Even in the absence of evidence of malice or ill-intent, the unreasonable withholding of payments can result in a special award.
Sivakumaru Sinnapu and Economical Mutual Insurance Company, FSCO A09-000900, July 30, 2010 – Arbitrator Wilson
Date of MVA: June 22, 2006
It is the arbitrator’s finding that the standards of subsection 282(10) of The Insurance Act require only that a determination of reasonableness in the withholding or delay of payments be made. “No ill-will, no intent to harm an insured, delay, or intentionally withhold payments is necessary”.
In this matter, the insurer’s own experts, excluding one, appeared to support the insured’s position that he met the criteria for benefits after the first 104-weeks of disability. However, the insurer took the position, based on the lone dissenting expert that the insured did not meet the criteria for benefits after the 104-weeks, going so far as to make a request from this expert that appeared to be outside his scope of expertise. As a result, the arbitrator found the withholding of payments to be unreasonable, and as such a special award was payable.
In determining quantum of the special award, which could be any amount up to 50% of the outstanding benefits including interest, the arbitrator acknowledged the findings in Liberty Mutual Insurance Company and Persofsky et al.:
To paraphrase, the award should be proportionate to: (i) the blameworthiness of the insurer’s conduct; (ii) the vulnerability of the insured person; (iii) the harm or potential harm directed at the insured person; (iv) the need for deterrence; (iv) the advantage wrongfully gained by the insurer from the misconduct; and (vi) should take into account any other penalties or sanctions that have been or likely will be imposed on the insurer due to its misconduct.
It was the arbitrator’s finding, based on these criteria, that the insurer should have been able to see the serious repercussions of stopping payments to the insured even though their actions were not made with malice. Based on this, the arbitrator put the award at the high end, an amount equalling 40% of the outstanding benefits and interest.
What this means for you:
It is important in making a decision that could have serious repercussions to an insured, that all available information be considered. Upon doing so, even if there is no evidence of malice or ill-intent, the fact that the resulting decision may be considered unreasonable, could result in a special award pursuant to subsection 282(10) of The Insurance Act.
For further discussion on special awards, we refer you to another ADS blog.
New SABS changes:
- There does not appear that there would be any impact on this decision as a result of the New SABS.