Largest Punitive Damages Award – Baker v. Blue Cross Life Insurance Company of Canada

By now everyone has heard about the Toronto jury decision awarding the largest known punitive damages on record to an individual plaintiff in Canada after a five-week trial in the Ontario Superior Court of Justice.

The award of $1.5 million in punitive damages was made against the Blue Cross Life Insurance Company of Canada (“Blue Cross”) in connection with its more than 6-year denial of long-term disability (“LTD”) benefits in favour of Sara Baker, a 47-year-old woman who suffered a brain bleed/stroke in 2013 after which she was unable to return to her job as a Director at a hospital. The six-member jury also awarded the full reinstatement of Ms. Baker’s LTD benefits, along with $40,000 in aggravated damages for Ms. Baker’s mental distress.

As this was a jury decision there are no reasons for the decision but this is what has been reported so far:

  • Blue Cross initially paid disability benefits to Ms. Baker after her brain bleed/stroke. LTD benefits were denied when Blue Cross determined she could return to work in an alternate occupation that would pay her at least 60% of her pre-disability earnings. Ms. Baker’s doctors opined that her cognitive impairments, headaches, and mental fatigue, were intractable and rendered her unable to work.
  • Due to the COVID-19 pandemic and restrictions on civil jury trials, Ms. Baker sought to have her case determined by a Judge alone.  Blue Cross maintained the trial should be decided by a Jury which resulted in a further delay. Blue Cross, in a sworn affidavit, explained that a jury trial was essential to its “strategy for the defence of this action” based on “the surveillance reports and videotapes.” These included 375 hours of covert surveillance Blue Cross had undertaken of Ms. Baker, none of which showed Ms. Baker engaged in any activities inconsistent with the symptoms of her brain bleed/stroke.
  • In his closing address to the jury, Ms. Baker’s counsel, Stephen Birman, cited Blue Cross’ excessive and irrelevant surveillance, along with numerous examples of Blue Cross failing to consider available medical and vocational evidence, including that of its own medical experts, as grounds for a finding that Blue Cross had breached its duty of good faith and caused Ms. Baker mental distress.

TAKEAWAY:  In assessing the merits of a claim for bad faith, the Court must find that the conduct was high-handed, arbitrary, malicious or reprehensible to offend the Court’s sense of decency and therefore worthy of punishment. Vulnerability or hardship of the insured is also an important consideration. It is important to understand that although an insurers’ claims file may be full of errors, those by themselves do not constitute bad faith. Similarly, the incorrect denial or termination of disability benefits is not in itself evidence of bad faith.