Indexed As: Branco v. American Home Assurance Co. et al. Saskatchewan Court of Queen's Bench Judicial Centre of Saskatoon Acton, J. March 21, 2013.

Transcription

1 Luciano Branco (plaintiff) v. American Home Assurance Company, Cameco Corporation, Kumtor Operating Company and Zurich Life Insurance Company Limited (defendants) (2006 Q.B.G. No. 267; 2013 SKQB 98) Indexed As: Branco v. American Home Assurance Co. et al. Saskatchewan Court of Queen's Bench Judicial Centre of Saskatoon Acton, J. March 21, Summary: Branco, at age 58, developed reflex sympathetic dystrophy in his right foot after two injuries while working as a welder for the Kumtor Operating Co. in Kyrgyzstan. He had not worked since March Branco started this action in He claimed that American Home Assurance (AIG) and Zurich Life Insurance wrongfully denied him disability and medical benefits, and that Kumtor and its parent company (Cameco) breached the employment contract by not providing disability and medical benefits. The issues included evidentiary and choice of law issues, whether AIG and Zurich breached the duty of good faith and fair dealing, whether Branco was entitled to aggravated damages or damages for mental distress, and whether punitive damages should be awarded. The Saskatchewan Court of Queen's Bench assessed punitive damages against Zurich in the amount of $3 million, and against AIG in the amount of $1.5 million. The court assessed aggravated damages against Zurich in the amount of $300,000, and against AIG in the amount of $150,000. Both AIG and Zurich failed to deal with Branco's claim in good faith. "The actions of AIG and Zurich establish a pattern of abuse of an individual suffering from financial and emotional vulnerability." Conflict of Laws - Topic 7245 Contracts - Choice of law - Insurance contracts - The pertinent insurance contract stated that Swiss law would be applicable to any disputes between the parties - The Saskatchewan Court of Queen's Bench held that Saskatchewan law was the appropriate law to apply - "There is a real and substantial connection to Saskatchewan. [The defendants] Cameco and Kumtor have head offices here. The contract of employment establishes use of Saskatchewan law and the workers' disability benefits are based upon Saskatchewan Workers Compensation Board benefits. Canadian courts do not apply foreign laws if the law in question is contrary to public policy.... For [the defendant] Zurich to argue that they should not be bound by a legal system which accepts punitive damages when it does substantial business in Canada, the United States, Britain and Australia, all of which recognize punitive damages, is unacceptable." - See paragraphs 102 to 112. Damage Awards - Topic 205 Injury and death - Psychological injuries - Mental distress (incl. nervous shock) - [See second Damage Awards - Topic 2412].

2 Damage Awards - Topic Exemplary or punitive damages - Breach of contract - The Saskatchewan Court of Queen's Bench assessed punitive damages against the defendant insurer AIG in the amount of $1.5 million - AIG was to provide monthly benefits to replace loss of income to the plaintiff, an injured welder under a workers' compensation peace of mind contract - AIG discontinued benefits for lengthy periods of time - AIG's actions continued for 18 months, then six months and then eight years - AIG was aware of the hardship it was inflicting upon the plaintiff - That was further reinforced by the numerous and expensive court applications made by AIG and its co-defendant throughout the many years of litigation - "The goal of punitive damages is deterrence. Insurers must discontinue exploiting the vulnerability of insureds in times of disaster. The court must also consider the fact that previous awards such as $60,000 in Sarchuk and $1,000,000 in Whiten appear to have done little or nothing to deter insurance companies from their actions." - See paragraphs 184 to 199. Damage Awards - Topic Exemplary or punitive damages - Breach of contract - The defendant Zurich's policy provided benefits for employees in the event of a non-work related disability - Zurich, for more than 10 years from the date of the plaintiff's accident, refused to make payments required monthly under the policy, even after receipt of independent medial reports establishing the plaintiff's disability as early as 2002, and the acceptance of the plaintiff's claim by their own claims department - Instead, Zurich and the other defendants coordinated "unconscionably low" offers of settlement based on "starving" the plaintiff into submission - An early offer insisted on deducting $9,000 in legal fees - Zurich made numerous court applications and was able to postpone payments due and owing under the policy until The plaintiff suffered financial and psychological pressure -The Saskatchewan Court of Queen's Bench assessed punitive damages against Zurich in the amount of $3 million - "It is hoped that this award will gain the attention of the insurance industry. The industry must recognize the destruction and devastation that their actions cause in failing to honour their contractual policy commitments to the individuals insured." - See paragraphs 200 to 216. Damage Awards - Topic Exemplary or punitive damages - Insurers -[See both Damage Awards - Topic ]. Damage Awards - Topic 2412 Aggravated damages - Insurers - The plaintiff, a "sought-after, highly trained" welder, initially hurt his foot during his shift in December 1999 and aggravated the injury in March He was not able to work after the second injury - The defendant AIG's insurance policy provided workers' compensation coverage - AIG failed to pay the plaintiff for months and years, then provided a lump sum payment - In December 2004, AIG discontinued payments permanently because the plaintiff refused to enrol in an inappropriate vocational retraining - The Saskatchewan Court of Queen's Bench assessed aggravated damages against AIG in the amount of $150,000 - The insurance policy was a peace of mind contract - AIG breached the contract in failing to continue payments to age

