Call Us Now

Blog

Nova Scotia Supreme Court awards $680,000 in punitive and aggravated damages in Long Term Disability (LTD) Insurance Case

Posted On: January, 24 2015

In a June 2014 decision, the Supreme Court of Nova Scotia awarded $500,000 in punitive and $180,000 in aggravated damages to plaintiff Bruce Brine as a result of his insurer Industrial Alliance’s (“Industrial”) failure to handle Mr. Brine’s claim for Long Term Disability (“LTD”) benefits in a good faith manner.

Mr. Brine worked as a police officer for a number of years when he became severely disabled by depression. Mr. Brine stopped working as a result of his depression and was approved for LTD benefits in 1995 which were available to him through his employment.

As with many group policies of LTD insurance, Mr. Brine’s LTD insurance policy with Industrial provided that any disability benefits payable by the Canada Pension Plan (“CPP”) or through Mr. Brine’s public service pension plan would be directly deducted and offset from Mr. Brine’s LTD benefits.

After three years of being on LTD benefits, Mr. Brine was approved for disability benefits under both CPP and his pension plan. In 1998, Mr. Brine received lump sum payments for both CPP and his pension benefits, representing the retroactive disability benefits that Mr. Brine ought to have received between 1995 and 1998.

Under Mr. Brine’s policy, Industrial was required to pay benefits until Mr. Brine reached age 65. The policy provided that if Mr. Brine received a lump sum payment of CPP or other benefits, this lump sum was to be divided equally and offset over the remaining term of Mr. Brine’s policy. Because Mr. Brine was 49 when he received a lump sum payment of CPP and pension benefits, this meant Industrial was required to divide his lump sum payment for CPP and pension benefits and apply an offset over the remaining 16 years of the policy.

Instead of pro-rating the offset for CPP and pension benefits in accordance with the policy, Industrial implemented a total clawback of Mr. Brine’s LTD benefits and cut off his LTD benefits completely between October 1998 and 2003. This meant that Industrial had reduced Mr. Brine’s LTD benefit to zero, until the CPP and pension payments were completely paid off. As a result, Mr. Brine’s financial circumstances deteriorated and he was forced to declare bankruptcy. After Mr. Brine’s bankruptcy was discharged, Industrial refused to recognize that Mr. Brine’s CPP and pension benefit overpayment had been discharged, and refused to reinstate LTD benefits until 2003.

Mr. Brine’s difficulties were compounded by the fact that in July 1998, Industrial had terminated the vocational rehabilitation services that he was entitled to under the policy, which caused him to experience a setback in his mental health. Further, between 1995 and 1998, Industrial withheld tax and issued T4 statements for Mr. Brine’s LTD benefits, despite the fact that his benefits were non-taxable.

After 1999, Industrial continued to issue T4 statements for Mr. Brine’s LTD benefits, even after Mr. Brine obtained two Tax Court of Canada rulings which determined that Mr. Brine’s LTD benefits were non-taxable. Mr. Brine was repeatedly forced to deal with inquiries and re-assessments from Canada Revenue as a result of Industrial’s ongoing failure to comply with the Tax Court of Canada rulings.

At trial, the Judge agreed that a portion of Mr. Brine’s CPP and pension benefit overpayment had been extinguished by his bankruptcy. Accordingly, the Court awarded Mr. Brine damages of $62,036, representing the portion of his CPP and pension overpayment that ought not to have been collected by Industrial.

The Court further found that Industrial had breached its duty of utmost good faith in its handling of Mr. Brine’s LTD claim. Specifically, the Court found that Industrial’s arbitrary termination of Mr. Brine’s rehabilitation benefits and its conduct of continuing to treat Mr. Brine’s disability benefits as taxable, despite the Tax Court of Canada rulings, justified an award of punitive and aggravated damages. The trial judge awarded Mr. Brine $150,000 in aggravated damages and $500,000 in punitive damages as a result of this conduct on the part of Industrial. The Trial judge further awarded $30,000 in mental distress damages to Mr. Brine for Industrial’s failure to comply with the offset provisions of the policy.

The full text of the Nova Scotia Supreme Court’s decision can be found here: Industrial Alliance Insurance and Financial Services Inc. v. Brine, 2014 NSSC 219.

 

Contact Us

RECENT NEWS & EVENTS

5 STAR REVIEWS

  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by SB

    I just wanted to let you know how happy I am with the outcome and how very grateful I am for the guidance and support that you and your team provided.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Google user

    Patrick James is really a great lawyer who is smart and great to deal with. He's been our litigation counsel for over 5 years on several different matters. Patrick recently gave our company great strategic advice that resulted in a big commercial litigation win for our company. He's fierce, tenacious, and really cares about getting the best outcome for his clients.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Google user

    Patrick is a very good lawyer. He recently successfully defended a lawsuit against my company and has pursued several litigation claims for us in the past. All claims settled input favour. Mr. James is smart and quickly gives you great strategic advice. Patrick has been a real asset to our business.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Sandra L.

    Andrew Wray and Patrick James recently helped settle a difficult situation for me and my family. The results were exactly what we were hoping for. They are honest, strategic and will provide you with the best advice for you and your financial situation. I highly recommend them to everyone I know.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Mark C.

    Their team is highly focused and incredibly professional - from our experience it would be difficult not to believe that Pinto Wray James are one of Ontario's leading Firms in Labor and Employment law. The mindful client care and complete understanding of the case eased fears and the stress that comes with any legal dispute. Expect to find high level smartly crafted legal solutions at Pinto Wray James LLP - couldn't recommend more.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Sherry C.

    Patrick is knowledgeable, strategic, supportive, and patient. His guidance and advice helped me to maintain focus and to keep things in perspective. His experience and keen perception provides him with an edge that allows him to assess the situation, the people involved, and to offer a strategic resolution that works best for all involved. If you ever require legal advice and assistance, I highly recommend him and his team. They will be there 100% for you.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Christian V.

    Patrick is a fearless advocate for diverse clients. His strategic approach, and his empathy, are what set him apart as a litigator, and champion of the underdog.
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by A Google User

    I have no hesitation recommending Andrew Wray of Pinto Wray James LLP. He provided me with legal advice regarding an employment law issue and his council was practical and honest. Andrew's approach is very much one of blending legal excellence with good common sense. An excellent lawyer!
  • Rating: 5 Lawyer Toronto - 5 Star Reviews
    Pinto Wray James Reviewed by Larry S.

    Patrick listens to his clients and shows compassion, empathy and professionalism. He cares deeply that the individual that has been wrongfully terminated gets the best judgment available to him. I would not hesitate in recommending him to friends or family.
Submit