By Lewis Waring, Licensed Paralegal and Student-at-Law, Editor, First Reference Inc.
In Greig v Desjardins Financial Security Life Assurance Company, the Superior Court of British Columbia (SCBC) considered a defendant’s handling of a plaintiff’s claim for LTD benefits. SCBC held that the Defendant’s handling of the Plaintiff’s claim for long-term disability (LTD) benefits was bad enough to violate its fiduciary duty and awarded the Plaintiff $50,000 in aggravated damages and $200,000 in punitive damages, accordingly.
The Defendant is a policy administrator for a health and welfare benefits trust funded by the provincial government, which is distinct from insurance.
On November 15, 2011, the plaintiff, a unionized employee, was injured in a motor vehicle accident. His injuries included “debilitating pain in his neck, arm, and chest affecting his left side more than the right.” He also “began to experience severe headaches, emotional and psychological issues, and cognitive impairment. After the Plaintiff’s injury, he was eager to recover and eventually returned to work earlier than had been scheduled. On March 15, 2012, he returned to work and continued to maintain employment until January 29, 2014, when he was injured for a second time at work. WorkSafeBC denied the Plaintiff’s benefits based upon the idea that his injury of January 29, 2014, was an aggravation of his existing injuries.
The Plaintiff then applied for and was granted LTD benefits through the Defendant. Shortly thereafter, the Defendant terminated the Plaintiff’s benefits for 17 months, between April 15, 2015 and September 30, 2016. During that 17-month period, the Plaintiff lost his home and fell into a financial crisis. After the end of the 17-month period, a medical appeal panel re-assessed the Plaintiff and reinstated his benefits retroactively to the date of termination.
Administrator as fiduciary
The main issue in this case was whether the Defendant’s mishandling was egregious enough to merit punitive and/or aggravated damages as a result. In answering this question, the SCBC noted that the Defendant failed to properly adjudicate the Plaintiff’s claim, despite acknowledging their duty to do so (at para 166). The Plaintiff had sent “additional medical information on an ongoing basis following the termination,” but in response, the Defendant did not acknowledge the sent material or take any action until the Plaintiff’s file was transferred to Ms. Bauzon (BC representative).
The SCBC found that the Defendant’s singular focus upon litigation led to an ignorance of provided medical evidence, which the SCBC ultimately ruled was “high-handed, arbitrary, and worth of rebuke (at para 250).” As a result of the Defendant’s high-handed conduct, the SCBC found that the Plaintiff had suffered egregious harm. This high award was based in part upon the nature of the relationship between the parties. The SCBC observed the fiduciary nature of the relationship between insurers and their insured. Importantly, it found that the duty of good faith between an insurer and an insured applies to the relationship between an administrator and client, requiring that the administrator perform his duties regarding the insured with upmost good faith (at para 63).
The BCSC found that the Defendant had utilized a standard more stringent than the insurance plan’s text. Specifically, the Defendant noted that the Plaintiff had not sought “optimal” treatment despite knowledge that the Plaintiff could not afford such treatment. Furthermore, the Defendant failed to take into account the Plaintiff’s psychological condition.
“Essential character” analysis
Another issue at play was the boundaries of the Plaintiff’s collective agreement with regards to aggravated and punitive damages. The BCSC found that the Plaintiff’s claims for aggravated and punitive damages fell outside the jurisdiction of his collective agreement and that thus there was a jurisdictional gap which the BCSC filled. This jurisdictional gap was the aggravated and punitive damages awarded as a result of the egregious behaviour of Defendants.
In order to determine whether the court could step in to fill the alleged jurisdictional gap, the BCSC applied what is known as the Weber analysis, a two-stage analysis which assesses “whether a court has jurisdiction over a dispute arising between parties to a collective agreement at para 30.”
The first stage of the Weber analysis is the definition of the “essential character” of the dispute. In most cases, the dispute will clearly fall within the realm of the relevant collective agreement. But, in some cases, such as in Greig, the essential character will be decided based upon the “interpretation, application, administration or violation of the collective agreement (at para 31; Weber at 52).
In Greig, the adjudicator found that the essential character of the dispute was beyond the scope of his collective agreement.
The second stage of the Weber analysis is the question of whether declining to take jurisdiction would result in a deprivation of “an ultimate remedy (at para 39).” The court decided that without the court stepping in, the employee would have lacked an ultimate remedy and as such, decided that the second element of the Weber had been satisfied.
The SCBC awarded the Plaintiff punitive damages on the grounds that the Defendant harmed the Plaintiff while he was already financially vulnerable.
A key takeaway for employers is that damages or other losses do not necessarily fall within the bounds of a collective agreement simply because such an agreement exists. According to the Weber analysis, remedy may fall outside the jurisdiction of the collective agreement and, in fact, the court’s stepping-in may even be required by common law. If an adjudicator finds that “if I did not exercise my inherent jurisdiction, the plaintiff would have no recourse (para 60),” a court may step into a situation that may have appeared at first to be the employee’s union’s territory.
Another takeaway for employers is a simple reminder that having a back-up plan instead of relying on insurance organizations or plan administrators may help avoid a situation where neither a collective agreement nor third-party will cover an amount of damage, leaving a jurisdictional gap that may expose the employer to liability. When dealing with insurers, take their obligation to deal fairly with a claim with a grain of salt. Insurers often seek to minimize coverage when possible, creating potential exposure to liability for employers when employees are injured during the course of their duties.