McQueen v. Echelon General Insurance Co. [2011] O.J. No. 4563 (Ont CA)

Appeal by the insurer from an award of accident benefits and damages for mental distress.

At trial, the plaintiff sought housekeeping, transportation, costs of medical assessments and damages for bad faith and mental distress.

The insurer made three major arguments on the issue of damages for mental distress:

1. That there was procedural unfairness based on the trial judge’s
consideration of conduct unrelated to rejected claims for statutory
accident benefits;

2. That merely denying benefits does mean that there was bad faith; and

3. That the trial judge lacked jurisdiction to make an award for mental
distress.

The trial judge quickly dismissed the initial two arguments by concluding that the plaintiff was seeking to recover damages for more than the SABS benefits and that this was not a case where the insured simply denied benefits.

In regards to the allegation that there was merely a denial of benefits the appeal judge agreed with the trial judge on the following points:

• The insurer had a duty to act in good faith in all its dealings with the
insured and had an additional duty not to inflict unnecessary mental
distress. Fidler v. Sun Life Assurance Co. Ltd. 2006 2 SCR 3 (Fidler);

• That the insurer repeatedly refused to provide benefits noting that they
were not “reasonable and necessary”, but never provided and reasons why
they were not reasonable and necessary;

• That damages were warranted because benefits were denied contrary to
medical recommendations;

• That the insurer took an adversarial approach to the plaintiff in the
beginning;

• That the one object of the insurance contract was to secure the plaintiff’s
peace of mind and that it was within the reasonable contemplation of the
parties that breach of peace of mind promise would bring about mental
distress; and

• That the plaintiff’s mental distress was palpable and accepted her evidence
that the change in her emotional and psychological conduct was the result
of her relationship with the insurer.

In regards to the jurisdiction argument, the insurer argued that the plaintiff was not a party to the insurance contract since it was her husband’s policy, and therefore, she was not entitled to claim for damages for mental distress.

It was further argued that Fider was distinguishable because Fidler dealt with LTD benefits not SABS benefits and that consequently, peace of mind cannot have been a contemplated term.

The appeal judge held that the reasoning in Fidler applies to an insured person under an automobile policy, whether the person is the named party or not.

“Mental distress to anyone insured under the policy upon breach would
have been within the reasonable contemplation of the insurer and the
insured and, thus, damages are recoverable pursuant to the basic
principle of compensatory damages.”

….

“People purchase motor vehicle policies to protect themselves from
financial and emotional stress and insecurity. An object of such
contracts is to secure a psychological benefit that brought the prospect
of mental distress upon breach within the reasonable contemplation of
the parties at the time the contract was made.”

In the end, the appeal judge affirmed all aspects of the trial judge’s decision only modifying the total awarded under the transportation head of damages as the trial judge provided inadequate reasons for the amount.

- Alison McBurney