Unnamed Insured May be Able to Recover Damages For Denial for Benefits of Another Insured
Watkins v Western Assurance Company, 2016 ONSC 2574
The Plaintiff’s mother was injured in a motor vehicle accident in 2003 when he was 15 years old. The Plaintiff was not in the car at the time of the accident. In 2011 he brought a claim for damages arising out of the Defendant’s handling of his mother’s claim when they terminated her income replacement benefits. The Plaintiff has alleged wrongful and bad faith denial of his mother’s claim which caused him mental distress and impaired his chances at a bright future. In 2012 the Plaintiff brought an action for accident benefits. The Defendant brought a motion for summary judgment on the accident benefits claim and a motion to strike the claim for damages. The summary judgment motion was granted but the motion to strike was dismissed.
The Plaintiff argued that because he had not been provided a written explanation of accident benefits, the time requirements for submitting an application were not running. However, the court found that since the Plaintiff was not in the vehicle at the time of the accident there was no requirement for the insurance company to provide an explanation regarding benefits. The informational requirement is only triggered when the insurer is specifically informed that a dependent minor has suffered harm as a result of the accident or intends to apply for benefits. As the Plaintiff did not bring the claim within two years of him attaining the age of majority and did not have a reasonable explanation for the delay the summary judgment motion was granted and the claim was dismissed.
The damages claim was not plain and obvious that it did not have a chance of success. The Plaintiff’s mother was injured and received accident benefits. A dispute arose between the parties and her income replacement benefits were terminated. An action regarding the termination was settled in 2007. The Plaintiff brings a claim that as a result of his mother’s denial of benefits he was deprived of her care, guidance and companionship which lead to his inability to acquire a post-secondary degree, achieve pre-accident goals, maintain relationships and integrate into society.
The court found that although this may be a novel cause of action that should not prevent the Plaintiff from proceeding. For the purposes of the motion it was admitted that the Plaintiff’s mother’s claim was mishandled and it adversely impacted the Plaintiff. The Insurance Act provides that an insured person includes any dependent who was not involved in the accident but suffered a psychological or mental injury as a result of the accident. The Ontario Court of Appeal held that damages may be awarded to a person who is insured under a policy whether the policy names that person or not. It could also be reasonably foreseeable that a breach of an insurance policy, which is a policy for peace of mind, could cause mental distress to anyone insured under the policy. There are also no obvious residual policy reasons of why this duty of care should be negated.
The court noted that this is a novel cause of action and expressed that they did have concerns as to whether the harm was foreseeable, if the relationship of the parties was sufficiently proximate and if there are residual policy considerations which may negate the duty of care. If the allegations can be proven at trial then there may be some form of relief granted by the court so it was not plain and obvious that the claim could not be successful. The motion to strike was dismissed.
What the Insurer Should Know
It is not impossible for an insured to be compensated for a denial of a claim even if that denial does not relate to claims made for their own damages.