the part that is hardest to explain across a desk, and the Fidler case I mentioned above explains it better than I can.
In the same decision where the Supreme Court upheld the $20,000 for mental distress, it threw out an award of punitive damages. The Court of Appeal had added $100,000 on the basis that the insurer had acted in bad faith. The Supreme Court said the trial judge had found no bad faith, that finding should be left alone, and without it there was no foundation for punishing anybody.
So an insurer can be wrong, be ordered to pay you everything you were owed, and still owe nothing at all for how it behaved along the way. The law asks how they got it wrong, not simply whether they did. That distinction decides a great many of these arguments, and we get a chance to examine the insurance adjuster during the lawsuit and question them about why they made the decisions that they did.
A word of caution about the big numbers you read about
Every few years a case comes along with a number in it that makes the newspapers, and people arrive in my office having read about it. It is worth knowing what tends to happen to those numbers afterwards.
The one I am asked about most often involved a 52 year old welder in Saskatchewan whose benefits two insurers refused to pay. In 2013 a trial judge awarded punitive damages in the millions, and it was reported across the country as a turning point. On appeal in 2015 it came down hard: the punitive damages against one of the insurers were reduced to $175,000, and the mental distress award from $150,000 to $15,000. The Supreme Court of Canada declined to hear it any further.
I am not telling you that to be discouraging. The trial judge was not wrong to be angry about how that man was treated, and the appeal court never said he was. But the appeal courts have a reasonably settled view of what these awards should look like, and it is a good deal more modest than the headlines. Anyone who tells you otherwise is selling something.
What I would actually tell you
In my experience disability insurers in Ontario know perfectly well that most people will not appeal a denial, and that most of those who do will take less than they are entitled to rather than keep fighting. The arithmetic still works for the insurer even when they lose one now and then. That is the honest backdrop to all of this.
So I would not have you pin your hopes on a punitive award. They are rare, they get trimmed, and a case run as a crusade is usually a case run badly. What I would have you do is keep everything. Every letter, every phone call and the date of it, every form they made you complete for the second time, every assessment they sent you to and what came back. If they put you under surveillance after your own doctor had already confirmed you could not work, that is worth knowing about.
Conduct leaves a trail, but the trail gets built while your claim is running, not afterwards when somebody goes looking for it. If you think your insurer has crossed a line, say so to your lawyer early rather than at the end.
