Damage Control

Does a $5-million punitive damage award against two insurance companies sting? Perhaps, not as much as one would think.

“It’s still pocket change as far as I’m concerned,” Alfred Kwinter, a partner at Singer, Kwinter in Toronto, commented during the Oatley-McLeish Guide to Motor Vehicle Litigation, a seminar presented by the Law Society of Upper Canada over two days in April.

Speaking to an audience of mostly plaintiff and defendant lawyers, Kwinter was referring to the record punitive damage award made in March by a judge of the Saskatchewan Court of Queen’s Bench. Sitting without a jury, Justice Murray Acton found in favour of Luciano Branco against two insurance companies following the plaintiff’s work-related injury while employed overseas by a Saskatchewan company.

American Home Insurance Company, the insurer that provided workers’ compensation equivalent insurance to Branco, was ordered to pay $1.5 million in punitive damages and $150,000 in aggravated damages. For its part, Zurich Life Insurance Co. Ltd., the plaintiff’s disability insurer, was ordered to pay $3 million in punitive damages and $300,000 in aggravated damages.

It remains to be seen whether or not the punitive damage award in Branco will be upheld on appeal, but “the case clearly demonstrates the court’s frustration with the insurance companies abusing their financial advantage to force the insureds to settle earlier and for less than they deserve,” Kwinter argued in a paper that accompanied his presentation.

How easy is it to get punitive damages, or punies as Kwinter calls them? Perhaps, tougher than one would think.

“It ain’t easy at all. It’s very, very tough,” Kwinter told seminar attendees.

Explaining the purpose of punitive damages is deterrence, Kwinter distinguished between punitive damages and aggravated damages. He said the latter are compensatory, while characterizing the former as “a windfall. They are not compensation,” he added.

Should a person plead punitive damages? “My answer to that question is, ‘Yes, plead them.'” Plead, especially, in cases involving insurance policies related to life insurance, disability claims and fire claims, Kwinter advised, “because you don’t know what evidence is going to come out.”

Without pleading punitive damages, he noted it is likely questions about how a file was handled at the underwriting, adjuster or claims level will be stopped. 

HISTORY LESSON

After the Supreme Court of Canada upheld a $1-million punitive damage award in the 2002 decision, Whiten v. Pilot Insurance Co. – which involved the claim of a plaintiff whose home and its contents were destroyed by fire – “plaintiff counsel were dancing in the street,” joked Kwinter. “We have a million dollars and we figure all awards after that are just going to fall into place and we’re going to see million-dollar awards all over the place. Well, it didn’t happen.”

That said, he suggested “if you want punitive damages, always, always, always file a jury notice. Judges are much less inclined to give you punitive damages, notwithstanding the recent decision that came out of Saskatchewan.”

Punitive damages have been awarded where there is evidence an insurance company has acted in a harsh and outrageous manner, and/or has taken an unnecessarily adversarial approach to a plaintiff, Kwinter wrote in his paper. “They are less likely to be awarded where an insurer has obtained valid medical information on which it chooses to rely.”

Citing McIntyre v. Grigg, released in 2006, Kwinter said this “key case” illustrates the difficult battle that plaintiff counsel faces in obtaining a significant punitive damage award in a motor vehicle case. In McIntyre v. Grigg – which involved a pedestrian struck by a car driven by a drunk driver – the Court of Appeal for Ontario ultimately reduced the $100,000 jury award of punitive damages to $20,000, Kwinter reported.

Kwinter – who acted for the plaintiff husband and wife in a case in which the insurer alleged arson, but failed to prove it – said he believes the $350,000 punitive damage award in Plester v. Wawanesa Mutual Insurance Co., a 2006 ruling by Ontario’s appeal court, is the highest award against an insurer upheld by the province’s high court.

Commenting on the Supreme Court of Canada’s 2006 decision, Fidler v. Sun Life Assurance of Canada, on appeal from British Columbia’s Court of Appeal, Kwinter suggested the ruling “really set us back.”

