Income Replacement Benefits Restored Where Insurer Failed to Consider Impact of Psychological Impairment

December 15, 2007, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Decided by:  Justice Borkovich

Decision date:  April 2, 2007

Daniela Stranges was injured in a car accident that occurred on May 18, 1996.  She applied for and received Statutory Accident Benefits (SABs) from All State.  She received Income Replacement Benefits (IRBs) until they were terminated by the insurer in September 1997.

In this case the judge had determined that Ms. Stranges was entitled to continuing benefits because the form used to terminate did not comply with the SABs and was improper.  This was consistent with the decision of the court in Smith and Cooperators.

However, the judge did consider the assessment completed by the Disability Assessment Centre (DAC) that led to the termination of her benefits.  The doctor at the DAC was authorized to carry out assessments in connection with musculo-skeletal matters.  The doctor concluded that Ms. Stranges was not disabled from physical perspective but clearly had a major depressive illness which could be considered disabling.

The judge noted that the insurer was aware, from the information that it had at the time of the assessment, that Ms. Stranges was suffering from psychological impairments which may be connected to the car accident.  The judge felt that Ms. Stranges claim for IRBs was based on both physical and psychological impairments arising from the car accident and should have arranged for an appropriate DAC to consider both types of impairments. Based on the application of a flawed process, the judge would have reinstated IRBs.  It would then be left to the insurer to arrange a proper assessment.

There was some dispute as to whether the psychological injuries were connected to the car accident.  Ms. Stranges did have a history of psychological problems pre car-accident.  There was medical evidence that indicated that a person who has suffered a previous psychological episode is more likely to have another.  At the time of the car accident there was evidence of financial stressors and caring for a young child while being pregnant with another.  Due to her pregnancy, Ms. Stranges had to endure pain without the benefit of pain relieving medications.  The judge determined that the consequences of the car accident materially contributed to the major mood disorder diagnosed by the doctors post car accident.

With respect to punitive or aggravated damages in connection with a bad faith claim, it must first be recognized that any dispute between an insured and an insurer is based on contract.  The judge noted that while punitive damages in a contract case are obtainable, it is rarely granted.  Punitive damages require an "actionable wrong" in addition to the breach sued upon.  While the insurance adjuster was interested in closing the accident benefit file as soon as possible, the judge did not find any evidence that showed any plan to arbitrarily delay the payment of benefits to Ms. Stranges.  The judge also noted that punitive damages are awarded against a defendant in exceptional cases for malicious, oppressive and high-handed misconduct that "offends the court´s sense of decency".  The judge did not feel that the evidence showed that the insurer´s conduct to be a marked departure from the ordinary standards of decent behaviour.

The judge also noted The SABs, which provide for a high interest rate that applies to unpaid benefits (2% per month compounded) has built into it a sufficient punishment for the insurer who breaches the SABs.

Posted under Accident Benefit News, Automobile Accident Benefits, Car Accidents, Disability Insurance, Pain and Suffering

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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 or call us toll-free at 1-866-414-4878.

It is important that you review your accident benefit file with one of our experienced personal injury / car accident lawyers to ensure that you obtain access to all your benefits which include, but are limited to, things like physiotherapy, income replacement benefits, vocational retraining and home modifications.

Practice Areas

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