3 65 or a date to which the plaintiff was able to return to work - AIG also breached its duty to deal in good faith as evidenced by its lengthy and unexplained delays in payments, and in expecting the plaintiff to consider minimum wage employment - Those acts were malicious and designed to leverage a reduced settlement of the claim - See paragraphs 146 to 152. Damage Awards - Topic 2412 Aggravated damages - Insurers - The plaintiff, a "highly-trained" welder, accidentally dropped a steel plate on his foot during his shift in He re-injured his foot in He was not able to work after the second injury - The monthly long term disability benefits payable under the defendant Zurich's policy were to continue to age 65 - The plaintiff did not receive any payment from Zurich until Zurich accepted that the plaintiff, 62, was totally disabled up to and including December The Saskatchewan Court of Queen's Bench held that the plaintiff was entitled to aggravated damages against Zurich which the court assessed in the amount of $300,000 - The policy was a peace of mind contract - The plaintiff was entitled to expect that the monthly payments would be made in a prompt and regular manner - The fact that Zurich paid interest to the date of payment did not compensate for the plaintiff's mental distress caused by its "egregious" actions - The consequences had a major negative impact upon the plaintiff's life and continued to affect his quality of life - The delay was "completely reprehensible" - The plaintiff was entitled to aggravated damages and damages for mental distress caused by Zurich in its failure to honour its duty of good faith and fair dealing - See paragraphs 154 to 160. Damages - Topic Exemplary or punitive damages - Insurance claim denial - [See both Damage Awards - Topic ]. Evidence - Topic 2118 Special modes of proof - Judicial admissions - Withdrawal or amendment of admission - During trial, the issue arose whether or not the defendant insurer (Zurich) could lead evidence to contradict its reply to an undertaking made at its examination for discovery - It was raised that the plaintiff's initial claim to Zurich was not approved on March 4, 2002, as stated in the reply to undertaking - Counsel attempted to lead evidence at trial that the claim was approved a year later on March 4, The plaintiff went to trial relying on the admissions made by Zurich - The Saskatchewan Court of Queen's Bench stated that "Zurich should not now be permitted to deny the previously sworn testimony provided in the examination for discovery" - There was no suggestion that the date of March 4, 2002 was incorrect until after the plaintiff had closed his case - Zurich had a number of years in which to raise the matter if it was in fact an issue - Therefore, the court accepted the evidence provided under oath in the examination for discovery of the proper officer of Zurich - See paragraphs 96 to 101. Evidence - Topic 2401 Special modes of proof - Presumptions - Specific presumptions - Inference from failure to call or adduce available evidence - Both defendant insurers (AIG and Zurich) failed to

