Mr. Branco had workers compensation benefits and group long term disability insurance coverage through his employment, which were administered and paid by two companies, American Home Assurance Company (“AIG”) and Zurich Life Insurance (“Zurich”), respectively.
Although Mr. Branco initially received some insurance benefits from AIG to replace his lost income, AIG stopped paying his benefits just a few months after approving his insurance claim. After withholding his disability benefits for two months, AIG then offered Mr. Branco a lump sum payment of $22,500 to settle his entire insurance claim. Mr. Branco was 50 years old at the time of his injury and was earning just under $52,000 a year. AIG’s lump sum settlement offer represented less than six months of wages, even though Mr. Branco was potentially entitled to lost wages and other health care benefits up to the age of 65. Mr. Branco refused the company’s low-ball offer, commenced a legal claim, and spent the next several years being subjected to arbitrary suspensions of his benefits from the company and ongoing requests for medical reports, despite the fact that he was permanently disabled and clearly entitled to benefits.
For its part, Zurich allowed Mr. Branco’s long term disability claim to become lost in an administrative black hole and delayed the payment of Mr. Branco’s long term disability benefits for a period of nine years, despite the fact that the company had approved Mr. Branco’s claim when he first applied in 2003. After receiving his application for long term disability benefits, and before issuing any payments, Zurich also offered to settle Mr. Branco’s claim for a lump sum of only $53,600, despite the fact that Mr. Branco was entitled to over 10 years of lost wages benefits, worth more than $500,000 over the life of his disability insurance claim.
After his benefits were first suspended, Mr. Branco commenced a statement of claim against AIG and Zurich for breaching their contractual obligations to provide him with disability benefits. In March 2013, the Saskatchewan Queen’s Bench court released its decision in Mr. Branco’s case.
The Saskatchewan Court found that the companies had breached their contractual obligations to pay Mr. Branco’s benefits and had acted unfairly and in bad faith. The court was particularly aghast at the insurance companies for withholding payments, then offering to settle both claims for far less than their actual value. The Court found that the act of withholding benefits placed undue pressure on Mr. Branco to accept a low settlement, as he would have no income upon which to live unless he accepted the offers. Describing the insurance companies’ conduct as cruel, malicious and torturous, the Court ordered punitive and aggravated damages of $4.95 million against AIG and Zurich, as well as Mr. Branco’s legal costs and all of the benefits he was entitled to under his policies.
Significantly, the Court also ordered AIG and Zurich to continue Mr. Branco’s monthly disability benefits until the age of 65, and ordered AIG to reimburse him for his medical expenses for the rest of his life, as required by the policy.
In justifying this large punitive damages award, the court observed that a punitive damages award of $3 million may not be particularly significant to the financial bottom line of a successful worldwide insurance company. The Court stated that it hoped that the award would gain the attention of the insurance industry, so that it would recognized “the destruction and devastation” caused by “failing to honour their contractual policy commitments” to insured persons. The full text of the Court’s decision can be found here: Branco v American Home Assurance Company, 2013 SKQB 98 (CanLII).