Ferme Gérald Laplante & Fils Ltée v. Grenville Patron Mutual Fire Insurance Co. [Indexed as: Ferme Gérald Laplante & Fils Ltée v. Grenville Patron Mutual Fire Insurance Co.]
61 O.R. (3d) 481
[2002] O.J. No. 3588
Docket No. C29291
Court of Appeal for Ontario
Weiler, Charron and Sharpe JJ.A.
September 20, 2002
*Application for extension of time granted and application for leave to appeal to the Supreme Court of Canada dismissed with costs July 10, 2003 (Iacobucci, Binnie and LeBel JJ.). S.C.C. File No. 29485. S.C.C. Bulletin, 2003, p. 1113.
Damages -- Punitive damages -- Insured bringing action against insurer when insurer resisted making certain payments under fire insurance policy -- Jury finding for insured and awarding punitive damages in amount of $750,000 in addition to compensatory damages -- Jury could reasonably have concluded that insurer breached its duty to act fairly and in good faith in failing to pay promptly those amounts it reasonably believed were owing under policy -- No reasonable and properly instructed jury could conclude that insurer's conduct was so outrageous or extreme as to warrant punishment or that award of punitive damages was rationally required to punish insurer's misconduct.
The plaintiff carried on a family dairy business which was insured under a fire insurance policy issued by the defendant. A fire broke out in a barn and burned for ten days, totally destroying the barn and its contents, damaging silos, killing a bull and a cow, and forcing the relocation of the remaining herd of cattle. Certain aspects of the plaintiff's claim turned out to be contentious, and an action was commenced. By the time of the trial, the defendant had paid over $1.17 million under the policy. The plaintiff sought an additional $700,000 at trial. The jury awarded a further $488,389 in compensatory damages and $750,000 in punitive damages. The defendant appealed. The central issue in the appeal was whether the jury's award of $750,000 in punitive damages should be upheld.
Held, the appeal should be allowed.
Per Charron J.A. (Sharpe J.A. concurring): The single most important feature of punitive damages that must be kept firmly in mind is that their purpose is not to compensate a plaintiff, but to punish a defendant for its misconduct, to deter the defendant and others from similar misconduct in the future, and to denounce the misconduct as meriting society's condemnation. It is a fundamental principle of the law of punitive damages that the remedy be resorted to only in exceptional cases, and with restraint. The exceptional case is usually described as one where the defendant's misconduct was "malicious""oppressive""high-handed" or "offensive to the court's sense of decency". Restraint is then exercised by limiting the award to those cases of serious misconduct where punitive damages serve a rational purpose. The question is whether the misconduct of the defendant was so outrageous that punitive damages were rationally required to act as a deterrence. This rationality test must be met both with respect to the question of entitlement to the award of punitive damages, and its quantum. It is important to provide the jury with the necessary guidance to ensure that they understand these principles and the nature of their task in determining whether an award should be made. On appeal, the standard of review applicable to any punitive damages ultimately awarded is whether a reasonable jury, properly instructed, could have concluded that an award in that amount, and no less, was rationally required to punish the defendant's misconduct.
In a contract case, the plaintiff must show more than simply a breach of the defendant's obligations under the contract. In order to found a claim for punitive damages in a contract case, there must be an independent actionable wrong. In an insurance contract, the law has long recognized, in addition to the express terms of the contract agreed to by the parties, a mutual obligation between [page482] insurer and insured to act in utmost good faith. A breach of this additional duty can found a claim for punitive damages by either insurer or insured. The implied obligation to act in good faith has been extended beyond mutual disclosure requirements in relation to the nature of the risk being undertaken. In particular, the courts have recognized that the insured, having suffered a loss, will frequently be in a vulnerable position and largely dependent upon the insurer to provide relief against the financial pressure occasioned by the loss underlying the claim. Hence the obligation to act in utmost good faith requires an insurer to act promptly and fairly at every step of the claims process.
In this case, it was clear from the jury's verdict that it found that the defendant failed to indemnify the plaintiff for its loss to the full extent available under the policy. The failure to pay the moneys that remained owing constituted a breach of contract for which the plaintiff was fully compensated in damages, interest and costs. In order to substantiate its claim for punitive damages, in addition to the claim for compensatory damages, it was incumbent on the plaintiff to show that the defendant breached its duty to act fairly and in good faith in its investigation, assessment and negotiation of the claim.
A reasonable jury, properly instructed, could have concluded, in its assessment of the conduct of the defendant throughout the claims process, that the defendant had breached its duty to act fairly and in good faith in failing to pay promptly those amounts it reasonably believed were owing under the policy. As such, the defendant could be made liable to pay any consequential damage resulting from such breach. No such damage was in question in this appeal. However, no reasonable jury, properly instructed, could conclude that the conduct in question was so outrageous or extreme as to warrant punishment. The jury was properly instructed on the exceptional nature of the remedy, its underlying purpose, and the egregious and extreme nature of the misconduct that can found an award of punitive damages. However, the jury was never instructed on the nature and extent of the defendant's obligation to act fairly and in good faith in processing the plaintiff's claim, as distinct from its obligation to pay what was owed under the policy. Such an instruction was necessary in order to convey to the jury some understanding of the legal requirement for an independent actionable wrong. Further, the jury was provided no assistance in relating the law on punitive damages to the evidence. It would not have been obvious to the jury that the focus on the question of punitive damages was not the ultimate success or failure of the parties' respective arguments on the various aspects of the claim but, rather, the overall conduct of the insurer during the whole claims process. The conduct of the insurer should be considered fairly with some understanding of its right to investigate and assess the claim and its duty to do so fairly and in good faith. It was obvious from the award on the various items of compensatory damages that the jury took a very favourable, and on certain items most generous, view of the plaintiff's case. Hence, the jury may have felt strongly against the defendant for what it found to be its wrongful denial of the plaintiff's claim for substantial amounts. The jury may simply have equated an insurer's denial of an ultimately successful claim with the type of misconduct that can found an award for punitive damages. There was little evidence beyond speculation to support the contention that the defendant abused its position or power and purposely set out to force the plaintiff into an unreasonable settlement. The record suggested, rather, that this was a hard-fought commercial dispute between two sophisticated parties. Although it was open to the jury to disapprove of the position taken by the defendant in the overall negotiation of the contentious parts of the claim, and even to find that in some respects it had breached its duty of good faith in failing to pay what was clearly owed under the policy, the evidence could not reasonably support the finding that an award of punitive damages, let alone in the amount of $750,000, was rationally required to punish the misconduct. [page483]
Per Weiler J.A. (dissenting in part): It was rational for the jury to make an award of punitive damages in this case. The evidence that was open to the jury to accept, especially concerning the defendant's conduct in relation to the plaintiff's claim for loss of income, established a rational purpose for awarding punitive damages. The defendant was not entitled to wait almost nine months before making any initial payment for loss of income and to delay a further three years before obtaining the report of a second expert as to loss of income. Moreover, having represented to the plaintiff that it was entitled to enter the chicken broiler business, the defendant's position, maintained until and throughout trial, that income loss should be calculated instead on the basis that the plaintiff had continued in the dairy business, was unreasonable. In these circumstances, it was open to the jury to decide that it did not wish to license the defendant to breach its duty of good faith in this manner and to denounce this marked departure from ordinary standards of decent behaviour by awarding punitive damages. Considered as a whole, the jury charge adequately instructed the jury on the requirements for an award of punitive damages. The trial judge fairly reviewed the positions of the parties and related the conduct in issue, payment of sums clearly owed in a timely manner, to the issue of punitive damages. With respect to the quantum of punitive damages, the amount awarded should be no greater than necessary to rationally accomplish the purpose of punitive damages. In this case, the award of $750,000 was not proportionate and was therefore irrational. The appeal should be allowed to the extent of setting aside the award of $750,000 in punitive damages and, in its place, substituting an award of $200,000.
