The respondent's long-term disability benefits were terminated by her insurer based on video surveillance, despite a lack of medical evidence indicating she could return to work.
After five years of denied benefits, the insurer reinstated them shortly before trial.
The trial judge awarded $20,000 in damages for mental distress but denied punitive damages, finding no bad faith.
The Court of Appeal upheld the mental distress award and added $100,000 in punitive damages.
The Supreme Court of Canada allowed the insurer's appeal in part, setting aside the punitive damages but upholding the mental distress award.
The Court held that damages for mental distress for breach of contract are recoverable under the Hadley v. Baxendale principle if they were within the reasonable contemplation of the parties, which is the case for disability insurance contracts.
