Insurer's Pattern of Dealing With Previous Clients a Factor
In a recent decision from the Supreme Court of British Columbia, the court agreed that the plaintiff was entitled to introduce evidence of systemic wrongdoing on the part of the defendant, a long term disability insurer, with respect to the adjudication of the plaintiff’s long term disability claim, while pursuing a punitive damages claim. The issue revolved around the “appeal” process that is offered by an LTD insurer to the insured once the LTD insurer has denied payments or continuing payments under the long term disability policy. The plaintiff alleged the following:
In its adjudication of long-term disability claims, the defendant has a practice of offering to reconsider a denial of long-term disability benefits and declining the vast majority of appeals knowing that while the offer to reconsider its decision provides an appearance of fairness, the reality is that successive unsuccessful appeals have the effect of wearing out and discouraging claimants and exposing them to missed limitation periods.
The plaintiff’s claim was not for disability benefits, but rather the plaintiff was alleging a failure on the part of the LTD insurer to adjudicate the plaintiff’s claim for long term disability benefits fairly and in good faith. The LTD insurer attempted to strike this portion of the claim. The LTD insurer’s position was that only it’s conduct in relation to the plaintiff was relevant. The court determined that evidence of the LTD insurer’s conduct was not intended to advance a distinct cause of action based on systemic bad faith. Rather, it was a material fact relating to the plaintiff’s claim. The allegation of a practice or pattern of wrongdoing is the basis upon which the claim for punitive damages is advanced.