4 call witnesses to explain unfavourable claims against them - AIG failed to call its adjuster to explain why she adopted the same strategy which she used in an almost identical case which resulted in punitive damages being awarded against AIG - Zurich failed to call any member of its legal department who had control of the plaintiff's file from at least 2003 to 2009 to explain why no action was taken on the claim - The only witness called from Zurich head office was the claims officer who had no knowledge of the file - The Saskatchewan Court of Queen's Bench held that both of those failures led to adverse inferences against AIG and Zurich - See paragraphs 92 to 95. Insurance - Topic 730 Insurers - Duties - Duty of good faith - [See both Damage Awards - Topic 2412]. Practice - Topic 4959 Admissions - Withdrawal, amendment or setting aside of - [See Evidence - Topic 2118]. Cases Noticed: Wawanesa Mutual Insurance Co. v. Hewson (2004), 254 Sask.R. 203; 336 W.A.C. 203; 2004 SKCA 112, refd to. [para. 90]. Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252; 147 N.R. 44; 83 Man.R.(2d) 81; 36 W.A.C. 81; 99 D.L.R.(4th) 741, refd to. [para. 91]. Murray v. Saskatoon, [1952] 2 D.L.R. 499; 4 W.W.R.(N.S.) 234 (Sask. C.A.), refd to. [para. 93]. Sarchuk v. Alto Construction Ltd. et al., [2004] 1 W.W.R. 228; 234 Sask.R. 133; 2003 SKQB 237, refd to. [para. 94]. Graham v. Thompson, [1947] 1 W.W.R (Sask. C.A.), refd to. [para. 97]. Perreault v. Board of Kinistino School Unit No. 55 (1957), 8 D.L.R.(2d) 491; 21 W.W.R. 17 (Sask. C.A.), refd to. [para. 98]. Family Insurance Corp. v. Lombard Canada Ltd., [2002] 2 S.C.R. 695; 288 N.R. 373; 167 B.C.A.C. 161; 274 W.A.C. 161; 2002 SCC 48, refd to. [para. 104]. World Fuel Services Corp. v. Ship Nordems et al., [2012] 4 F.C. 183; 415 N.R. 100; 2011 FCA 73, refd to. [para. 105]. Canada (Attorney General) v. Nalleweg (1998), 223 A.R. 89; 183 W.A.C. 89; 1998 ABCA 282, refd to. [para. 106]. Cansulex Ltd. v. Reed Stenhouse Ltd. (1986), 70 B.C.L.R. 273 (S.C.), refd to. [para. 107]. Beals v. Saldanha et al., [2003] 3 S.C.R. 416; 314 N.R. 209; 182 O.A.C. 201; 2003 SCC 72, refd to. [para. 108]. Algoma Steel Inc., Re (2003), 168 O.A.C. 89; 63 O.R.(3d) 78; 39 C.B.R.(4th) 5 (C.A.), refd to. [para. 122]. Nedco Ltd. v. Clark, [1973] 6 W.W.R. 425; 43 D.L.R.(3d) 714 (Sask. C.A.), refd to. [para. 124]. Tridont Leasing (Canada) Ltd. v. Saskatoon Market Mall Ltd., [1995] 6 W.W.R. 641; 131 Sask.R. 169; 95 W.A.C. 169 (C.A.), refd to. [para. 125]. Gregorio v. Intrans-Corp. and Paccar of Canada Ltd. (1994), 72 O.A.C. 51; 18 O.R.(3d) 527; 115 D.L.R.(4th) 200 (C.A.), refd to. [para. 128].

5 Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 132]. Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3; 350 N.R. 40; 227 B.C.A.C. 39; 374 W.A.C. 39; 2006 SCC 30, refd to. [para. 133]. Ferme Gérald Laplante & Fils ltée v. Grenville Patron Mutual Fire Insurance Co. (2002), 164 O.A.C. 1; 217 D.L.R.(4th) 34; 61 O.R.(3d) 481 (C.A.), refd to. [para. 135]. Bacon v. Saskatchewan (1990), 88 Sask.R. 182 (Q.B.), refd to. [para. 144]. Gallop v. Co-Operators Insurance Association (Guelph) (1977), 16 O.R.(2d) 49; 77 D.L.R.(3d) 306 (C.A.), refd to. [para. 154]. Wilson v. Saskatchewan Government Insurance (2012), 405 Sask.R. 8; 563 W.A.C. 8; 2012 CarswellSask 789; 2012 SKCA 106, refd to. [para. 175]. Kagal et al. v. Tessler et al. (2004), 190 O.A.C. 77; 41 C.L.R.(3d) 1 (C.A.), refd to. [para. 177]. Khazzaka v. Commercial Union Assurance Co. of Canada (2002), 162 O.A.C. 293; 66 O.R.(3d) 390 (C.A.), refd to. [para. 178]. Authors and Works Noticed: Sopinka, John, Lederman, Sidney N., and Bryant, Alan W., The Law of Evidence in Canada (2nd Ed. 1999), p. 297, para [para. 94]. Counsel: Alex Kotkas, Gulu Punia and Arif Chowdhury, for Luciano Branco; Jerri Cairns and David P. Wedge, for American Home Assurance; Catherine A. Sloan and Paul L. Clemens, for Cameco Corporation and Kumtor Operating Company; Colin D. Clackson, for Zurich Life Insurance. This trial was heard before Acton, J., of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following judgment, dated March 21, Editor: E. Joanne Oley Judgment for the plaintiff. Damage Awards - Topic 205 Injury and death - Psychological injuries - Mental distress (incl. nervous shock) - The plaintiff, a "highly-trained" welder, accidentally dropped a steel plate on his foot during his shift in He re-injured his foot in He was not able to work after the second injury - The monthly long term disability benefits payable under the defendant Zurich's policy were to continue to age 65 - The plaintiff did not receive any payment from Zurich until Zurich accepted that the plaintiff, 62, was totally disabled up to and including December The Saskatchewan Court of Queen's Bench held that the plaintiff was entitled to aggravated damages against Zurich which the court assessed in the amount of $300,000 - The policy was a peace of mind contract - The plaintiff was entitled to expect that the monthly payments would be made in a prompt and regular