APPEAL from a judgment in an action by an insured against an insurer.
Whiten v. Pilot Insurance Co., 2002 SCC 18, 209 D.L.R. (4th) 257, 283 N.R. 1, [2002] I.L.R. 1-7340, 20 B.L.R. (3d) 165, revg (1999), 1999 3051 (ON CA), 42 O.R. (3d) 641, 170 D.L.R. (4th) 280, [1999] I.L.R. 1-3659, 32 C.P.C. (4th) 3 (C.A.), consd Other cases referred to 702535 Ontario Inc. v. Lloyd's London (2000), 184 D.L.R. (4th) 687, [2000] I.L.R. 1-3826 (Ont. C.A.); Carter v. Boehm (1766), 97 E.R. 1162, 3 Burr. 1905, 1 Wm. Bl. 593 (K.B.); Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, 24 O.R. (3d) 865n, 126 D.L.R. (4th) 129, 184 N.R. 1, 30 C.R.R. (2d) 189, 25 C.C.L.T. (2d) 89; Horseshoe Bay Retirement Society v. S.I.F. Development Corp. (1990), 66 D.L.R. (4th) 42, 3 C.C.L.T. (2d) 75 (B.C.S.C.); Khazzaka (c.o.b. E.S.M. Auto Body) v. Commercial Union Assurance Co. of Canada, [2002] O.J. No. 3110 (Quicklaw) (C.A.); Pardhan v. American Home Insurance Co. (1997), 31 O.R. (3d) 641 (C.A.), revg in part (1993), 1993 8551 (ON SC), 13 O.R. (3d) 642, [1993] I.L.R. 1-2976 (Gen. Div.); Peters v. Commonwealth Insurance Co., [1990] I.L.R. 1-2649, 47 C.C.L.I. 288 (Ont. H.C.J.); Plaza Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co. (1994), 18 O.R. (3d) 663, 115 D.L.R. (4th) 37, [1994] I.L.R. 1-3067, 56 C.P.R. (3d) 46, 4 E.T.R. (2d) 69 (C.A.), revg (1990), 1990 8054 (ON SC), 68 D.L.R. (4th) 586, [1990] I.L.R. 1-2658 (Ont. H.C.J.) (sub nom. Plaza Fiberglass Manufacturing Ltd. v. New Hampshire Insurance Co.); Royal Bank of Canada v. W. Got & Associates Electric Ltd., [1999] 3 S.C.R. 408, 73 Alta. L.R. (3d) 1, 178 D.L.R. (4th) 385, 247 N.R. 1, [2000] 1 W.W.R. 1; Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085, 36 B.C.L.R. (2d) 273, 58 D.L.R. (4th) 193, 94 N.R. 321, [1989] 4 W.W.R. 218, 42 B.L.R. 111, 25 C.C.E.L. 81, 90 C.L.L.C. 14,035 Authorities referred to Brown, C., and J. Menezes, Insurance Law in Canada, looseleaf (Toronto: Carswell, 1999) Ontario Law Reform Commission, Report on Exemplary Damages (Toronto: Ontario Law Reform Commission, 1991) [page484]
Ronald Caza and Pierre Champagne, for respondent. Earl A. Cherniak, Q.C., Kirk F. Stevens and Pamela Foy, for appellant.
[1] CHARRON J.A. (SHARPE J.A. concurring): -- The central issue in this appeal is whether the jury's award of $750,000 in punitive damages against the appellant insurance company should be upheld by this court. The appellant also raises additional grounds of appeal with respect to the trial judge's instructions to the jury and some of his rulings on evidentiary and other issues. In my view, as I will explain shortly, none of those additional grounds shows reversible error. However, it is my view that the jury's award of punitive damages cannot be supported on the evidence. For the reasons that follow, I would therefore allow the appeal and set aside that award.
I. The Facts
[2] The respondent, Ferme Gérald Laplante & Fils Ltée ("Laplante"), carried on a family dairy business. A fire broke out in its barn on October 27, 1993. At the time of the fire, Laplante was insured with the appellant, Grenville Patron Mutual Fire Insurance Company ("Grenville"), for loss or damage directly resulting from fire. Grenville was notified of the fire and its representative attended at Laplante's on the day of the fire. The fire burned for ten days before it was finally extinguished. The barn and its contents were totally destroyed. The silos were damaged. One bull and one cow died in the fire. The remaining herd of over 180 cattle, some of which were injured, had to be relocated. The Laplante family felt devastated.
[3] Discussions between Laplante and Grenville on the scope of insurance coverage and assessment of the loss commenced immediately after the fire. The case was handled on behalf of Grenville by its head adjuster, Heather Bellinger, and by its General Manager, Alton Whitehorne. Parts of the claim were not contentious and some payments were made promptly. On November 10, 1993, Grenville made an initial payment for 50 per cent of the loss of the barn and another building in the amount of $292,500. Further payments were made in the weeks that followed and within two months of the fire, the total amount paid [page485] by Grenville was $612,923. The second payment in the amount of $292,500 for the loss of the barn and other building was made in accordance with the terms of the policy, in November 1994. The total amount paid by Grenville as of January 1995 with respect to non-contentious items was approximately $980,000.
