Punitive Damages & When Insurance Companies Need To Pay

Punitive Damages & When Insurance Companies Need To Pay



Most disputes between an insurance company and their insured are reasonable differences of opinion: You honestly believe you cannot return to work and the insurance company believes you can. If both positions are backed by solid medical evidence, off to trial (or mediation) you go.


But sometimes the insurance company is out in left field. Sometimes the insurer just ignores critical medical information, claps its hands over its ears and continues to deny you long term benefits. With no justification. When that happens, our clients often turn to us and say that they should have to pay for this.


In such cases, the door is wide open for “extra” compensation, that is, for punitive and mental distress damages. These can add up.


In a case that is hot off the press, LTD benefits were denied to Marilyn Fraser by Fenchurch, the insurer. Fenchurch asked that a doctor of their choice examine Ms Fraser. The good doctor did just that and said there was not much physically wrong with her. But the physician did NOT say that she was able to return to work and instead recommended a further psychological examination or assessment. Fenchurch could not be bothered with that, however, and they continued to deny her benefits. In a simply awful internal memo, the claims adjuster said that they should deny her benefits and, if she appealed, then and only then should they proceed with the recommended psychological assessment.


This did not make the court happy when the matter got to trial. The court said that an insurer cannot ignore its own expert’s recommendations and cannot deem a person able to return to work when its own specialist does not support that. As well, the court found that the insurance adjuster was playing games with Ms Fraser’s well being – by only agreeing to the psychological examination if she mustered the courage to appeal.


Result? The court hammered Fenchurch with $150,000 in punitive damages, as a warning to other insurers not to play the same games. Ms Fraser also got $10,000 for mental distress damages.


Bottom line: In all cases, we look for signs that the insurer has acted in bad faith and outrageously. We claim punitive and mental distress compensation in all such cases.


Have you been denied long-term disability benefits by your insurer? Are you left wondering why? Read this article: 5 Common Reasons Insurers Deny Disability Claims.