Kwinter noted that Fidler had been cut off benefits for five years, based only on surveillance, and the insurance company paid all of her benefits just before trial. She proceeded to trial in a bid to obtain punitive and aggravated damages.

Kwinter commented disapprovingly on Fidler, noting that what once was regarded as outrageous and high-handed and callous had been watered down to “extremely troubling,” he said, using language within the decision.

JURISDICTIONAL MATTERS

The country’s highest court injected a greater level of certainty around jurisdictional analysis with two recent companion decisions released in 2012.

At the seminar, John Adair, a partner at Adair, Morse LLP in Toronto, spoke about jurisdiction and the effect of Van Breda v. Club Resorts Ltd. and Charron v. Club Resorts Ltd. Adair was one of three lawyers who was acting on the appeal for the plaintiffs in the Charron case.

Both cases involved an Ontario resident who was injured while in Cuba and who commenced an action in Ontario against parties in Ontario and Cuba. Also in both cases, the decision of the Ontario court to assume jurisdiction was upheld by the Supreme Court of Canada.

The high court came down firmly on the side of creating more predictability and certainty in jurisdictional analysis through the creation of presumptive connections, Adair reported. In his paper accompanying his presentation, he noted that in a case concerning a tort, the following factors are presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute:

(a) the defendant is domiciled or resident in the province;

(b) the defendant carries on business in the province;

(c) the tort in question was committed in the province; and

(d) a contract connected with the dispute was made in the province.

The presumption that arises from the presence of any of those factors is rebuttable, Adair pointed out. For example, where the connecting factor is a contract made in Ontario, the presumption can be rebutted by showing that the contract had little or nothing to do with the subject matter of the litigation.

“If you can’t fit yourself within one of those four categories, you’re out of luck,” Adair told seminar attendees.

The court indicated the list is not closed, “but it’s not a matter of cobbling together a few other facts. You would have to find a new analogous ground on which to establish jurisdiction, which I think is unlikely in the short term.”

Adair noted the court chose not to comment on the “doctrine of the forum of necessity,” which had been endorsed by the Court of Appeal for Ontario. Explaining the doctrine, Adair suggested “even though there’s no sufficient connection” to Ontario, if a person is critically injured and returns to the province for treatment, the argument can be made that it is necessary for the person to litigate in Ontario.

“Where the line will get drawn on the extent of the injury that’s necessary to establish the ‘forum of necessity’ is something that remains to be seen, but I think will be very important to personal injury actions,” Adair added.

Warning that the bar for establishing jurisdiction is “now much higher than it used to be,” he suggested the high court “has basically said you can’t just take basic fairness into account in deciding whether to assume jurisdiction.”

In cases involving accidents in foreign jurisdictions, Adair said there are two primary tactics plaintiff lawyers are using to get their clients w
ithin presumptive connecting factors: adding Ontario-resident parties; and adding underinsurance claims, which involve a contract connected with the dispute and made in Ontario.

Referring to three recent Ontario jurisdiction decisions that involve motor vehicle accidents in New York State, Adair commented in his paper that the decisions are inconsistent among themselves and, in his view, “inconsistent with Van Breda, thus demonstrating that courts continue to struggle with this type of case.”

In one decision from last year, Cesario v. Gondek, a wife sued her husband in order to create an Ontario defendant “which was a purely tactical move that had no merit whatsoever because the New York defendant was not contesting liability – it was a rear-end accident,” Adair said.

He recommended, as a first step, to provide a simple “Yes” or “No” to the question of whether or not a presumptive connecting factor, such as an underinsurance claim, exists. It would then be necessary to consider the strength and importance of that aspect of the case and decide if the defendant could successfully rebut the presumption.

If counsel is willing to analyze the real substance of the facts on which they will be relying, they should avoid fighting hugely expensive jurisdictional motions that are not going to clear the hurdle, Adair suggested.