[4] Other aspects of the claim were more complex and, in the end, proved more contentious. Within three months of the fire, the matter was in the hands of the parties' respective solicitors and, from that time on, the parties communicated through their solicitors. Negotiations between the parties did not succeed in resolving the issues between them and this action was commenced in October 1994. At that time, $688,247 had been paid by Grenville. By the time the trial commenced in January 1998, over $1.17 million had been paid under the policy. Laplante sought an additional $700,000 at trial. The jury awarded a further $488,389 in compensatory damages and $750,000 in punitive damages.
[5] The main items of contention were the following: a) loss of livestock; b) loss of earnings; c) applicability of a co- insurance clause with respect to the damage to the silos; and d) loss on the sale of the remaining herd. Laplante relies on Grenville's overall handling of its claim with respect to those items in support of the jury's award for punitive damages. I will therefore review in more detail the respective positions of the parties and the course of their negotiations on those aspects of the claim.
(a) Loss of livestock
[6] Under the policy, the insurer agreed "to indemnify the insured for death or total destruction of Farm Livestock directly resulting from . . . [f]ire". Laplante insured its cows for $2,100 each and its bulls for $2,000 each. The policy further provided that the insurer "shall not be liable beyond the actual cash value of the property at the time any loss or damage occurs".
[7] A first issue arose with respect to the number of livestock covered under the policy. One cow and one bull died in the fire. There was no question that Laplante was entitled to be indemnified with respect to the loss of these two animals. An issue arose, however, with respect to a number of animals that were sold for meat in the days that followed the fire. The day after the fire, Laplante sold three bulls and two cows for meat because they had been injured in the fire. A few days later, Laplante sold 11 more cows for meat. A day or two after the sale of these animals, the matter was discussed with Bellinger. She indicated that she anticipated no problem with Grenville with respect to the animals that had already been sold because it was a reasonable assumption that some animals would be injured in the fire. However, she explained the provisions of the policy to the Laplantes and told them that a veterinarian's certificate condemning each animal would be required before any other livestock was sold. [page486]
[8] After this meeting, Laplante retained a veterinarian to check the remaining cows at the four different locations where they had been brought and an additional 30 cows were identified by the veterinarian as "unfit for sale for dairy cows". They were therefore sent to auction and sold for meat. Laplante received a total of $31,296 for the sale of the 43 cows and three bulls.
[9] Bellinger was subsequently informed of the number of cows that had been sold. Robert Laplante testified that she was surprised when she received the list and advised him that she would have to see what the Board of Directors would say about this. A week later, Laplante received a call from the veterinarian's clinic advising that Bellinger was there to discuss the matter with Dr. Rathwell, the veterinarian who had condemned the cows. She wanted to know which of the 30 cows were condemned to die and if any of them could have been cured with time.
[10] Laplante took the position that the 33 cows that were sold for meat were totally destroyed within the meaning of the policy because they were no longer able to produce milk. Laplante also took the position that the three bulls that were sold were likewise totally destroyed as a result of the fire because they were injured as a result of smoke inhalation. Laplante further took the position that an agreement had been reached with Bellinger to the effect that the initial 13 cows and three bulls would be covered, that any additional cows condemned by a veterinarian would likewise be covered, and that Grenville could not renege from this agreement now that the animals were gone.
[11] Grenville, on the other hand, took the position that "total destruction" meant that the animal was condemned to die as a result of injuries sustained in the fire. The policy covered both death and total destruction so that injured animals could be euthanized rather than left to die from their injuries. Grenville rejected Laplante's contention that a cow's inability to produce milk, even if caused by the fire, meant that it was totally destroyed within the meaning of the policy. It took the position that the coverage under the policy was not for loss of use. It was akin to life insurance rather than disability insurance. Bellinger denied that any agreement had been made as contended by Laplante. Since Grenville never received confirmation from the veterinarian that the animals had to be destroyed due to life threatening or non-treatable injuries, it refused to pay this part of the claim.
[12] An issue also arose as to the amount that should be paid for any livestock that died or was totally destroyed in the fire. Laplante took the position that it was entitled to receive the full amount for which it was insured, $2,100 for each cow and $2,000 for each bull. Gérald Laplante testified that he understood from [page487] his discussion with the insurance broker who sold him the policy that it was up to Laplante to determine the value of its livestock, pay the premiums accordingly, and that this value would be paid in the event of a loss. Grenville, on the other hand, relied on the provisions of the policy that limited liability to the actual cash value of the property at the time of the loss. Grenville took the position that since the rest of the herd was later auctioned at $1,428 per head on average (the sale of the herd at that price will be discussed later), that figure represented the actual cash value of each animal at the time of the fire. Laplante disagreed that the sale price obtained on the sale of its remaining herd represented the actual cash value of the animals. Laplante was of the view that the animals were worth less at the time they were auctioned because of the stress they suffered as a result of the fire. Consequently, Laplante maintained its position that the actual cash value at the time of the loss was the full insured value of $2,100 for each cow and $2,000 for each bull.
[13] These issues were never resolved. Grenville eventually paid the sum of $2,178 on August 30, 1997 for the two animals that died in the fire. Grenville paid the further sums of $34,393 towards the loss of the livestock, plus $6,865 in interest and $3,439 in costs on December 29, 1997, shortly before the commencement of trial. The latter amounts were paid on a without prejudice basis in an attempt to settle this part of the claim. The jury ultimately resolved the issue in favour of Laplante and awarded compensation in the amount of $2,100 for each of the 44 cows and $2,000 for each of the four bulls, for a total of $100,400 less the proceeds received from their sale.
(b) Loss of earnings
[14] Laplante was insured for any loss of earnings sustained during the interruption of its business as a result of the destruction of its barn, less those operating expenses that did not necessarily continue, up to a maximum of $720,000. Recovery was limited to the period of time required, with the exercise of due diligence and dispatch, to rebuild the barn, up to a maximum of one year. Hence, there were two components to the claim for loss of earnings: the calculation of the amount to which Laplante was entitled, and the period of time during which it would be entitled to be indemnified for this loss. Both quickly became contentious.
