Whiten v Pilot Insurance Co

Last updated
Whiten v Pilot Insurance Co
Supreme court of Canada in summer.jpg
Supreme Court of Canada
Hearing: December 14, 2000
Judgment: February 22, 2002
Full case nameDaphne Whiten v Pilot Insurance Company and The Insurance Council of Canada and the Ontario Trial Lawyers Association
Citations 2002 SCC 18, [2002] 1 S.C.R. 595
Docket No.27229 [1]
RulingAppeal allowed, and cross-appeal dismissed
Court membership
Chief Justice: Beverley McLachlin
Puisne Justices: Claire L'Heureux-Dubé, Charles Gonthier, Frank Iacobucci, John C. Major, Michel Bastarache, Ian Binnie, Louise Arbour, Louis LeBel
Reasons given
MajorityBinnie J., joined by McLachlin C.J. and L'Heureux‑Dubé, Gonthier, Major and Arbour JJ.
DissentLeBel J.

Whiten v Pilot Insurance Co, 2002 SCC 18, [2002] 1 S.C.R. 595 is a leading Supreme Court of Canada decision on the availability of punitive damages in contract. The case related to the oppressive conduct of an insurance company in dealing with the policyholders' claim following a fire. According to the majority, "[t]his was an exceptional case that justified an exceptional remedy." [2]

Contents

Background

On January 18, 1994, the Whitens discovered a fire in their home in Haliburton County, Ontario. The family fled their home in the night wearing only their pajamas, and one member of the family suffered serious frostbite to his feet. The fire destroyed the Whiten's home, possessions, and resulted in the deaths of their three cats. [3] The family rented a small cottage nearby and received a single payment of $5,000 from the Pilot Insurance Company for living expenses, and subsequently cut off support for the family. [4]

The local fire chief concluded the fire was accidental and concluded it started from a malfunctioning kerosene heater on the porch of the home. As firefighters on scene did not find evidence of arson, the Fire Marshall's office was not called to investigate. [5] The independent insurance adjustor retained by Pilot Insurance investigated the fire and concluded based on the physical evidence and family's conduct that the fire was accidental. [6]

Pilot Insurance found that the family was behind on mortgage payments and that the Whiton's were arranging refinancing. The independent adjuster was also made aware of the family's financial difficulties during the investigation. [7] Pilot Insurance refused to accept the findings of the independent adjustor and later rejected similar advice from the Insurance Crime Prevention Bureau that there was little basis to deny the claim for fraud. [8] After requesting the independent adjuster continue to investigate new avenues for arson, which they were unable to find any evidence, Pilot Insurance replaced the adjuster. [9]

Pilot had also retained an engineering expert that initially concluded the fire was accidental, however after meeting with Pilots attorney the engineer reclassified the fire as "suspicious, possibly incendiary". [10]

Ontario Court of Justice decision

In the January 25, 1996, a jury in the Ontario Court of Justice awarded Whiten $1,287,300, including $1 million for punitive damages, as well as interest on the awarded compensatory damages. [11] The punitive damages awarded by the jury exceeded the $125,000 claimed by Whiten. In his written decision, Justice Theodore Matlow noted the jury's assessment of punitive damages was "very high and perhaps without precedent" but described the award as "entirely reasonable in light of the evidence". [12]

Ontario Court of Appeal decision

Pilot Insurance appealed the award of $1 million in punitive damages as the company did not commit "an independent actionable wrong" and because its actions was not reprehensible enough to warrant the damages. Instead Pilot requested the court remove the punitive damages, or limit the damages to $15,000 to $25,000. [13] Furthermore, Pilot conceded that despite the position taken at the lower court, the evidence unequivocally showed that the Whiten's fire was accidental. [14]

On February 2, 1999, the majority for the Ontario Court of Appeal written by Justice George Finlayson and concurred by Justice Marvin Catzman, agreed Pilot's reprehensible conduct justified the award of punitive damages, however, Finlayson found the $1 million award excessive. [15]

Dissenting in part, Justice John I. Laskin found Pilot's behaviour was reprehensible and the $1 million punitive damage award was justified. [16]

Reasons of the court

The Court's opinion was written by Binnie J.; Justice LeBel dissented.

