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In 1995, I was a student gathering witness statements as part of the Truth and Reconciliation Commission process in South Africa. The South African Truth and Reconciliation Commission (TRC) was a government body set up to address violence and human rights abuses that had been perpetuated during the Apartheid era.

The experience was educational but also overwhelming and heart wrenching. The process of documenting and cataloging the multitudinous horrors that were experienced, etched itself deeply into my psyche.

It was a process that propelled me into the practice of law and the process that cemented my desire to represent the “Davids” against the “Goliaths” of this world. 

Over time, I found myself drawn to the practice of long-term disability law, which has satisfied my intense desire to fight for a levelling of the playing field. This has been made possible largely due to the ability to hone in on the “duty of good faith” that is owed by an insurance company to an insured individual.

What is the Duty of Good Faith?

Whiten v. Pilot Insurance Co., is a leading Supreme Court of Canada decision in which the Supreme Court held that an insurance company has a contractual obligation to deal with policyholders “in good faith”.

In 702535 Ontario Inc. v. Non-Marine Underwriters Members of Lloyd’s London [702535], the court elaborated as follows:

“The duty of good faith also requires an insurer to deal with its insured’s claim fairly. The duty to act fairly applies both to the manner in which the insurer investigates and assesses the claim and to the decision whether or not to pay the claim. In making a decision whether to refuse payment of a claim from its insured, an insurer must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured’s economic vulnerability or to gain bargaining leverage in negotiating a settlement. A decision by an insurer to refuse payment should be based on a reasonable interpretation of its obligations under the policy…”

In Asselstine v. The Manufacturers Life Insurance Co., the court held that:

“…The defendants, and insurance companies generally, cannot expect to be able to disregard compelling medical and other information while placing undue emphasis on evidence aligned only with their interests; and rely on a report based on flawed premises generated and selectively disclosed by them, meanwhile steadfastly maintaining an unsupportable position, and be seen as balancing fairly the interests of both the insured and the insurer…”

The “duty of good faith” is a broad topic and much has been written on it.

This blog, however, will focus on three recent decisions emanating from British Columbia in which the courts determined that an insurer acted in bad faith or breached the duty of good faith.

All three cases deal with the same insurance company.

Godwin v. Desjardins Financial Security Investments Inc.

Vanessa Godwin was a paralegal insured under a group disability policy offered through the Canadian Bar Association. In June 2011, she became unable to work due to mental health issues. Ms. Godwin applied for and received disability benefits initially. Her benefits were terminated in October 2013 after she underwent an Independent Medical Examination.

Ms. Godwin’s claim was handled by Desjardins claims specialist, Ms. Da Silva. In the course of the adjudication, Ms. Da Silva received a report from Ms. Godwin’s family physician and from her a social worker she had been seeing for counselling indicating that Ms. Godwin was not ready to return to work due to ongoing mental health issues. Ms. Da Silva referred the file to an internal medical consultant for review. He concluded that Ms. Godwin’s situation was dominated by occupational/motivational factors rather than by a severe and limiting psychiatric impairment.

On January 31, 2012, Ms. Da Silva wrote to Ms. Godwin advising:

“Having completed our review of your claim, we have found that there is no objective medical evidence that supports an ongoing totally disabling condition. Based on these findings, our decision is to deny your claim for Long Term Disability Benefits….we are unable to confirm that your condition is severe enough to cause significant and prolonged psychiatric impairments whereby the performance of your own occupation would be medically contraindicated…”

The court felt that:

  1. The definition in the policy did not require there to be “significant and prolonged psychiatric impairment”;
  2. There was objective medical evidence in the form of a GAD-7 (Generalized Anxiety Disorder) Score of 17 indicative of severe anxiety;
  3. There was ample evidence to make a determination that Ms. Godwin’s condition was severe enough for the performance of her own occupation to be medically contraindicated;
  4. The issue of motivation was misconceived;
  5. There was no basis for Desjardins determining that Ms. Godwin was medically fit to resume her former duties; and 
  6. Overall impression of the adjudication and denial letter was of a claims examiner looking for reasons to deny coverage.

Ms. Godwin appealed the denial of her claim. A report was submitted by her treating psychiatrist who opined that her symptoms were significant and she was unable to return to any type of work. The file was sent to the same internal medical consultant for review who again concluded that there were occupational and motivational factors.

Ms. Da Silva denied the appeal again stating that Ms. Godwin’s condition was not “severe enough” to have caused “significant and prolonged psychiatric impairment”.

Ms. Godwin provided a further report from her psychiatrist which was again reviewed by the internal medical consultant who again raised the possibility of motivational factors. In a letter dated November 23, 2012 Ms. Da Silva advised Ms. Godwin that her claim was approved retroactive to 2011.

After requesting a progress report from Ms. Godwin’s treating psychiatrist in 2013, Ms. Da Silva arranged for an Independent Medical Examination to be conducted. On the basis of the Independent Medical Examination, Desjardins terminated benefits again, only to reinstate them 6 days before trial.

The court was critical of the independent medical report which it felt had gaps in the reporting of Ms.Godwin’s history and was not  a balanced report. 