6 manner - The fact that Zurich paid interest to the date of payment did not compensate for the plaintiff's mental distress caused by its "egregious" actions - The consequences had a major negative impact upon the plaintiff's life and continued to affect his quality of life - The delay was "completely reprehensible" - The plaintiff was entitled to aggravated damages and damages for mental distress caused by Zurich in its failure to honour its duty of good faith and fair dealing - See paragraphs 154 to 160. Damage Awards - Topic Exemplary or punitive damages - Insurers - The Saskatchewan Court of Queen's Bench assessed punitive damages against the defendant insurer AIG in the amount of $1.5 million - AIG was to provide monthly benefits to replace loss of income to the plaintiff, an injured welder under a workers' compensation peace of mind contract - AIG discontinued benefits for lengthy periods of time - AIG's actions continued for 18 months, then six months and then eight years - AIG was aware of the hardship it was inflicting upon the plaintiff - That was further reinforced by the numerous and expensive court applications made by AIG and its co-defendant throughout the many years of litigation - "The goal of punitive damages is deterrence. Insurers must discontinue exploiting the vulnerability of insureds in times of disaster. The court must also consider the fact that previous awards such as $60,000 in Sarchuk and $1,000,000 in Whiten appear to have done little or nothing to deter insurance companies from their actions." - See paragraphs 184 to 199. Damage Awards - Topic Exemplary or punitive damages - Insurers - The defendant Zurich's policy provided benefits for employees in the event of a non-work related disability - Zurich, for more than 10 years from the date of the plaintiff's accident, refused to make payments required monthly under the policy, even after receipt of independent medial reports establishing the plaintiff's disability as early as 2002, and the acceptance of the plaintiff's claim by their own claims department - Instead, Zurich and the other defendants coordinated "unconscionably low" offers of settlement based on "starving" the plaintiff into submission - An early offer insisted on deducting $9,000 in legal fees - Zurich made numerous court applications and was able to postpone payments due and owing under the policy until The plaintiff suffered financial and psychological pressure -The Saskatchewan Court of Queen's Bench assessed punitive damages against Zurich in the amount of $3 million - "It is hoped that this award will gain the attention of the insurance industry. The industry must recognize the destruction and devastation that their actions cause in failing to honour their contractual policy commitments to the individuals insured." - See paragraphs 200 to 216. Damages - Topic Exemplary or punitive damages - Insurance claim denial - The Saskatchewan Court of Queen's Bench assessed punitive damages against the defendant insurer AIG in the amount of $1.5 million - AIG was to provide monthly benefits to replace loss of income to the plaintiff, an injured welder under a workers' compensation peace of mind contract - AIG discontinued benefits for lengthy periods of time - AIG's actions continued for 18 months, then six months and then eight years - AIG was aware of the hardship it was

