The Supreme Court of Canada has restored a jury award of $1 million in punitive damages made against Pilot Insurance Co. The Whiten v. Pilot case has been closely watched by insurers due to the magnitude of the punitive award. A legal source serving the insurance industry says the Supreme Court’s ruling has set a new precedent in the application of punitive awards in Canada. Insurers will have to increase their contingency reserves to deal with such costs, he adds, with future punitive court awards expected to rise in both number and value. Daphne and Keith Whiten initially sued Pilot for $125,000 in punitive damages after the insurer refused a claim for the loss of their house due to fire. The insurer alleged that the couple had destroyed their own home with the intent of committing insurance fraud. A jury then awarded the Whiten couple an amount of $1 million in punitive damages. This outcome was appealed by Pilot, with the result that the Ontario Appeal Court reduced the damages to $100,000 in 1999. In response, the Whitens cross-appealed the Ontario court decision, resulting in the latest $1 million outcome. In addition to the $1 million in punitive damages, the Whitens also received $320,000 in court costs and $345,000 for the loss of their house. In a statement released after the Supreme Court ruling, Pilot’s president Stuart Kistruck says that, while the company recognizes the decision of the court, it is also disappointed with the fact that the punitive award was raised back to the level previously determined by a trial jury. "To maintain the integrity of the insurance business for both policyholders and the industry, it is the duty of every insurer to verify claims made. We believed in this case [Whiten] that there was sufficient initial evidence to take the position that we did. We fear that the court’s decision on this case may have ramifications on future cases of insurer/policyholder resolutions that will have a very negative effect on what is a very smooth functioning insurance system in Canada, for all sides."