Insured may obtain aggravated and punitive damages in long-term disability claim

June 05, 2016, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Punitive and Aggravated Damages in a Long-Term Disability Claim

In a long-term disability case   it is important to be aware  that, in certain situations,  a trial Judge can  order your insurance company to pay   aggravated damages, mental distress damages  or punitive damages.  Any amounts a Judge may award for these types of  damages, are paid to you in addition to  any long-term disability benefit, legal cost or interest amounts ordered by the trial Judge.

Simply put, aggravated damages or mental distress damages  are intended to compensate you for suffering or mental distress caused by   the  conduct of your insurance company.  Long-term disability benefit policies are typically  viewed  as “peace of mind” contracts.  The understanding is   that  you  take comfort in expecting  that your long-term disability insurance policy will provide you and your family with protection in the event that you are disabled.  When an insurance company denies your long-term disability benefits however, it can  obviously cause  significant levels of anxiety or mental distress.  Of course,  this is the exact opposite of the “peace of mind”  and protection you expected and that you paid for.  It is in  this type  of situation that a court may order your insurance company to pay   aggravated damages or mental distress damages in order to compensate you. 

Punitive damages on the other hand, are intended to punish your insurance company for their wrongdoing.  Punitive damages are  also intended to deter, to discourage and  to hopefully prevent other  insurance companies from similar wrongdoing.   It is important to understand  however, that punitive damages are not awarded in all long-term disability cases and are in fact very difficult to get.  The courts have indicated that punitive damages should only be imposed in exceptional cases.  In deciding whether punitive damages should be awarded, there are a number of legal tests the court will consider.  These tests include whether the insurance company’s conduct has been   “high-handed”, “malicious”, “oppressive” or   “highly reprehensible” and  whether the conduct “offends the court’s sense of decency”.

Punitive damages are also intended to strongly remind long-term disability insurance companies of their obligation to act in good faith.  Included in the duty of good faith  is a requirement that your long-term disability insurance company   deal with you fairly.  This applies to the way your  insurance company investigates and assesses your  claim.  It also applies to their decision to either pay or deny your long-term disability claim.  In making a decision whether or not to pay your long-term disability benefits, an insurance company must assess the merits of your long-term disability claim in a balanced, objective and reasonable manner. 

Your insurance company  must not deny coverage or delay payment of your long-term disability benefits in order to take advantage of your financial situation  or to gain bargaining or negotiation leverage.  Your insurance company’s decision should be based on a reasonable interpretation of their obligations under your long-term disability policy.  Without  reasonable grounds to deny your long-term disability coverage or payment, the duty of good faith requires that your insurance company pay your disability benefits  on a timely basis.

The simple fact that your insurance company has denied your long-term disability benefits does not mean that they have acted in bad faith.  It also does not mean that a court will order your insurance company to pay any amounts for aggravated, mental distress or punitive damages.   In order to successfully claim aggravated, mental distress or punitive damages,  you will be required to present facts  to the court that   satisfy the necessary legal tests. 

Accordingly, it is always important to speak to an experienced long-term disability lawyer about the possibility of claiming aggravated, mental distress and punitive damages.  Speaking to an experienced long-term disability lawyer  will also help to ensure that you receive any additional damages that you may be entitled to as part of  your long-term disability claim.  

About Deutschmann Law

Deutschmann Law serves South-Western Ontario with offices in Kitchener-Waterloo, Cambridge, Woodstock, Brantford, Stratford and Ayr. The law practice of Robert Deutschmann focuses almost exclusively in personal injury and disability insurance matters. For more information, please visit www.deutschmannlaw.com or call us at 1-519-742-7774.

The opinions expressed here, while intended to provide useful information, should not be interpreted as legal recommendations or advice.