Binnie

The Supreme Court outlined the contractual duty of an insurer to deal with policyholders in good faith, the breach of which would make the insurer liable for punitive damages. Writing for the majority, Justice Binnie held that the defendant insurance company had breached its contractual duty through its high-handed and reprehensible treatment of the plaintiff insureds. Justice Binnie also restored the unprecedented $1 million jury award, which the a majority at the Ontario Court of Appeal had reduced to $100,000.

Justice Binnie accepted the standard for imposing punitive damages articulated in Hill v Church of Scientology of Toronto : "Punitive damages are awarded against a defendant in exceptional cases for 'malicious, oppressive and high-handed' misconduct that 'offends the court's sense of decency'..." [17] Binnie set out the following principles to guide trial judges in their charges to juries:

(1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community's collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a "windfall" in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient. [18]

LeBel

In dissent, Justice LeBel accepted the appropriateness of a punitive damage award but was critical of the award's magnitude and skeptical of the remedy's deterrence objective on the facts of the case: there was no evidence of endemic high-handed behaviour, either by the defendant insurer toward its policyholders, or in the Canadian insurance industry generally. In any event, he opined, regulatory and penal mechanisms would be more appropriate for any industry-wide concerns, than less predictable damage awards. [19]

Justice LeBel agreed generally with the majority's description of principles governing punitive damages and, in particular, the importance of rationality and proportionality in shaping any such award. However, the original jury award in this case failed the rationality test because of its sole purpose of punishing the insurer's bad faith. It also failed the proportionality test because of the gulf between the quantum of the award and the loss suffered by the plaintiffs. [20] The reduced award at the Court of Appeal, according to Lebel J., satisfied both of these tests, "impos[ing] significant punishment for the bad faith of Pilot without upsetting the proper balance between the compensatory and punitive functions of tort law." [21] This award was sufficient and "consistent with the nature and purpose of punitive damages in the law of torts". [22] The majority result, on the other hand, was inappropriate in the context of tort law:

Tort law fulfills diverse functions. While deterrence and denunciation both still play a role, since it broke away from criminal law in the Middle Ages, in its core function, tort law has been compensatory or corrective...The purpose of this part of our legal system remains to make good the loss suffered, no less, no more...The award of punitive damages in discussion here leads us far away from this principle. It tends to turn tort law upside down. It transmogrifies what should have remained an incident of a contracts case into the central issue of the dispute. The main purpose of the action becomes the search for punishment, not compensation. [23]

Significance of the decision

Justice Binnie pointed to this decision among all of his Supreme Court opinions as giving him "particular satisfaction": [24]

There was a lawyer who I believe must have been acting pro bono, who carried it all the way to the Supreme Court. He had gotten a jury so incensed at the insurance company that they awarded a million dollars in punitive damages. In the end, we upheld the outcome and it seemed to me that on a human scale, a massive injustice had been corrected and a very powerful message sent to the insurance industry. Occasionally, you feel that you have really made a difference.

See also

Related Research Articles

At common law, damages are a remedy in the form of a monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. To be recognised at law, the loss must involve damage to property, or mental or physical injury; pure economic loss is rarely recognised for the award of damages.

Punitive damages, or exemplary damages, are damages assessed in order to punish the defendant for outrageous conduct and/or to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit. Although the purpose of punitive damages is not to compensate the plaintiff, the plaintiff will receive all or some of the punitive damages in award.

<i>Hill v Church of Scientology of Toronto</i> Libel case

Hill v Church of Scientology of Toronto February 20, 1995- July 20, 1995. 2 S.C.R. 1130 was a libel case against the Church of Scientology, in which the Supreme Court of Canada interpreted Ontario's libel law in relation to the Canadian Charter of Rights and Freedoms.

BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), was a United States Supreme Court case limiting punitive damages under the Due Process Clause of the Fourteenth Amendment.