[15] With respect to the amount of the loss, Laplante's position from the outset and throughout the trial was that the matter was essentially determined as early as November 1993 when the parties' respective accountants met and agreed that the loss of earnings would be approximately $38,700 per month. It was Laplante's [page488] position that the payments should have commenced promptly thereafter in accordance with the accountants' calculations. Laplante filed proofs of loss from time to time for loss of earnings from the time of the fire on October 27, 1993 until October 24, 1994. It was Laplante's position that it exercised due diligence and dispatch and that it was entitled to receive compensation for its loss of earnings for the full allowable period.
[16] It is apparent from the first exchange of correspondence between the solicitors in early February 1994 that there were a number of issues on the assessment of this part of the claim. It is also clear from the negotiations between the parties that the matter was further complicated by reason of two decisions made by Laplante, albeit decisions made for apparently sound business reasons and with the concurrence of Grenville. The first decision, made at the beginning of November 1993, was to sell the remaining herd pending reconstruction of the barn. The second decision, made approximately one month later, was to discontinue the dairy operation and go into farming of broiler chickens instead. These decisions and the events that followed figured rather prominently in the negotiations between the parties. Since Grenville's overall handling of this part of the claim seems to be a key element of Laplante's claim for punitive damages, I will review some of these events as well as the relevant evidence at trial in more detail.
[17] Arrangements were made early on for Laplante's accountant, Jean-François Gratton, to meet with an accountant retained by Grenville, Margaret Lavictoire, on November 17, 1993 to calculate the proper figure for loss of earnings. According to Gratton's calculations and a "draft for discussion" letter prepared by Lavictoire, the loss was calculated at approximately $38,700 per month. Gratton was firm in his testimony that Lavictoire had agreed in a subsequent telephone conversation that this was the appropriate figure. Lavictoire did not testify at trial.
[18] In the meantime, Laplante was considering its options to get back into business. First, it decided that it was best to sell its remaining 156 cows. On November 8, 1993, Laplante wrote a detailed letter to Grenville setting out all of the reasons why in its view it would probably not be economically wise to try to maintain its existing herd pending the reconstruction of the barn. Laplante therefore proposed to sell its herd and to purchase a new herd when the time came to recommence the dairy operation. At the conclusion of this letter, Laplante set out its understanding of its right to indemnification for loss of earnings under the policy. Laplante understood that it was entitled to receive the sum of $60,000 a month, less all of the operating expenses not incurred as a result of the destruction due to the fire, for up to a maximum of [page489] one year, provided that it exercised "due diligence and dispatch" to rebuild the barn. Laplante then inquired from Grenville:
will this figure be affected by the sale of the herd? . . . if the insurer will take the position that we did not mitigate our damages by proceeding to sell the herd, we must know before 2:00 p.m. tomorrow, Tuesday, November 9, 1993, that you will be taking this position.
[19] Grenville responded, on November 9, 1993 as requested, with the following:
We understand your circumstances, and are in agreement that dispersal of your milking herd is warranted under these conditions. Although we are unable to make any definitive guarantee regarding the earnings insurance coverage on your policy at this time, settlement will be made in accordance with the terms and conditions of your insurance policy. It is our understanding that the accountants will be meeting on November 17th, 1993.
[20] Laplante sought a clarification of the meaning of "dispersal of your milking herd" and was advised that it meant "selling of your milking herd". Consequently, Laplante sold its remaining 156 cows on November 13, 1993 and received $221,340 in proceeds from the sale.
[21] Laplante also considered going into another area of farming and did some serious research, including a trip to Europe, to consider alternatives. On or about December 10, 1993, Laplante determined that it would like to go into farming of broiler chickens and advised Grenville accordingly. A number of discussions followed between the parties, the details of which I need not go into, leading to approval being given by Grenville on January 17, 1994. By that time, the ground was frozen and Laplante was advised by relevant experts that it was not advisable to commence construction at that time. Laplante proceeded to obtain the necessary architectural plans and specifications and provincial and municipal approvals. Construction commenced in the spring and was completed in October 1994.
[22] Negotiations continued between the parties with respect to the claim for loss of earnings and further documentation was exchanged. Laplante filed proofs of loss from time to time in accordance with its accountant's calculations. Grenville disagreed with the $38,700 figure arrived at as a result of the initial meeting between Gratton and Lavictoire. Grenville was of the view that Lavictoire had not calculated the loss of earnings in accordance with the terms of the policy. The policy, in part, provided as follows:
(a) Earnings means net profit plus payroll expense, taxes, interest, rents and all other operating expenses earned by the business.
. . . . . [page490]
(c) In determining loss hereunder due consideration shall be given (1) to the earning of the business before the date of damage or destruction and to the probable earnings thereafter had no loss occurred; (2) to the continuation of operating expenses, including payroll expense to the extent necessary to resume operations with the same quality of service which existed immediately preceding the loss; (3) to the reduction of loss which could be made possible by the insured by resuming complete or partial operation of the described property, or by making use of other property.
[23] In a revised opinion prepared by Lavictoire on March 3, 1994, she stated that the proper loss of earnings was between $17,150 and $23,340 per month. Grenville also took the position that, under the terms of the policy, the loss should be calculated by assuming that Laplante would stay in the same line of production. Based on Laplante's earnings for 1992 and 1993, Grenville was of the view that a proper amount would be $15,000 a month. Laplante was of the view that the calculation should not be made on the assumption that it had remained in the same line of business and, on this point, contended that Grenville was reneging from the position taken by its representatives.
[24] With respect to the time period during which Laplante would be entitled to indemnification, Grenville took the position, based on information it received from barn contractors, that the barn could have been reconstructed in three to four months and that Laplante's recovery was limited to that period of time. It was Grenville's view that any delay in construction beyond that time was solely attributable to Laplante's decision to get out of the dairy business. In turn, Laplante blamed Grenville for the delay between mid-December 1993 and mid-January 1994 in obtaining approval for the change of business. As indicated earlier, by that time the ground was frozen solid and construction could not commence.
[25] The parties never resolved their differences on the loss of earnings. On June 4, 1994, Laplante, through its solicitor, reiterated its position on this and other aspects of its claim and questioned why Grenville did not at least pay those amounts that it agreed were owing. Laplante notified Grenville of its intention to complain to the Superintendent of Insurance. [See Note 1 at end of document] Grenville paid the sum of $50,000 on August 23, 1994 towards the loss of earnings. Later, in preparation for trial, Grenville retained another accountant, James Anthony Forbes, and, on the basis of that expert's report, Grenville paid a further sum of $86,324 on August 8, 1997 on a without prejudice basis, for a total of $136,324. The total amount claimed for loss of [page491] earnings in the various proofs of loss was $460,421, hence $324,097 more than the amount paid before trial. The jury awarded an additional $246,910 for loss of earnings.