7 inflicting upon the plaintiff - That was further reinforced by the numerous and expensive court applications made by AIG and its co-defendant throughout the many years of litigation - "The goal of punitive damages is deterrence. Insurers must discontinue exploiting the vulnerability of insureds in times of disaster. The court must also consider the fact that previous awards such as $60,000 in Sarchuk and $1,000,000 in Whiten appear to have done little or nothing to deter insurance companies from their actions." - See paragraphs 184 to 199. Damages - Topic Exemplary or punitive damages - Insurance claim denial - The defendant Zurich's policy provided benefits for employees in the event of a non-work related disability - Zurich, for more than 10 years from the date of the plaintiff's accident, refused to make payments required monthly under the policy, even after receipt of independent medial reports establishing the plaintiff's disability as early as 2002, and the acceptance of the plaintiff's claim by their own claims department - Instead, Zurich and the other defendants coordinated "unconscionably low" offers of settlement based on "starving" the plaintiff into submission - An early offer insisted on deducting $9,000 in legal fees - Zurich made numerous court applications and was able to postpone payments due and owing under the policy until The plaintiff suffered financial and psychological pressure -The Saskatchewan Court of Queen's Bench assessed punitive damages against Zurich in the amount of $3 million - "It is hoped that this award will gain the attention of the insurance industry. The industry must recognize the destruction and devastation that their actions cause in failing to honour their contractual policy commitments to the individuals insured." - See paragraphs 200 to 216. Insurance - Topic 730 Insurers - Duties - Duty of good faith - The plaintiff, a "sought-after, highly trained" welder, initially hurt his foot during his shift in December 1999 and aggravated the injury in March He was not able to work after the second injury - The defendant AIG's insurance policy provided workers' compensation coverage - AIG failed to pay the plaintiff for months and years, then provided a lump sum payment - In December 2004, AIG discontinued payments permanently because the plaintiff refused to enrol in an inappropriate vocational retraining - The Saskatchewan Court of Queen's Bench assessed aggravated damages against AIG in the amount of $150,000 - The insurance policy was a peace of mind contract - AIG breached the contract in failing to continue payments to age 65 or a date to which the plaintiff was able to return to work - AIG also breached its duty to deal in good faith as evidenced by its lengthy and unexplained delays in payments, and in expecting the plaintiff to consider minimum wage employment - Those acts were malicious and designed to leverage a reduced settlement of the claim - See paragraphs 146 to 152. Insurance - Topic 730 Insurers - Duties - Duty of good faith - The plaintiff, a "highly-trained" welder, accidentally dropped a steel plate on his foot during his shift in He re-injured his foot in He was not able to work after the second injury - The monthly long term disability benefits payable under the defendant Zurich's policy were to continue to age 65

8 - The plaintiff did not receive any payment from Zurich until Zurich accepted that the plaintiff, 62, was totally disabled up to and including December The Saskatchewan Court of Queen's Bench held that the plaintiff was entitled to aggravated damages against Zurich which the court assessed in the amount of $300,000 - The policy was a peace of mind contract - The plaintiff was entitled to expect that the monthly payments would be made in a prompt and regular manner - The fact that Zurich paid interest to the date of payment did not compensate for the plaintiff's mental distress caused by its "egregious" actions - The consequences had a major negative impact upon the plaintiff's life and continued to affect his quality of life - The delay was "completely reprehensible" - The plaintiff was entitled to aggravated damages and damages for mental distress caused by Zurich in its failure to honour its duty of good faith and fair dealing - See paragraphs 154 to 160. Practice - Topic 4959 Admissions - Withdrawal, amendment or setting aside of - During trial, the issue arose whether or not the defendant insurer (Zurich) could lead evidence to contradict its reply to an undertaking made at its examination for discovery - It was raised that the plaintiff's initial claim to Zurich was not approved on March 4, 2002, as stated in the reply to undertaking - Counsel attempted to lead evidence at trial that the claim was approved a year later on March 4, The plaintiff went to trial relying on the admissions made by Zurich - The Saskatchewan Court of Queen's Bench stated that "Zurich should not now be permitted to deny the previously sworn testimony provided in the examination for discovery" - There was no suggestion that the date of March 4, 2002 was incorrect until after the plaintiff had closed his case - Zurich had a number of years in which to raise the matter if it was in fact an issue - Therefore, the court accepted the evidence provided under oath in the examination for discovery of the proper officer of Zurich - See paragraphs 96 to 101.