Plaintiff Awarded $150,000 in Punitive Damages and $10,000 in Aggravated Damages in Wrongful Denial of Long-Term Disability Claim: Fraser v. Fenchurch General Insurance Company, 2022 ONSC 6222

Written By: Lindsay Charles and Cody Malloy, Student-at-Law

Justice Leibovich released this noteworthy judge alone trial decision on November 2, 2022 regarding a disputed long term disability (LTD) benefit denial.  The Defendant insurer denied the Plaintiff’s long term disability claim but failed to follow the recommendation of the independent medical assessor that the insured should be psychologically assessed.  The Plaintiff was awarded $150,000 in punitive damages and $10,000 in aggravated damages.

The only issue at this trial was extra-contractual damages.  The Plaintiff, Ms. Fraser, stopped working in March of 2017 due to severe pain arising from previous health issues (fibromyalgia, heart attack, knee surgery).  The Plaintiff was seen by an independent medical assessor who found nothing physically that would prevent the Plaintiff from returning to work but recommended a psychiatric assessment to determine if the Plaintiff had psychological impairments.  The Defendant denied the Plaintiff’s claim in November of 2017 without conducting a psychiatric assessment.  The Defendant testified that they did not obtain the psychiatric assessment because that recommendation was contingent on there being evidence of a mental illness disorder.  The Defendant’s position was that there was no claim indicating any mental illness disorder.  In essence, the Defendant was going to conduct the psychiatric assessment only if Ms. Fraser appealed the denial.

After the Plaintiff initiated this action, both sides retained psychiatric experts who agreed that the Plaintiff could not return to work.  The Plaintiff’s psychiatric expert diagnosed her with various long standing psychological impairments and noted how fibromyalgia (one of the Plaintiff’s physical health issues) also has a related psychiatric disorder since it is a form of chronic pain.  The Defendant’s psychiatric expert’s report was consistent with the Plaintiff’s.

In September of 2020, the Defendant granted the Plaintiff long term disability retroactively, but the Plaintiff maintained the action because she felt the initial denial was done in bad faith.  The Plaintiff claimed bad faith based on the following four submissions:

  • The application as it was originally submitted should have been approved
  • The application was wrongfully denied based on incomplete information since the Defendant did not follow the independent medical examiner’s advice to obtain a psychiatric assessment
  • The Defendant should have reassessed the claim when they were informed the Plaintiff’s application for Canada Pension Plan disability benefits (CPPD) was approved
  • The Defendant’s conduct at trial was inappropriate

The Defendant countered there was no breach of their duty of good faith in that:

  • They acted on the claim in a timely manner
  • They retroactively gave the Plaintiff benefits
  • They had no obligation to follow the advice of the independent medical examiner
  • The application for CPPD was different than the one before them, and that they only received the file from Plaintiff’s counsel after it had already decided, based on the fresh psychiatric evidence, to grant the claim

With respect to the aggravated damages claim, the Defendant countered that the Plaintiff suffered no financial loss, and the evidence of mental distress was only minor.

For aggravated damages, the court noted that damages related to mental distress should be recoverable where they are established by the evidence and shown to have been within the reasonable contemplation of the parties at the time the contract was made.  An award for punitive damages requires a finding of bad faith by the insurer.  The court explained that punitive damages are non-compensatory and are designed to address the purposes of retribution, deterrence, and denunciation.

The court focused its analysis on what the Defendant knew at the time the Plaintiff originally filed her application in March of 2017.  Justice Leibovich dismissed the Plaintiff’s argument about CPPD because the Defendant denied their claim based on different information contained in the CPPD application.  Furthermore, Justice Leibovich found nothing wrong with the Defendant’s conduct at trial and dismissed the Plaintiff’s fourth position.  The court was also of the position that the Defendant was not in the wrong for initially seeking an independent medical assessment.  As such, the Defendant was not obligated to accept the Plaintiff’s claim as originally submitted, and therefore dismissed the Plaintiff’s first position.

Where the court found in favour for the Plaintiff was with regards to the Defendant ignoring the recommendation of the independent medical assessor to conduct a psychiatric evaluation.  Justice Leibovich reasoned that although the Defendant had no obligation to follow the independent medical assessor’s recommendation, the requirement of good faith requires the Defendant to fairly investigate the claim and assess the claim in a balanced and reasoned manner.  By ignoring this recommendation, Justice Leibovich felt that the Defendant acted unreasonably.

The court highlighted how the Defendant claimed they did not conduct the psychiatric assessment because they do not take them lightly and they are invasive.  However, the Defendant was more than willing to conduct the assessment had the Plaintiff appealed the denial.  At paragraph 98 in the decision, Justice Leibovich described the Defendant’s choice to not obtain a psychiatric assessment as “high handed, a marked departure from the conduct one would expect in the situation and designed to take
advantage of Mrs. Fraser’s vulnerable state and to avoid paying the claim.”  Justice Leibovich found that punitive damages were appropriate based on the conduct of the Defendant.

In awarding the Plaintiff aggravated damages, the court emphasized how the Plaintiff had to wait three years for long term disability benefits and the Plaintiff’s loss of income undoubtedly caused her anxiety.

McLeish Orlando’s disability lawyers have a long history of holding insurance companies accountable when they deny legitimate claims or unjustly terminate benefits before the policy holder is capable of returning to work. We force disability insurers to live up to their obligations and honor the terms of their policies. We have represented physicians, teachers, lawyers, business executives and many others who either have an any occupation policy or who have purchased a lifetime “own occupation” option for their disability test for entitlement.  Our lawyers have forced long term disability insurers across the province to:

  • Pay all arrears of payments with interest and reinstate terminated payments; or
  • Pay a negotiated, lump sum cash-out of all past and future payments

If your long term disability claim has been denied, contact McLeish Orlando’s disability lawyers for a free consultation.  Help is a phone call away.

Lindsay Charles


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