(c) Damage to the silos
[26] The main disagreement between the parties with respect to the damage to the silos related to the enforceability of a co-insurance clause and its effect on the amount Laplante could claim for this loss. An amendment to the policy contained a co- insurance clause that substantially reduced the amount Laplante could claim on this item. This amendment was also reflected in a corresponding adjustment to the premium. Laplante contended, however, that it was not made aware of this clause and that its effect was contrary to the arrangements that were made with the insurance broker at the time the insurance was purchased. The parties also disagreed on the amount required to repair the silos. Laplante's estimate of the cost of the repairs was substantially higher than Grenville's.
[27] The parties were unable to resolve their differences on this item. Grenville paid the sum of $22,450 with respect to the damage to the silos on August 30, 1997. The jury ultimately found in favour of Laplante on the issue of the co-insurance and awarded damages accordingly, albeit based on Grenville's lower estimate of the cost of repairs.
(d) Loss on sale of remaining herd
[28] As indicated earlier, Laplante sold its remaining herd of 156 cows because, in its view, the potential costs and problems of maintaining the herd pending the reconstruction of the barn exceeded the potential benefit that could be derived from the continued operation of the dairy business during that time period. Grenville agreed with this decision. Laplante maintained that it had sold the herd at a loss, namely at a value less than its value just before the fire and that this loss was recoverable under the policy. Laplante relied on the following provision in the policy:
The Company shall be liable for:
(b) such expenses as are necessarily incurred for the purpose of reducing any loss under this coverage (except expense incurred to extinguish a fire) not exceeding however, the amount by which the loss under this coverage is hereby reduced.
[29] Grenville disagreed that Laplante incurred a loss and maintained that the auction price reflected the true value of the herd. [page492]
[30] This issue also remained unresolved at the commencement of the trial. The jury ultimately awarded Laplante the sum of $104,160 on this item of damages.
II. The Grounds of Appeal
[31] On this appeal, Grenville raised the questions whether:
a. there was a proper basis for any award of punitive damages and, if there was, whether the quantum awarded by the jury was excessive;
b. the trial judge properly charged the jury on: i) the earnings loss claim; ii) the existence of the co-insurance clauses; and, iii) punitive damages;
c. the trial judge erred in allowing Laplante to present parol evidence on the terms of the policy through the testimony of Gerald Laplante and the insurance broker Richard McDermid;
d. the claim for the alleged loss resulting from the sale of the herd should have been put to the jury or, alternatively, whether the award was supported by the evidence;
e. Laplante's accountant, Gratton, was properly qualified as an expert on the issue of loss of earnings;
f. the trial judge erred in holding that 100 per cent of the silo loss was repayable, despite the "Rebuilding Provision" in the policy; and
g. the trial judge erred in deducting only 50 per cent of the settlement funds received by Laplante in a related action against the broker.
[32] As indicated earlier, it is my view that none of the issues raised, except those related to the award of punitive damages, provides any basis for intervention by this court. Those grounds of appeal can therefore be disposed of somewhat more succinctly and I will do so before dealing with the award of punitive damages.
III. Analysis
- The trial judge's charge to the jury
(a) The instructions on the earnings loss claim
[33] During the course of the trial, the trial judge asked counsel for each party to prepare a statement setting out their respective [page493] client's theory of the case. They each did so. During the course of his final instructions to the jury, the trial judge read out the two statements for the jury, clearly identifying each as having been prepared by counsel. A major thrust of Laplante's case on the loss of earnings issue was that Gratton and Lavictoire had arrived at an agreement that the monthly amount to which Laplante was entitled to was $38,750. Laplante's theory on this issue was read out to the jury in these words:
Montant de la perte de revenus dûs à Ferme Gérald Laplante & Fils Ltée
L'assureur a retenu les services d'une comptable pour calculer le montant de la perte de revenus dûs à la Ferme Laplante. Cette comptable, Margaret Lavictoire et Jean- François Gratton, le comptable des Laplantes depuis plusieurs années, sont arrivés à une entente que le montant mensuel de la perte de revenus était de 38,750$.
Un expert subséquent que l'assureur a retenu a évalué la perte initiale à un montant plus élevé [sic] mais avait reçu de l'assureur des instructions de déduire des revenus imaginaires d'un troupeau vendu avec le consentement de l'assureur et une entente que cette vente n'affecterait pas le " loss of earnings ".
[34] Grenville submits that the trial judge erred in leaving that aspect of the plaintiff's theory for the jury's consideration in these words because it left the impression that Grenville had agreed to settle the earnings loss claim for that amount and had reneged from that agreement. Grenville submits that there was no evidence of such a settlement agreement and, in particular, it was clear that Lavictoire, who was merely an independent expert retained to assist in the quantification of the loss, had no authority, ostensible or actual, to settle this claim.
[35] Grenville is correct in stating that there was no evidence of a settlement agreement on the loss of earnings issue and no evidence that Lavictoire had any authority to bind the insurance company. In my view, Grenville is also correct in stating that Laplante, in setting out its theory as it did, was attempting to create the impression that there had been some sort of a meeting of the minds between the parties from which Grenville subsequently parted. This strategy was obvious, not only from this statement, but from the overall conduct of Laplante's case on this issue.
[36] Nonetheless, I see no error in leaving the theory of Laplante's case for the jury's consideration in these words. First, the evidence of Lavictoire's lack of authority to bind the insurance company was before the jury. Whitehorne had clearly testified to that effect and there was no evidence to the contrary. Second, it was open to Grenville, in its own statement of theory of the case, to expressly refute Laplante's suggestion of any settlement agreement. It did not do so. Rather, the defence theory on this issue, as read to the jury, was as follows: [page494]
(A) The amount of loss of earning per month
It is Grenville's position that the proper amount of loss of earnings is reflected in the Forbes' report. The report states that the loss of earnings is approximately $18,000 per month with additional loss for the first and last month of the claim.
Further, even though the model is different from Forbes' report, when all the proper deductions are made from Mr. Gratton's report by Mr. Forbes during cross-examination, the loss of earnings is $19,900 per month.
Further, Margaret Lavictoire's revised opinion of March 19, [sic] 1994, states that the proper loss of earnings is between $17,150 and $23,340 per month.
