Beyond Fidler: Examining the SCC Decision and its Impact
During the summer of 2006, the Supreme Court of Canada released the long-awaited judgment in Fidler v. Sun Life Assurance Company of Canada.1 In Fidler, the Court affirmed the trial judge’s $20,000 award for aggravated damages, but at the same time, overturned the $100,000 punitive award imposed by the British Columbia Court of Appeal. This longterm disability case provides valuable guidance from the Supremes on both the applicability of aggravated damages for what have become known as “peace of mind contracts” and the availability of punitive damages in the insurance context. The insurance industry appears to be viewing Fidler as a victory which it can use to control the “spurious proliferation of punitive damages claims.” While the loss of the punitive damages award clearly presents a challenge for Plaintiffs’ Counsel, a close reading of the decision reveals the judgment presents as many opportunities as challenges for us to use in our efforts to achieve fair compensation for our clients.
Background
Connie Fidler worked as a receptionist at a branch of the Royal Bank of Canada in Burnaby, BC. Around 1990, she had to be hospitalized due an acute kidney infection called pyelonephritis. She eventually recovered from the infection, but she continued to experience extreme fatigue. Her doctors eventually concluded that she was suffering from chronic fatigue syndrome and fibromyalgia. Connie was covered under a standard long-term disability policy provided by Sun Life which covered her for two years if she was unable to do her own job and then after two years if she unable to do any job for which she was reasonably qualified for by education, training or experience.
Connie received LTD benefits from January 1991 until April 1997. At that time, Sun Life terminated Connie’s benefits. It is worth noting that at this time, Sun Life had no medical evidence that Connie could work, but rather it had some video surveillance which purported to show that Connie was more active than she claimed she was capable of being. Sun Life saw the surveillance as impugning Connie’s credibility which led the insurance company to doubt her assertion that she was incapable of working.
In the two years that followed, various medical practitioners examined Bonnie including an I.E. doctor for Sun Life who concluded that Connie should consider a graduated training program to improve her level of physical fitness followed to a gradual return to work. Rather than send Connie on a training program, Sun Life relied on the view of an internal medical consultant that,
All in all there is no medical and non-medical evidence to support tht this lady cannot perform at a light physical, clerical or sedentary job on a regular basis since, at least, Sept. 96.
Connie Fidler commenced her law suit in February 1999. In April 2002, a week before the trial was scheduled to start, Sun Life reinstated Connie’s benefits with interest.2 The trial proceeded on the basis of whether Connie was entitled to aggravated or punitive damages. The trial judge awarded Ms. Fidler $20,000 in aggravated damages for mental distress,3 on the basis that aggravated damages may be awarded without separately actionable conduct if the contract is for “peace of mind” which is the case with long-term disability contracts. However, the trial judge declined to award punitive damages on the basis that Sun Life’s conduct, while “rather zealous”, did not constitute bad faith.
Both parties appealed to the British Columbia Court of Appeal.4 The Court unanimously declined to interfere with the trial judge’s award of aggravated damages. However, in a 2-1 decision, the Appellate Court split of whether Sun Life’s conduct warranted an award of punitive damages. Writing for the majority, Chief Justice Finch concluded that the insurer’s conduct fell short of the duty of utmost good faith “by a very wide margin”5 and imposed a $100,000 punitive award.
Sun Life appealed to the Supreme Court of Canada against both the aggravated and punitive damages. The Supremes unanimously upheld the damages for mental distress, but also found that the punitive damages award must be set aside in favour of the ruling of the trial judge.
The reasons of Chief Justice McLauchin and Madame Justice Abella who wrote for the Court bear closer examination.
Damages for mental distress for breach of contract
The insurance industry has focused on the punitive damages section of the Fidler decision, but Court actually spends the majority of its time dealing with the interesting question of when it should allow damages for mental distress for breach of contract. In their attempt to provide some clarity to this area of the law, the Supremes appear to have streamlined the process of obtaining damages for intangible losses resulting from the breach of peace of mind contracts...
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1 (2006) sec 30 (CanLII), [2006] S.C.J. No. 30.
2 This amounted to $52,516.10.
3 Justice Ralph applied the B.C. Court of Appeal decision in Warrington v. Great-West Life 1996 CanLII 1443, (1996), 139 D.L.R. (4th) 18. [ Fidler v. Sun Life (2002), BCSC 1336 (CanLII), 2002, 6 (B.C.L.R. (4th) 390, BCSC 1336)].
4 2004 BCCA 273 (CanLII), (2004), 27 B.C.L.R. (4th) 199, 2004 BCCA 273.
5 Paragraph 71.
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