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Insurance contract to pay accident benefits not “a contract for peace of mind”: Ontario judge


January 19, 2010   by Canadian Underwriter


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The daughter of a woman who was injured in an auto collision and subsequently denied accident benefits is not entitled to collect benefits under her mother’s policy based on the loss of her mother’s care and guidance, the Ontario Superior Court has ruled.
In Mirjagic v. State Farm Mutual Automobile Insurance Company, a daughter (the plaintiff) and her mother were involved in an automobile collision. State Farm denied benefits to the mother.
The daughter pleaded that the insurer’s denial of the benefit caused the mother to suffer a total physical and mental breakdown.
As a result, the insurer’s decision had caused the daughter to lose her mother’s care and guidance at the age of 11. This further caused the daughter to be put in foster care, compromising her education and ruining her life, Hamilton trial lawyer Lou Ferro argued before the court on behalf of the daughter.
Citing s. 270.5(a)(ii) of the Insurance Act, a motions judge held the insurance company could be liable to the mother for damages for mental distress for breach of contract, because this was a contract for peace of mind.
And likewise, since the daughter was a dependent, she was also a party to the contract for peace of mind, the motions judge found.
But Ontario Superior Court Justice James Ramsay disagreed, saying “there is good reason to doubt the correctness of the proposition that this was a contract for peace of mind.
“The contractual provisions in question were imposed on the parties by statute,” the judge wrote. “Furthermore, even assuming that this was a contract for peace of mind, there is good reason to doubt the correctness of the proposition that the plaintiff was in the same position as her mother.”
The judge acknowledged there is a tort of negligence for infliction of psychiatric damage, but “the plaintiff has not pleaded mental distress to herself that amounts to a recognized psychiatric illness.”


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