Blue Cross to pay $1.5-million in punitive damages

Lawyers for Sara Baker are drawing attention to a recent decision by Ontario’s highest court, upholding a jury decision to award Baker $1.5-million in punitive damages, after it was found that Blue Cross Life Insurance Company of Canada showed reckless indifference to its duty to consider Baker’s claim in good faith. At worst, the Court of Appeal for Ontario documents state, the company engaged in a deliberate strategy to wrongfully deny her benefits.

Baker suffered a stroke while exercising in 2013. She was 38 years old at the time and a director at Humber River Hospital. After being denied benefits, and after exhausting the company’s appeal process, a jury agreed that Baker was totally disabled within the meaning of Blue Cross’ long-term disability benefits policy. It ordered retroactive benefits in the amount of $220,604 be paid, along with aggravated damages for mental distress worth $40,000 and punitive damages in the amount of $1.5-million.

“The trial judge found that full indemnity costs were appropriate in this case and fixed those costs at $1,083,953.50, all inclusive,” the court decision states. The Ontario Court of Appeal upheld the award for punitive damages but granted leave to appeal the costs award, saying the trial judge erred in creating a new category of cases where full indemnity costs automatically follow. The Canadian Life & Health Insurance Association (CLHIA) was granted intervenor status in the case regarding the matter of costs only.

Blue Cross did not appeal the declaration that Baker is totally disabled and did not take issue with the trial judge’s instructions regarding punitive damages, but did appeal the punitive damages award itself. “Blue Cross asserts that a contextual and fair reading of the entire report demonstrates that Ms. Baker’s claim was handled in a balanced and reasonable manner.” 

In summary, the decision continues, “the evidence at trial raises serious concerns regarding the manner in which several disability claim examiners and reviewers at Blue Cross processed Ms. Baker’s file. At best, it shows reckless indifference to its duty to consider the respondent’s claim in good faith and to conduct a good faith investigation, and at worst, a deliberate strategy to wrongfully deny her benefits.” 

Blue Cross’ submission, they continue, is that the company acted in good faith, despite their erroneous assessment. “In other words, it has a right to be incorrect without being liable for punitive damages.” 

During the course of the trial, Blue Cross elected to call no witnesses except one of its appeals specialists. “The result is that the jury never had evidence regarding why representatives of Blue Cross acted the way they did and whether they considered other courses of action. There was ample evidence to support an award of punitive damages.” 

Citing examples in the record that would justify such an award, the court then called out Blue Cross for stopping benefits payments on three separate occasions, using a deny first, ask questions later approach. It relied on opinions which it knew or ought to have known were incorrect and selectively relied on evidence that supported the denial of benefits. The company also ignored conflicting medical evidence in the case. It delayed obtaining independent medical exams, distorted assessment reports and repeatedly omitted medical report caveats in its internal files and in all communications, both internally and with Baker.

“In the face of this evidence, Blue Cross asserts that, while it reached the wrong conclusion about Ms. Baker’s condition, it acted in good faith. It was open to the jury to accept this theory of the case. However, to do so, it would have had to ignore the coincidence that every time Blue Cross erred in handling the respondent’s file, it was to her detriment and to the benefit of Blue Cross,” the decision states. “Overall, we see repeated instances of the Blue Cross team ignoring information, misinterpreting experts’ reports, and relying on the ill-informed advice of their contracted doctors to deny benefits. In effect, they created a closed loop of information that ignored contrary information and created a counter-narrative based on their misinterpretation of the relevant data.” 

They go on to say that jurors could have concluded that Blue Cross was not only cavalier in treating Baker’s claim but that it undertook a deliberate strategy to wrongfully deny her benefits. “The fact that Blue Cross failed to call critical witnesses to provide the context about their handling of the file could further serve to support a finding that the conduct was deliberate.” 

Notably, the decision states that there was also ample evidence to conclude that the problems within the company are systemic in nature. “This was not a case of a rogue disability claim examiner. The many Blue Cross employees who touched this file took the same approach, which ignored the respondent’s rights under the policy. This evidence suggests that there may be many other claimants that may have been treated in the same manner.” 

“We have received the decision from the Court of Appeal for Ontario. We respect the legal proceedings that took place and decision of the courts and we are not appealing the decision,” said Blue Cross spokesperson to the Insurance Portal.