SUPREME COURT OF NOVA SCOTIA
Citation: Industrial Alliance Insurance and Financial Services Inc. v. Brine,
2014 NSSC 219
Date: 20140618 Docket: Hfx. No. 174118 Registry: Halifax
Between:
Industrial Alliance Insurance and Financial Services Inc.
-and-
Bruce Brine
LIBRARY HEADING
Judge: The Honourable Justice Cindy A. Bourgeois
Heard: November 4-7, 12 and 13, 2013 in Halifax and Bridgewater, Nova Scotia
Written
Decision: June 18, 2014
Subject: Interpretation of Insurance contracts, duty of good faith, application of principles of subrogation and estoppel.
Summary: Brine was an insured under a long term disability policy. He was approved for long term disability monthly benefits due to disabling depression. He was initially provided rehabilitation services which were subsequently cancelled. He asked for rehabilitation services to be re-instated, but the insurer did not do so. Due to receipt of lump sum retroactive payments in relation to CPP and Superannuation awards, the insurer undertook an upfront clawback of Brine’s disability benefits for a period of almost five years, asserting that receipt of the retroactive funds resulted in an overpayment. Brine claimed the insurer acted in bad faith in a number of ways and sought significant aggravated and punitive damages. The insurer also sought pursuant to the subrogation provisions of the policy to recoup funds in relation to the settlement of a human rights complaint undertaken by Brine.
Issue: Was the insurer’s interpretation of the policy correct, permitting the clawback? Was the insurer estopped due to representations made to Brine from seeking to collect those funds? Did this debt survive Brine’s bankruptcy? Did the insurer act in bad faith in terms of its management of Brine’s claim? What damages, if any, are appropriate?
Result: The insurer was not permitted to undertake an upfront clawback of Brine’s disability benefits, and damages were awarded accordingly. The overpayment did not survive Brine’s bankruptcy. The insurer acted in bad faith in several ways. Brine was awarded aggravated damages due to the mental distress arising from the insurer’s breach of its duty of utmost good faith. The insurer’s conduct was so oppressive and high-handed, that it justified a significant award of punitive damages.
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