<span class="mw-page-title-main">Ian Binnie</span> Justice of the Supreme Court of Canada from 1998 to 2011

William Ian Corneil Binnie is a former puisne justice of the Supreme Court of Canada, serving from January 8, 1998 to October 27, 2011. Of the justices appointed to the Supreme Court in recent years, he is one of the few appointed directly from private practice. On his retirement from the Court, he was described by The Globe and Mail as "arguably the country's premier judge", by La Presse as "probably the most influential judge in Canada of the last decade" and by the Toronto Star as “one of the strongest hands on the court.”

<i>Beals v Saldanha</i> Supreme Court of Canada case

Beals v Saldanha, [2003] 3 S.C.R. 416, 2003 SCC 72 is a leading Supreme Court of Canada decision on the conflict of laws, where the Court established the requirements to enforce foreign judgments in Canada. The Court held that foreign judgments were enforceable in Canada where there was a "real and substantial connection" between the foreign jurisdiction and the subject matter giving rise to the claim.

Insurance bad faith is a tort unique to the law of the United States that an insurance company commits by violating the "implied covenant of good faith and fair dealing" which automatically exists by operation of law in every insurance contract.

<span class="mw-page-title-main">Tort reform</span> Legal reforms aimed at reducing tort litigation

Tort reform consists of changes in the civil justice system in common law countries that aim to reduce the ability of plaintiffs to bring tort litigation or to reduce damages they can receive. Such changes are generally justified under the grounds that litigation is an inefficient means to compensate plaintiffs; that tort law permits frivolous or otherwise undesirable litigation to crowd the court system; or that the fear of litigation can serve to curtail innovation, raise the cost of consumer goods or insurance premiums for suppliers of services, and increase legal costs for businesses. Tort reform has primarily been prominent in common law jurisdictions, where criticism of judge-made rules regarding tort actions manifests in calls for statutory reform by the legislature.

<span class="mw-page-title-main">Good faith (law)</span> Implied covenant of honesty and fair dealing in contract law

In contract law, the implied covenant of good faith and fair dealing is a general presumption that the parties to a contract will deal with each other honestly, fairly, and in good faith, so as to not destroy the right of the other party or parties to receive the benefits of the contract. It is implied in a number of contract types in order to reinforce the express covenants or promises of the contract.

<i>Unifund Assurance Co v Insurance Corp of British Columbia</i> Supreme Court of Canada case

Unifund Assurance Co v Insurance Corp of British Columbia, [2003] 2 S.C.R. 63, 2003 SCC 40 is a leading constitutional decision of the Supreme Court of Canada on extraterritorial application of provincial legislation.

Cooper Industries, Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424 (2001), was a decision by the United States Supreme Court involving the standard of review that Federal Appeal Courts should use when examining punitive damages awards.

<i>Wallace v United Grain Growers Ltd</i> Supreme Court of Canada case

Wallace v United Grain Growers Ltd, 1997 CanLII 332, [1997] 3 SCR 701 is a leading decision of the Supreme Court of Canada in the area of Canadian employment law, particularly in determining damages arising from claims concerning wrongful dismissal.

Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008), was a case decided by the Supreme Court of the United States. The Court ruled in a 5-3 decision that the punitive damages awarded to the victims of the Exxon Valdez oil spill should be reduced from $2.5 billion to $500 million.

<i>State Farm Mutual Automobile Insurance Co. v. Campbell</i> 2003 United States Supreme Court case

State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), was a case in which the United States Supreme Court held that the due process clause usually limits punitive damage awards to less than ten times the size of the compensatory damages awarded and that punitive damage awards of four times the compensatory damage award is "close to the line of constitutional impropriety".

<i>Grant v Torstar Corp</i> Supreme Court of Canada case

Grant v Torstar Corp, [2009] 3 S.C.R. 640, 2009 SCC 61, is a 2009 Supreme Court of Canada decision on the defences to the tort of defamation. The Supreme Court ruled that the law of defamation should give way to the rights of a party to speak on matters of public interest, provided the party exercises a certain level of responsibility in verifying the potentially defamatory facts. This decision recognizes a defence of responsible communication on matters of public interest.