Based on the Laplantes' own financial statements from 1993, the net earnings of the farm was $10,880 per month.
[37] Third, the evidence of Lavictoire's initial opinion on the loss of earnings and her agreement with Gratton's calculations was relevant because it provided some support to Gratton's approach in the calculation of the loss. The evidence of Grenville's rejection of Lavictoire's initial opinion was also relevant to the jury's assessment of Grenville's overall handling of the claim, particularly as it related to the question of punitive damages. The evidence, therefore, was supportive of Laplante's theory and properly left for the jury's consideration. While it may have been preferable if the trial judge had provided more assistance to the jury in circumscribing the relevance of this evidence to the issues in the case in the latter part of his charge when he discussed the various issues, his failure to do so does not constitute error.
[38] Finally, this part of the trial judge's instructions was clearly identified for the jury as a statement of the theory of the plaintiff's case, as drafted by Laplante's counsel. As such, it was entirely accurate and added nothing to what the jury would already have understood from having listened to weeks of evidence and the submissions of counsel. In this context, the defence's failure to object at trial to this part of the charge is fatal to this ground of appeal.
(b) The instructions on the existence of the co- insurance clause
[39] As indicated earlier, there was an issue whether Laplante had agreed to the co-insurance clause of the policy. This clause materially affected the amount that Laplante could recover with respect to the damage to the silos. At the conclusion of his review of the evidence on this point, the trial judge told the jury "Never was it confirmed by Mr. McDermid [the insurance broker] or anyone else that the plaintiff agreed to this."
[40] The defence at trial objected to this instruction, noting that while there was no direct confirmation from anyone that Laplante [page495] agreed to the co-insurance clause, there was evidence that the revised declaration pages of the policy had been received by Laplante and that the reduced premium (as a consequence of the co-insurance clause) had been noted by its representatives. Counsel for Grenville therefore suggested to the trial judge that if he was calling the jury back on any other point, he may want to consider telling them that there was evidence from which Laplante's consent to this clause could be inferred. The trial judge did call the jury back on other matters but did not expand on his review of the evidence on this point. No further objection was made. On appeal, Grenville submits that Laplante's failure to read the declarations could not provide a proper basis for the remedy sought by Laplante and that the jury should have been so instructed.
[41] The argument on appeal is somewhat different [than] the objection made at trial and, to the extent that it is first raised before this court, it should not be given effect. In essence, the objection made at trial was that the review of the evidence on this issue could have been more complete. In my view, the jury was adequately instructed on the question of the co-insurance. The jury heard extensive evidence on this point and the theory of the defence was fully set out in the jury's instructions. It was not incumbent upon the trial judge to review every item of evidence. I see no merit to this ground of appeal.
(c) The instructions on punitive damages
[42] I will deal with this ground of appeal later in my judgment as part of the analysis on punitive damages.
- The alleged parol evidence about the terms of the policy
[43] Grenville submits that the trial judge improperly permitted Gérald Laplante to testify as to his understanding, based on his discussions with the insurance broker Richard McDermid, of the duration of the earnings loss coverage and his belief that he could himself establish the value of the animals for insurance purposes. Grenville also submits that McDermid should not have been allowed to testify about these discussions, as they were irrelevant. The express terms of the policy governed and not the oral discussions between the insured and the insurance broker.
[44] I need not decide whether this evidence should have been admitted because, from my review of the evidence in question, it is my view that, even if it were inadmissible, no harm was occasioned from its admission. The evidence did no more than set out Laplante's position on the interpretation of the express terms of the policy. The jury was properly instructed that the terms of the [page496] policy governed on these issues. I would not give effect to this ground of appeal.
- The loss resulting from the sale of the herd
[45] Grenville submits that there was no evidence to support Laplante's contention that the remaining herd of 156 cows had been auctioned at a loss and even less evidence to substantiate the jury's $104,160 award on this item of damages. Grenville submits that it was incumbent upon Laplante to establish that the loss, if any, constituted an expense "necessarily incurred for the purpose of reducing any loss under [the loss of earnings] coverage . . . not exceeding, however, the amount by which the loss [of earnings] . . . is hereby reduced" within the meaning of the policy. None of the accountants testified to that effect. Grenville therefore submits on appeal, as it did at trial, that this part of the claim should not have been left to the jury. Alternatively, Grenville submits that the award should be set aside by this court as unreasonable.
[46] Counsel for Laplante conceded in his submissions to the trial judge at the conclusion of the evidence that this claim would be a difficult one to establish, given that Laplante's own accountant contradicted some of the evidence relied upon to prove this loss, but submitted that the matter was still arguable and should be left with the jury. Counsel took the position that, if the jury was satisfied that the actual cash value of each cow was $2,100, it was open to them to make an award equal to the difference between that amount and the sale price of $1,428 as a necessary expense within the meaning of the policy.
[47] The trial judge decided to leave the matter with the jury. Grenville has not satisfied me that he erred in doing so. While the evidence presented by Laplante on this part of the claim was not entirely consistent or cogent, it is my view that there was nonetheless some evidence to substantiate the finding that the cows had been affected by the fire and their relocation and that, as a consequence, they sold at a lesser value than what they were worth just before the fire. Grenville has not met the heavy onus of showing that no reasonable jury acting judicially could arrive at this verdict. I would not give effect to this ground of appeal.
- Gratton's qualifications as an expert on the issue of loss of earnings
[48] Grenville argues that the trial judge erred in qualifying Gratton as an expert on the issue of loss of earnings. The basis [page497] for the trial judge's ruling is succinctly set out in his reasons on this point:
I can tell you now that I have no problem in qualifying him as an expert for the loss of earnings. And my reason for that is that Mr. Gratton has served the plaintiff's company for a number of years. He has been responsible for their account since 1987. He has prepared almost all, if not all, the documents for the plaintiff since 1987, with help naturally of others in his office, including the financial statements, including the income tax return. He certainly knows probably more about the financial situation of the plaintiff than any other accountant because he has been living with it for eleven years or so.
Also, it's true he doesn't have the degree, the C.A. or C.G.A., but you don't always have to have a degree to be an expert. That's my conclusion.
