[10] In July 2004, Echelon retained Dr. Kwok, an orthopaedic surgeon, to examine Ms. McQueen. Echelon did not give Dr. Kwok a copy of Ms. Foster’s report.
[11] Dr. Kwok wrote a report dated July 23, 2004, in which he stated that Ms. McQueen was capable of conducting her own housekeeping, was not disabled from driving a motor vehicle and was able to take public transportation.
[12] After receiving Dr. Kwok’s report, Echelon immediately stopped paying Ms. McQueen housekeeping and transportation benefits.
[13] Ms. McQueen requested, and Echelon sought, the advice of an independent medical occupational therapist. That therapist advised that Ms. McQueen required assistance with her housekeeping but that an in-home assessment should be performed first. Echelon told Ms. McQueen that the assessment would cost $620.11 but it refused to pay for the assessment because it was not “reasonable and necessary”.
[14] Despite Ms. McQueen’s repeated entreaties for the SABS benefits, and the provision of additional medical documentation showing that she needed them, Echelon refused to reinstate the benefits. The trial judge found that in a three-year period, Ms. McQueen received 21 denials for 16 separate benefits.
b) More than a simple denial of benefits
[52] Echelon also submits that this is merely a case about the denial of benefits and the simple denial of benefits does not amount to bad faith.
[53] I accept that a lack of good faith is not to be inferred simply because an insurer does not pay a claim. However, based on the findings of the trial judge, it cannot be said that this case was one in which Echelon simply denied benefits.
[54] The reasons of the trial judge must be read as a whole. The specific section of the judgment in which he deals with damages for bad faith and mental distress cannot be separated from the balance of the judgment in which he makes findings in relation to Echelon’s conduct. It is evident that those findings lay the foundation for his reasoning on damages.
[55] As early as para. 12 of the reasons, the trial judge refers to Fidler v. Sun Life Assurance Co. Ltd., 2006 SCC 30 (CanLII), 2006 SCC 30, [2006] 2 S.C.R. 3 (Fidler), noting that in Fidler, the Supreme Court of Canada held that an insurer owes a common law duty to act in good faith in all its dealings with an insured and has an additional duty not to inflict unnecessary mental distress. He returns to Fidler in paras. 51 and 52 of the reasons, stating that in a case of alleged mental distress, the court must be satisfied that:
a) an object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and
b) the degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation.
[56] Throughout the reasons, the trial judge repeatedly notes that Echelon refused to provide benefits on the basis that they were not “reasonable and necessary” but Echelon gave no reasons for why they were not reasonable and necessary: see, for example, para. 33.
[57] It is also clear that the trial judge was critical of Echelon for relying on Dr. Kwok’s report, which was based on a “superficial examination lasting only 30 minutes” (para. 39), especially as Echelon had not given Dr. Kwok a copy of the report its own occupational therapist, which was favourable to Ms. McQueen (paras. 34 and 36).
[74] The court explained, at paras. 56-58, that it was an object of the contract:
The bargain was that in return for the payment of premiums, the insurer would pay the plaintiff benefits in the case of disability. This is not a mere commercial contract. It is rather a contract for benefits that are both tangible, such as payments, and intangible, such as knowledge of income security in the event of disability. If disability occurs and the insurer does not pay when it ought to have done so in accordance with the terms of the policy, the insurer has breached this reasonable expectation of security.
Mental distress is an effect which parties to a disability insurance contract may reasonably contemplate may flow from a failure to pay the required benefits. The intangible benefit provided by such a contract is the prospect of continued financial security when a person’s disability makes working, and therefore receiving an income, no longer possible. If benefits are unfairly denied, it may not be possible to meet ordinary living expenses. This financial pressure, on top of the loss of work and the existence of a disability, is likely to heighten an insured’s anxiety and stress. Moreover, once disabled, an insured faces the difficulty of finding an economic substitute for the loss of income caused by the denial of benefits.
People enter into disability insurance contracts to protect themselves from this very financial and emotional stress and insecurity. An unwarranted delay in receiving this protection can be extremely stressful. Ms. Fidler’s damages for mental distress flowed from Sun Life’s breach of contract. To accept Sun Life’s argument that an independent actionable wrong is a precondition would be to sanction the “conceptual incongruity of asking a plaintiff to showmore than just that mental distress damages were a reasonably foreseeable consequence of breach”. [Citations omitted. Emphasis in original.]
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