Arbitrator finds special award against insurer despite finding absence of malicious intent

Despite finding that an insurer did not act maliciously, an Ontario arbitrator nevertheless ordered a special award against the insurer for unreasonably withholding benefits and failing to consider the consequences of discontinuing benefits to a “vulnerable” low-income immigrant.
In making the special award, Financial Services Commission of Ontario (FSCO) arbitrator John Wilson found the insurer’s process broke down when it discontinued its interim weekly income replacement benefits to Sivakumaru Sinnapu.
But the breakdown in process, in and of itself, was not sufficient to warrant a special award, Wilson added.
In his decision in Sivakumaru Sinnapu and Economical Insurance Company, Wilson said the “consequences of [the insurer’s] misguided termination” led him to order a special award on the high end of the scale.
“Notwithstanding that there was no direct evidence of malice in Economical cutting Mr. Sinnapu adrift, I have no hesitation in finding that the serious repercussions suffered by Mr. Sinnapu, including undue stress, would have been foreseeable by Economical had they read the totality of the evidence available to them at the time benefits were terminated,” Wilson found.
Sinnapu, a Montreal fishmonger, was involved in a motor vehicle accident in 2006. He applied for and received accident benefits from The Economical.
The Economical terminated his benefits after obtaining surveillance of Sinnapu seemingly walking without encumbrance in a mall setting.
The insurer also contended in an arbitration hearing that Sinnapu’s inability to work may in fact have been related to a serious injury that he sustained in a fall about a decade before his motor vehicle accident.
Ruled inadmissible at a previous hearing, the video surveillance evidence did not support The Economical’s position that Sinnapu was capable of continuing his work, which required heavy lifting, the arbitrator found.
Wilson found The Economical terminated Sinnapu’s benefits unreasonably, because the insurer did not do enough to reconcile the opinion of its chief expert with contradictory assessments it obtained from other medical experts.
Wilson said this breakdown in the insurer’s process, which did not occur because of malicious intent, was not enough on its own to warrant a special damages award.
But the fact that The Economical knew its termination would leave Sinnapu vulnerable as a low-income immigrant with no source of income replacement did merit a special award, Wilson found.
“Mr. Sinnapu’s fragile economic roots in Ontario and his position as an immigrant inevitably made him more vulnerable to arbitrary actions by his insurer,” Wilson found.