An insurance company has lost its appeal against a $45,000 punitive damages award, after a court found that the company acted in bad faith towards its policyholder.
The case, which was heard by the Court of Appeal for Ontario, involved a dispute between the insurer, Aviva Canada, and its policyholder, Mr. John Smith. Smith had purchased a homeowner’s insurance policy from Aviva, which included coverage for water damage.
In 2015, Smith’s home was damaged by a flood caused by a burst pipe. He filed a claim with Aviva, but the company denied coverage, stating that the damage was not caused by a sudden and accidental event as required by the policy.
Smith took legal action against Aviva, alleging that the company acted in bad faith by denying his claim without proper investigation. The court agreed with Smith and awarded him $45,000 in punitive damages, in addition to the $25,000 in damages for the actual loss.
Aviva appealed the decision, arguing that the punitive damages were excessive and not supported by the evidence. However, the Court of Appeal for Ontario dismissed the appeal, stating that the trial judge’s decision was reasonable and supported by the evidence.
In its ruling, the court noted that Aviva’s handling of Smith’s claim was “high-handed, malicious, and oppressive.” The company had failed to properly investigate the claim and had ignored evidence that supported Smith’s position.
The court also stated that punitive damages were necessary to deter Aviva from similar conduct in the future and to send a message to other insurers that bad faith practices will not be tolerated.
This decision serves as a reminder to insurance companies that they have a duty to act in good faith towards their policyholders. Denying a claim without proper investigation and ignoring evidence can result in serious consequences, including punitive damages.
Aviva has not yet commented on the ruling. It is unclear if the company plans to appeal the decision further.
