MANDEL: Court upholds record punitive damages against LTD insurer

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Blue Cross tried to steal Sara Baker’s Christmas, but they didn’t get away with it.

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In a decision released just before the holiday, Ontario’s highest court refused to strike the largest punitive damages award made against an insurer in Canadian history.

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After Baker’s marathon legal battle of six years, Blue Cross Insurance Company of Canada will have to pay her $1.5 million in punitive damages as well as $1 million for her legal costs.

“I’m just grateful this is behind me now,” said Baker, “and that the court recognized it wasn’t right for me to be treated this way.”

Insurance companies have a nasty, if well-earned, reputation of not paying out when you actually need them. When Baker suffered a stroke while exercising in 2013, the 38-year-old director of Humber River’ hospital’s food, environmental and porter services was left unable to work.

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Baker had disability insurance through her employer – but Blue Cross stopped payments three times to the mother of two before her appeals had them resumed. In 2016, when it came time for the second stage of long-term disability – where she had to prove she was totally disabled and unable to perform any occupation that would pay 60% of her pre-disability income – her insurer denied her again.

Left without income and unable to work, Baker filed her lawsuit against Blue Cross in 2017.

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The insurer continued to play hardball. When COVID suspended jury trials, Blue Cross refused to have the lawsuit heard before a judge alone. The company also rejected a settlement offer in 2018. During the long five years before her case finally got to trial, her insurer conducted an astonishing 375 hours of covert surveillance in hopes of catching Baker lying about her condition. Nothing turned up.

In 2022, the five-week trial finally got underway. And in the end, Baker won. Big.

The jury agreed she’d been left totally disabled and awarded her $220,604 in retroactive benefits, $40,000 in aggravated damages for mental distress and the record $1.5 million in punitive damages for the disgusting way she was treated by Blue Cross.

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“This wasn’t just one claims examiner who didn’t do the job,” explains lawyer Geoff Adair, who represented Baker at the appeal. “This was systemic right through Blue Cross. Claims examiner after claims examiner ignored the facts and treated Ms. Baker very poorly.”

A judge also took the unusual step of ordering Blue Cross to pay her full $1 million in legal fees. Not surprisingly, the insurer appealed both the punitive damages and the legal costs, insisting it acted in good faith.

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In a scathing decision, the Court of Appeal vehemently disagreed.

“Overall, we see repeated instances of the Blue Cross team ignoring information, misinterpreting experts’ reports, and relying on the ill-informed advice of their contracted doctors to deny benefits,” wrote Justice William Hourigan on behalf of the three-judge panel.

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“This is a pattern of misconduct that, at best, shows reckless indifference to its duty to consider the respondent’s claim in good faith and conduct a good faith investigation, and at worst, demonstrates a deliberate strategy to wrongfully deny her benefits, regardless of the evidence that demonstrated an entitlement.” 

The appeal court found it was open to the jury to conclude the “systemic and deliberate misconduct” required a high punitive damages award to deter Blue Cross from behaving the same way in the future.

“Deterrence is impossible unless the punishment is meaningful,” the judge wrote. “It is difficult to envision how an award of anything less than $1.5 million would even garner the attention of senior executives, let alone deter future misconduct.”

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Blue Cross also lost its appeal of having to pay $1 million in Baker’s legal fees.

“This is one of those rare cases where there has been bad faith conduct that warrants costs on this scale.”

Lawyer Stephen Birman, who led the team who represented Baker at trial, said he hopes the decision will lead to changes.

“I think insurance companies will realize there can be serious financial and reputational consequences to mistreating their consumers,” Birman said.  

We’d like to think so. But more likely, they’ll continue to take advantage of all the people who don’t have the stamina or cash to wage this David and Goliath legal battle.

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