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Insurers who bully their customers will be held liable says court in Branco v American Home Assurance Company et al.

We might be told that the "peace of mind" that we buy when purchasing insurance is priceless, but for Mr. Branco submitting a claim was just the beginning of an almost 15 year old battle that ended last month. 

Mr. Branco, a Canadian citizen who was originally from Portugal took a job at a mine site in Kyrgyzstan with a subsidiary of Cameco Corporation of Saskatchewan. He was an exemplary welder and employee with a perfect attendance record. Through his employment, Mr. Branco had insurance with American Home Assurance Company (AIG), which provided him with benefits similar to worker compensation benefits and long term disability insurance with Life Insurance Company (Zurich).

In December of 1999, Mr. Branco was injured after dropping a steel plate on his foot. Despite the injury, he packed his foot with snow to relieve the pain, completed his shift and his 28 day work rotation. Later he developed Reflex Sympathetic Dystrophy, which left him unable to work, even after surgery and extensive physiotherapy and rehabilitation.

Mr. Branco informed both insurers of his condition, but dealing with them proved to be difficult as he was confronted with delays and outright refusals to pay anything, despite medical reports that he had suffered a genuine permanent injury. After rejecting a low cash settlement offer, Mr. Branco was left unable to provide for his family, and forced to survive on loans as well as remortgaging his house. His marriage broke down for a year and once the court action was initiated in 2001 there were "numerous and constant court delays" which the judge attributed to the two insurers. [2]

In 2013, the Trial Judge awarded a record of $4.5 million in punitive damages for the emotional distress Mr. Branco has suffered due to the stalling tactics of the insurers. The judge concluded that insurance contracts were "peace of mind" contracts and one of the purposes of the insurance contracts in this case was continued financial security in the event that Mr. Branco was injured and unable to continue working. As such, Mr. Branco suffered emotional distressed when the insurers breached their duty to deal in good faith with the insured and failed to pay him the benefits to which he was entitled. "These acts were malicious and designed to leverage a reduced settlement of the claim,", "The actions of AIG and Zurich establish a pattern of abuse of an individual suffering from financial and emotional vulnerability," the judge said in awarding damages.

On appeal, which was decided last month, the court upheld the findings of aggravated and punitive damages against the insurers, but radically decreased the amounts. The damages were found "unwarrantedly high" and reduced to a total of $675,000. More specifically the Court noted that global aggravated damages award "far exceeds the much more modest awards which have been made to other insured who have suffered extended periods of financial insecurity with similar-type consequences to those experienced by Mr. Branco."

It is unfortunate that the Court deemed necessary to reduce the quantum of the awarded punitive damages that appear to be the only effective deterrent against insurers mistreating their customers. This case however still makes it abundantly clear that insurance companies must treat their insured fairly, and should not engage in stalling tactics aimed at pressuring the insured into accepting lower settlement amounts or unfairly deny claims. Branco makes it clear that a contract of insurance is considered to be a peace of mind contract and the insured will have the right to sue for damages related to mental distress if treated unfairly and significant misconduct on part of the insurers will not be tolerated.

American Home Assurance Company et al., 2015 SKCA 71

Branco v American Home Assurance Company, 2013 SKQB 98

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