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Fernandes v. Penncorp Life Insurance Co. [2014] ONCA 615

Decided March 22, 2013

“Mental distress damages are compensatory, not punitive. An award which was four times that requested by the respondent was markedly reduced as it could only be described as punitive.”

Ontario Court of Appeal

The Respondent, Fernandes, was bricklayer who could no longer work in his trade, due to a work-related injury. Fernandes applied for disability benefits, which the insurer denied. Fernandes sued his insurer for unpaid benefits as well as for punitive and aggravated damages for mental distress. The trial judge held that the insurer did not have a proper basis to terminate benefits and that it had acted in bad faith. The trial judge awarded the Respondent, $236,773 in disability benefits, punitive damages of $200,000, aggravated damages of $100,000 (mental distress damages) and full indemnity costs of $212,130.66. The Appellant, Penncorp, appealed the award for punitive and aggravated damages for mental distress. The Appeal Court dismissed the punitive damages appeal but allowed the appeal denying the Plaintiff’s award for mental distress. The Appeal Court held that the trial judge offered no explanation for the quantum; he failed to reference any of the psychiatric evidence and he failed to explain why the facts of this case justified a higher award than those in comparable cases or why he departed from the respondent’s requested quantum of $25,000 and the appellant’s suggestion of $20,000. The Court of Appeal held that the award was inordinately high and entirely disproportionate and reduced the aggravated damages from $100,000 to $25,000.

Submitted to the FDCC by David A. Bertschi, a founding partner at Bertschi Orth Solicitors and Barristers LLP,

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