In this situation, he is working for what I know to be an international firm of accounting. He is responsible, he said, for 350 clients. He supervises a C.A. The only thing he can't do is officially put his signature on the financial statements or whatever other documents that is required that a C.A. or C.G.A. sign. But it doesn't mean that because he can't put his signature on it, that he is not qualified. I mean, the C.A. signs them and he revises them. That's what his evidence is. He's responsible for all of this. So, I have no problem whatsoever in declaring that he is an expert for the loss of earnings.
[49] I see no merit to this ground of appeal. The trial judge's ruling is entirely supported by the evidence. Gratton was sufficiently qualified to testify on the loss of earnings. There is no reason to interfere.
- The 100 per cent recovery of the loss to the silos
[50] Under the terms of the policy, Grenville was liable to make an initial payment of 50 per cent of the damage to the silos (subject to the provisions of the co-insurance clause). Its obligation to pay the remaining 50 per cent only arose if Laplante decided to rebuild the silos and present Grenville with proof of the rebuilding expenses. Grenville submitted at trial that it is not liable to pay the remaining 50 per cent because Laplante decided in December 1993 that it would not rebuild the silos because it would convert its business to a poultry operation.
[51] Laplante argued at trial that Grenville, by its refusal to pay the money that it reasonably believed was owed under the policy, was precluded from relying on this limiting provision in the policy. Laplante relied on the reasoning in Peters v. Commonwealth Insurance Co. (1990), 47 C.C.L.I. 288, [1990] I.L.R. 1-2649 (Ont. H.C.J.). See also: Pardhan v. American Home Insurance Co. (1993), 13 O.R. (3d) 642, [1993] I.L.R. 1-2976 (Gen. Div.).
[52] In response, counsel for Grenville submitted to the trial judge that he understood Laplante's point on this issue, but could not consent to it. He left it up to the trial judge to decide. [page498]
[53] Grenville argues on appeal that the facts of this case can be distinguished from the facts in Peters and that the trial judge erred in applying the reasoning in that case. Grenville submits that the wording of the policy in the Peters case was different; the insured in that case had formed an intention to rebuild, which is not the case here; and Grenville, in fact, acknowledged its payment obligation with respect to the silos and did, in fact, pay what it reasonably believed it owed, namely the sum of $22,450.
[54] I am not persuaded that the trial judge made any error in the circumstances of this case as Grenville did not pay what it believed it owed until August 30, 1997, almost four years after the fire. I would not give effect to this ground of appeal.
- The deductibility of the settlement funds in a related action
[55] Laplante had commenced an action against the insurance broker in relation to the purchase of the insurance policy in this case. That action was settled. An issue arose whether the proceeds of this settlement should be deducted from any award in this case. Laplante took the position that the proceeds should not be wholly deducted because there were different issues in that litigation. Counsel for Grenville made the following submissions to the trial judge on this issue:
I can't help you much, Your Honour, I don't know why the settlement was made the way it was. I have a sense that there could be an element of double recovery. I don't know how you'd handle it.
[56] Grenville sets out its argument on this issue in one conclusory sentence in its factum to the effect that there was no basis for the trial judge's decision to deduct only 50 per cent of the settlement.
[57] There is nothing in the record that would allow this court to interfere with the exercise of the trial judge's decision on this issue. There is no merit to this ground of appeal.
- The award of punitive damages
(a) The position of the parties
[58] Grenville submits that the trial judge erred in the circumstances of this case in refusing defence counsel's request that the jury be asked to specify what conduct of Grenville merited punishment, if it decided that punitive damages were appropriate. The jury was simply left with the following questions on this issue:
VI. Exemplary and/or punitive damages
Is the Plaintiff entitled to exemplary and/or punitive damages? (yes or no) [page499]
If the answer to question 1 is "yes", what is the amount of exemplary and/or punitive damages payable by the Insurer to the Plaintiff? $________
[59] The jury was instructed on the law of punitive damages as follows:
Now question number six -- exemplary and/or punitive damages. What is the law on exemplary and punitive damages? Punitive damages may be awarded in situations where the defendant's misconduct is so malicious, oppressive and high handed that it offends the court's sense of decency. Punitive damages may only be awarded in respect of conduct which is of such nature as to be deserving of punishment because of its harsh, vindictive, reprehensible and malicious nature. The conduct must be extreme in its nature and such that by any reasonable standard is deserving of full condemnation and punishment. To support an award of punitive damages, there must be evidence of malice directly or by inference. Malice however does not solely mean personal ill will; it may also mean such a wanton and reckless disregard of the right of another as amounts to the equivalent of malice. It means however more than mere negligence or want of sound judgment or hasty action.
Exemplary damages are appropriate where the defendant has acted in a high handed fashion with open disregard for the plaintiff's rights. The aim of punitive damages is not to compensate the plaintiff but rather to punish the defendant. It is the means by which a jury expresses its outrage at the conduct of the defendant. This type of damages are in the nature of a fine which is meant to act as a deterrent to the defendant and to others from acting in the same manner.
While there is no doubt that a court or a jury may award punitive damages in a case where there has been a breach of contract, the circumstances under which such an award is made are rare. In order for the plaintiff to be awarded exemplary and/or punitive damages, you must find that:
The defendant's conduct was so malicious, oppressive and high handed that it offends your sense of decency.
The defendant's conduct was of such a nature as to deserving of punishment because of its harsh, vindictive, reprehensible and malicious nature.
The conduct of the defendant was extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment.
Number two, if the answer to question one is yes, what is the amount of exemplary and/or punitive damages payable by the insurer to the plaintiff?
Again here, the onus of proof is upon the plaintiff to prove these damages on a balance of probabilities.
[60] Counsel for Laplante objected to the trial judge's instructions on the quantum of damages. The jury was recalled and further instructed in these words:
You remember when I finished this morning I was talking about punitive damages and I told you what was required to prove punitive damages. And [page500] the second question was, if your answer to question one is yes, what is the amount? And I went on and said, the onus of proof is upon the plaintiff to prove these damages on a balance of probabilities. Now, he doesn't have to prove the amount of damages. He doesn't have to prove, you know, I suffered "x" amount of dollars in damages. If you find that there are punitive damages, it's up to you to determine the amount.
[61] Grenville submits that the charge to the jury on this issue merely recited the general legal test for punitive damages and did not relate the issue to the facts of the case. Moreover, the jury was not instructed that there had to be an independent wrong. While Grenville concedes that there was no objection to the charge itself on this point, it argues that had the request of trial counsel been acceded to, and the jury asked to specify the conduct in question, it would have better focused the jury on its proper task of determining which conduct of Grenville was harsh, malicious, reprehensible or vindictive. As the record stands, Grenville submits that it has no idea of the conduct for which it was so harshly punished.