<span class="mw-page-title-main">Tort law in India</span> Aspect of Indian law

Tort law in India is primarily governed by judicial precedent as in other common law jurisdictions, supplemented by statutes governing damages, civil procedure, and codifying common law torts. As in other common law jurisdictions, a tort is breach of a non-contractual duty which has caused damage to the plaintiff giving rise to a civil cause of action and for which remedy is available. If a remedy does not exist, a tort has not been committed since the rationale of tort law is to provide a remedy to the person who has been wronged.

<i>Euro-Excellence Inc v Kraft Canada Inc</i> Supreme Court of Canada case

Euro-Excellence Inc v Kraft Canada Inc, 2007 SCC 37, [2007] 3 S.C.R. 20, is a Supreme Court of Canada judgment on Canadian copyright law, specifically on the issue of indirect infringement and its application to parallel importation. Kraft Canada sued Euro-Excellence Inc. for copyright infringement due to their importation of Côte d’Or and Toblerone chocolate bars from Europe into Canada. A majority of the court found that the copyright claim could not succeed, although they split on whether the claim failed due to the rights of an exclusive licensee or due to the scope of copyright law.

<i>Cinar Corp v Robinson</i> Supreme Court of Canada case

Cinar Corp v Robinson is a leading case of the Supreme Court of Canada in the field of copyright law, which has impact in many key aspects of it, including:

<i>Honda Canada Inc v Keays</i> Canadian Supreme Court employment law case

Honda Canada Inc v Keays, 2008 SCC 39, [2008] 2 SCR 362 is a leading case of the Supreme Court of Canada that has had significant impact in Canadian employment law, in that it reformed the manner in which damages are to be awarded in cases of wrongful dismissal and it declared that such awards were not affected by the type of position an employee may have had.

TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993), was a decision by the Supreme Court of the United States, which upheld the decision of the West Virginia state court awarding $19,000 in compensatory damages and $10 million in punitive damages to the plaintiff. Although multiple justices recognized that the punitive damages were 526 times the compensatory damages, the Court held a "general concern of reasonableness" should guide courts in determining constitutionally acceptable damages under the due process clause of the Fourteenth Amendment.

References

  1. ↑ SCC Case Information - Docket 27229 Supreme Court of Canada
  2. ↑ para. 94.
  3. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at para 2.
  4. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at para 3.
  5. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at para 5.
  6. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at para 6.
  7. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at paras 6–7.
  8. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at paras 8–9.
  9. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at paras 11–12.
  10. ↑ Whiten v. Pilot Insurance Co., 2002 SCC 18 (CanLII), [2002] 1 SCR 595, at paras 13–15.
  11. ↑ Whiten v. Pilot Insurance Co., [1996] O.J. No. 227 (ON SC), at para 1.
  12. ↑ Whiten v. Pilot Insurance Co., [1996] O.J. No. 227 (ON SC), at para 13.
  13. ↑ Whiten v. Pilot Insurance Company, 1999 CanLII 3051 (ON CA), at para 3.
  14. ↑ Whiten v. Pilot Insurance Company, 1999 CanLII 3051 (ON CA), at para 2.
  15. ↑ Whiten v. Pilot Insurance Company, 1999 CanLII 3051 (ON CA), at para 50.
  16. ↑ Whiten v. Pilot Insurance Company, 1999 CanLII 3051 (ON CA), at para 4.
  17. ↑ para. 94; Hill v Church of Scientology of Toronto , [1995] 2 S.C.R. 1130, at para. 196.
  18. ↑ para. 94.
  19. ↑ paras. 159 & 161.
  20. ↑ paras. 151-58.
  21. ↑ para. 163.
  22. ↑ para. 143.
  23. ↑ paras. 146-48.
  24. ↑ Kirk Makin (2011-09-23). "Justice Ian Binnie's exit interview (transcript)". The Globe and Mail. Retrieved 2011-10-16.

Further reading

This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.