The court found that there was a breach of the duty of good faith on the basis, amongst other things, that Ms. Da Silva of Desjardins:

  1. Failed to analyze and weigh evidence placed before her
  2. Imported or applied tests for disability beyond those set out in the Policy and made findings not supported by the evidence
  3. Concluded without any foundation that motivational factors were dominating Ms. Godwin

Greig v. Desjardins Financial Security Life Assurance Company

Dennis Greig was injured in a motor vehicle accident on November 15, 2011. He returned to work thereafter but was subsequently injured on the job and no longer able to work after January 24, 2014. He applied for long term disability benefits and his benefits were initially approved. Benefits were then terminated by Desjardins on June 19, 2015.

In terminating benefits, the court found that Desjardins:

  1. Failed to acknowledge, investigate or support Mr. Greig’s psychological/emotional symptoms, despite overwhelming evidence of the psychological and emotional aspects of Mr. Greig’s ongoing issues;
  2. Insisted that it required objective evidence of disability when nothing in the Plan created that standard of proof (the court noted that complaints of depression are always subjective there are rarely objective findings); 
  3. Improperly focussed on secondary gains relying on second-hand hearsay information rather than comments from Mr. Greig’s employer that he got a lot of work done and was someone his employer could count on; 
  4. Wrongfully alleged that Mr. Greig did not pursue appropriate treatment, despite medical evidence that he followed all medical recommendations he had received and made best efforts to participate in rehabilitation; and
  5. Failed to take basic steps to adjudicate the claim such as adjudicating the appeal or seeking a medical examination (the court confirmed that the commencement of litigation does not put a stop to the processing of appeals).

The court found that there was an egregious breach of Desjardins’ duty of good faith to Mr. Greig.

Gascoigne v. Desjardins Financial Security Life Assurance Company

Nadine Lydia Gascoigne became unable to work as an adjuster for the Insurance Corporation of British Columbia on September 19, 2016. She submitted a claim for long term disability benefits to Desjardins which was initially approved. Her benefits were denied by Desjardins on January 31, 2017.

The court found that Desjardins:

  1. Consistently disregarded information from Ms. Gascoigne that her doctor had not cleared her for a return to work and instead proceeded on the unsubstantiated premise that she had “repeatedly” refused to accept modified duties;
  2. Did not seek clarification from Ms. Gascoigne’s doctor about her restrictions and limitations and whether a return to work was supported;
  3. Posed more detailed questions to its internal medical consultant than to her treatment providers;
  4. Relied upon the internal medical consultant’s opinion despite the fact that he had never examined Ms. Gascoigne and some of his opinions and observations were patently wrong;
  5. “Cherry-picked” facts presented to the internal medical consultant that reflected poorly on Ms. Gascoigne and in some instances were inaccurate;
  6. Allowed improper and irrelevant considerations into the claims process;
  7. Justified the denial of Ms. Gascoigne’s claim on the basis of “insufficient medical information” despite the fact that there was information identifying her condition and indicating her limitations and the only contradictory medical information came from the internal medical consultant which was of limited or no value.

The court found that Desjardins had breached its duty of good faith.

What Happens When There is a Breach of the Duty of Good Faith by the Insurer?

Once it has been determined that there has been a breach of the duty of good faith, the court will go on to determine whether extra-contractual damages are an appropriate award in the circumstances of the case. Not all cases result in an award of extra-contractual damages and it is dependent on the evidence presented in the case and how that is interpreted by the court.

What are Extracontractual Damages?

There are generally two types of extracontractual damages that are typically sought:

  1. Aggravated Damages (also referred to as “damages for mental distress”); and
  2. Punitive Damages

Very briefly, aggravated damages are awarded to compensate an individual who has suffered (emotionally and financially) as a result of the insurer’s conduct, while punitive damages are awarded in order to punish the insurer for reprehensible conduct.

What was Awarded in the Desjardins Trilogy?

  1. Godwin v Desjardins
    • Aggravated Damages – $30,000
    • Punitive Damages – $30,000
  2. Greig v Desjardins
    • Aggravated Damages – $50,000
    • Punitive Damages – $200,000
  3. Gascoigne v Desjardins
    • Aggravated Damages- $30,000
    • Punitive Damages- claim dismissed on the basis that Desjardins’ conduct was not sufficiently “high-handed, malicious, arbitrary or highly reprehensible.”

Although extra-contractual damages awards are often difficult to predict and there are a number of decisions over the years where extra-contractual damages have not been awarded, it appears that for the time being at least, the conduct of long term disability insurers is being heavily scrutinized by our courts.  This is truly a welcome development for those dedicated to the fight for justice!

If you feel that you have not been treated fairly by your long term disability insurer and would like to discuss your long-term disability claim with an experienced lawyer, MK Disability Lawyers LLP are experienced lawyers dedicated exclusively to the practice of disability insurance litigation. We would be happy to provide you with a free consultation.  Please contact us online or by calling us at 844-697-4600.

The preceding is not intended to be legal advice.  This blog is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice.  By using this blog, you understand that there is no solicitor-client relationship between you and the blog publisher.  The blog should not be used as a substitute for competent legal advice from a licensed lawyer in your jurisdiction.  If your disability claim has been denied and you require legal advice, contact a lawyer specializing in disability law.