Case information

Insurance — Remedies — Punitive Damages — Insurer’s duty to act in good faith — Insured under a travel medical policy suffering injuries on vacation requiring hospitalization and surgery — Insurer denying coverage — Insured commencing action against insurer — Prior to trial, insurer reversing decision to deny coverage and settling health care bills at steep discount — Whether compensatory damages, increased costs, or some other alternative remedy is available for breach of an insurer’s duty of good faith and fair dealing in the investigation, assessment, and payment of claims.

Case summaries are prepared by the Office of the Registrar of the Supreme Court of Canada (Law Branch). Please note that summaries are not provided to the Judges of the Court. They are placed on the Court file and website for information purposes only.

Christopher Stewart purchased a travel medical policy of insurance before going on vacation. The policy was underwritten by respondents Lloyd's Underwriters and Industrial Alliance Insurance and Financial Services Inc. / Industrielle Alliance, Assurance et Services Financiers inc. (together, “the insurers”).

While on vacation, Mr. Stewart fell and was injured after experiencing a brief loss of consciousness known as “syncope”. He was hospitalized and underwent surgery as a consequence. He was eventually flown back to a hospital in British Columbia.

As a result of this incident, Mr. Stewart incurred close to $300,000 in medical expenses. The insurers’ agent denied coverage under the travel medical policy, on the grounds that Mr. Stewart’s injuries were related to alcohol intoxication. Consequently, health care providers and collection agencies began contacting Mr. Stewart directly to seek payment of outstanding amounts. Mr. Stewart denied he had been intoxicated and retained legal counsel to commence an action against the insurers.

Several months before trial the decision to deny coverage was reversed. The insurers’ agent settled Mr. Stewart’s health care bills at a significant discount prior to trial, paying only about 20% of the outstanding amount.

The trial judge found that the insurers had breached their duty of good faith and fair dealing and awarded Mr. Stewart punitive damages, as well as non-pecuniary damages for mental distress. Mr. Stewart’s claim for legal fees as a head of compensatory damages was dismissed.

Mr. Stewart passed away after the trial, but his estate appealed from the dismissal of his claim for legal fees. The insurers cross-appealed against the award of punitive damages. The Court of Appeal dismissed the appeal but allowed the cross-appeal.