Jackson v Standard Life Assurance Co [2012] BCCA

Jackson v Standard Life Assurance Co [2012] BCCA

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  P sued D for breach of contract, sought one year of disability benefits. D denied benefits since she was not eligible insured on date of disability. Issues on appeal were interpretation of eligibility clauses in this disability policy. Policy required that employee be active at work for a defined period of time before she would be eligible for coverage. Eligibility period meant that she would become eligible for coverage “first of the month coincident with or immediately following the employment date.” P began work Aug 15, 2005 and last day worked was Aug 26, 2005 due to disability
  
  • 
    Issue on appeal: what is the first day of the month coincident with Aug 15? – since this determines whether P was eligible for benefits from Aug 26 onwards?
    
    • 
      D took position that coverage would begin Sept 1
      
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  At BCSC
  
  • 
    First considered whether eligibility conditions could hold meaning insurer stated – yes
    
  • 
    TJ looked at plain wording to determine this, but then looked at consequences of defining eligibility provisions that way, then held that applicability of provisions would be unfair to P and all other employees whose first day of work wasn’t on the first day of the month
    
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      Latter is an error! Consequences do not play into interpretation of a policy
      
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    TJ speculated that reasonable persons making this contract couldn’t have intended to implement the unfair provisions of the policy
    
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  At BCCA
  
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    Fundamental to contract interpretation that if construction renders clause ineffective, it should be rejected
    
  • 
    Considered words of eligibility provision, contract as a whole and ordinary use of wording in other similar policies and concluded that insurer’s interpretation correct – coverage began Sept 1
    
  • 
    Interpretation cannot be made in a vacuum, courts should be alive to how provisions have been interpreted in similar policies and contexts
    
    • 
      CA noted that wording in this case wasn’t unique, had been used in other policies
      

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  Administrative services only contract: insurer contracts with corporation, to undertake administration of disability insurance plan as an agent of an employer
  
  • 
    e.g. Manulife adjudicated a claim on behalf of SFU, former made declined a claim and terminated it
    
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  Asselstine v Manufacture’s Life Insurance Co [2005] BCCA: dealt with ASO contract between UBC and Manulife. P insured under group disability policy, she applied for LTD benefits, dealt directly with Manulife. Her benefits were terminated, and P sued Manulife.
  
  • 
    At TJ, court didn’t draw distinction between liability of university and insurer
    
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    CA stated that there was no basis that university and Manulife would be treated as one and same for purpose of liability, or that one was liable for conduct for another beyond legal liability w.r.t. agent. Manulife not a party to any contract against P, action against Manulife had to be dismissed
    
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  Any bad faith, punitive and mental distress claims are arguably not tenable against ASO service provider because any P’s extra contractual claims are based on foundation of contractual right or duty flowing from insurer to P
  
  • 
    Arguably, no privity of contract between P and Manulife, so extra contractual claims wouldn’t be able to succeed
    
  • 
    However, UBC might have a claim against Manulife
    

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  Just as under old Act, must determine which part of act should be referring to
  
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  Is group disability policy covered under life insurance, or accident and sickness insurance?
  
  • 
    Look at insurance regulation for definitions,
    
  • 
    Look at Act’s definitions under life insurance, s. 37, s. 40
    
  • 
    Look at accident and sickness insurance, s. 92, s. 94(3), s. 95
    

Damages for Mental Distress

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  Warrington v Great West Life [1995] BCSC: P in constant struggle to survive financially, had to apply for welfare benefits. Court awarded family $10k for mental distress
  
  • 
    First decision to provide aggravated damages in BC
    

Fidler v Sun Life Assurance Co [2006] SCC

Facts	- F diagnosed with chronic fatigue syndrome, under insurance policy at work, she was eligible to receive long term disability benefits after becoming totally disabled - Totally disability clause read: An employee is totally disabled if he is in a continuous state of incapacity due to illness which” While it continues throughout the Elimination Period and during the following 24 months… of incapacity prevents him from performing the essential duties of his own job at the onset of disability While it continues after such period, prevents him from engaging in any occupation for which he is or may become reasonably qualified by education, training or experience - For over five years, D denied F disability benefits - Before trial, D offered to reinstate F’s benefits - At trial, only issue was F’s entitlement to damages, TJ awarded her $20k in damages for mental distress arising from breach of the insurance contract, CA upheld that and added punitive damages of $100k
Issues	- Whether damages for mental distress should be awarded
Rules	- Damages for mental distress are allowed where such damage was in the reasonable contemplation of the parties at the time the contract was made, brought the rule back to first principles via Hadley i.e. where the very object of the contract is to provide pleasure, relaxation, peace of mind or freedom from molestation - Peace of mind shouldn’t be an exception to the general rule, but should apply within established principles - There is still the requirement that P must prove his or her loss, court must be satisfied that An object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and The degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation These factors require sensitivity to particular facts of each case - An independent actionable wrong is not required for an award for mental distress - Aggravated damages are an award that aims at compensation, but takes full account of intangible injuries, such as distress and humiliation, that may have been caused by D’s insulting behaviour - SCC reaffirmed principles of punitive damages: misconduct must depart from the ordinary standards of decency, much higher threshold to pass than aggravated damages Available where one breached not only contractual obligations, but also independent contractual obligation to deal with claim in good faith Insurer will not necessarily be in breach of duty of good faith by incorrectly denying a claim that is eventually conceded or judicially determined to be legitimate Question is whether the denial was the result of the overwhelmingly inadequate handling of the claim, or the intro of improper considerations into the claims process
Analysis	- The object of the disability insurance contract was to secure a psychological benefit (of income protection) that brought the prospect of mental distress upon breach within reasonable contemplation of parties at time contract was made Bargain consisted of exchange between payment of premiums and receiving of benefits by P in case of disability This was a contract for benefits that were tangible (payment), and intangible (knowledge of income security in event of disability) If benefits denied unfairly, may not be possible for one to meet ordinary living expenses, this financial pressure on top of disability and loss of work likely to heighten insured’s anxiety and stress Mental distress is an effect which parties to an insurance contract might reasonably contemplate to flow from failure to pay required benefits, and P’s damages for mental distress flowed directly from D’s breach of contract - The mental distress was of a degree sufficient to warrant compensation D’s breach caused P substantial loss over five years Ample medical evidence documented stress P suffered - Award of punitive damages reversed, insurer did not act in bad faith While D terminated benefits in absence of medical evidence indicating ability to return to work, and denied these benefits for 5 years, there was no improper purpose on the part of D Rather, the claims process reflected real, but incorrect concern as to whether P was incapable of performing any work as required under the policy
Conclusion	- P’s award for aggravated damages upheld, award for punitive damages overturned

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  There is authority to suggest that courts should approach aggravated damages on a cautious and reasonable basis
  

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