[62] Grenville further submits that there is no basis in the evidence to support the award for punitive damages. Although the punitive damages awarded by the jury in this case approach the $1 million awarded in Whiten v. Pilot Insurance Co., 2002 SCC 18, 209 D.L.R. (4th) 257, Grenville submits that there is no reasonable parallel between the two cases. The insurer here did not pursue an unfounded allegation of arson against a vulnerable insured. This case was, rather, a commercial dispute about the interpretation of a contract and the quantum of a complex claim. Grenville submits that it never breached its duty of good faith, but, if it did, any such breach cannot rationally justify any award of punitive damages, much less an award of this magnitude.
[63] It is Laplante's submission that Grenville generally acted in flagrant disregard of its duty to act fairly and in good faith during the course of assessing its claim. In particular, Laplante submits that a) Grenville failed to pay promptly those amounts that it recognized as payable under the policy, and that it did so with the intention of forcing Laplante to settle for less than what it was legally entitled to; b) Grenville reneged from certain undertakings to the Laplante family and applied more onerous conditions than those contained in the policy in order to avoid paying moneys that were clearly owed; and c) Grenville refused to follow the advice of its own experts on the quantum of the loss. Laplante submits that, notwithstanding this court's power to review such an award, this court owes a high degree of deference to the jury and should not interfere with the award.
[64] In so far as the instructions to the jury are concerned, Laplante takes the position that there was no reversible error; [page501] counsel invites the court to compare the instructions that were given in this case with those in Whiten, where neither this court nor the Supreme Court of Canada saw fit to set aside the verdict on that ground.
(b) The law on punitive damages
[65] The Supreme Court of Canada has provided an extensive review of the law of punitive damages in Whiten and has provided guidance on its general application and, more particularly, on its application in a contract case. The Supreme Court has also reiterated the applicable standard of appellate review of such awards. I will simply reiterate those principles that apply to the facts of this case.
[66] The single most important feature of punitive damages that must be kept firmly in mind is that their purpose is not to compensate a plaintiff, but to punish a defendant for its misconduct, to deter the defendant and others from similar misconduct in the future, and to denounce the misconduct as meriting society's condemnation. As such, as stated in Whiten"punitive damages straddle the frontier between civil law (compensation) and criminal law (punishment)" (para. 36). Since criminal law and quasi-criminal regulatory schemes are recognized as the primary vehicles for punishment, it is a fundamental principle of the law of punitive damages that the remedy be resorted to only in exceptional cases, and with restraint.
[67] The exceptional case is usually described as one where the defendant's misconduct was "malicious""oppressive""high-handed""offensive to the court's sense of decency": see for example, Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at para. 196, 126 D.L.R. (4th) 129. These incantations are well-known and they cannot be ignored. As stated in Whiten, they serve to limit "the award [of punitive damages] to misconduct that represents a marked departure from ordinary standards of decent behaviour" (para. 36).
[68] Restraint is then exercised by limiting the award to those cases of serious misconduct where punitive damages serve a rational purpose. As stated by Cory J. in Hill (at para. 197), the question is whether "the misconduct of the defendant [was] so outrageous that punitive damages were rationally required to act as deterrence?" This rationality test must be met both with respect to the question of entitlement to the award of punitive damages, and its quantum: see Whiten at para. 101.
[69] The Supreme Court of Canada in Whiten emphasized the importance of providing the jury with the necessary guidance to ensure that they understand these principles and the nature of [page502] their task in determining whether an award should be made. See Whiten at para. 94 for a helpful list of points that should be conveyed to the jury. On appeal, the standard of review applicable to any punitive damages ultimately awarded is whether a reasonable jury, properly instructed, could have concluded that an award in that amount, and no less, was rationally required to punish the defendant's misconduct: Whiten at para. 96.
[70] As noted by the Supreme Court of Canada in Whiten (see para. 67), it is in the nature of the remedy that punitive damages will largely be restricted to intentional torts or breaches of fiduciary duty, but they are nonetheless available in other civil cases where the circumstances warrant the addition of punishment to compensation.
[71] In a contract case, the plaintiff must show more than simply a breach of the defendant's obligations under the contract. Since the parties themselves define the scope of their relationship and the nature and extent of their respective obligations, the remedy for breach of contract lies in putting the plaintiff in the same position as he or she would have been if the contract had not been breached. This is the remedy to which the parties have contractually agreed and it will generally be viewed as sufficient to remedy the wrong, no matter how egregious. The Supreme Court in Whiten confirmed its decision in Vorvis v. Insurance Corp. of British Columbia, [1989] 1 S.C.R. 1085, 58 D.L.R. (4th) 193 and held that, in order to found a claim for punitive damages in a contract case, there must be an independent actionable wrong. The wrong in question may be a tort, but need not be. It is sufficient if it can form the basis of an independent cause of action at law.
[72] In an insurance contract, the law has long recognized, in addition to the express terms of the contract agreed to by the parties, a mutual obligation between insurer and insured to act in utmost good faith. The Supreme Court in Whiten clarified that a breach of this additional duty could found a claim for punitive damages by either insurer or insured: "a breach of the contractual duty of good faith is independent of and in addition to the breach of contractual duty to pay the loss. It constitutes an 'actionable wrong' within the Vorvis rule, which does not require an independent tort" (para. 79).
[73] In its inception, the duty to act in utmost good faith related to the insured's obligation to disclose all material facts affecting the risk undertaken by the insurer. It was born out of a perceived need to address the power imbalance resulting from the insured's exclusive access to information regarding the insured property: see Brown and Menezes, [page503] Insurance Law in Canada, looseleaf (Scarborough, Ont.: Carswell, 1999) at para. 10.5. The disclosure obligation, however, was recognized as mutual. The seminal statement on good faith in insurance contracts is by Lord Mansfield in Carter v. Boehm (1766), 97 E.R. 1162 at p. 1164, 3 Burr. 1905 (K.B.):
Insurance is a contract upon speculation. . . . The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstances in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist. . . . Good faith forbids either party by concealing what he privately knows, to draw the other into a bargain from his ignorance of that fact, and his believing the contrary.
[74] This court adopted the reasoning in Carter v. Boehm in Plaza Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co. (1994), 18 O.R. (3d) 663, 115 D.L.R. (4th) 37 (C.A.). Robins J.A. stated at p. 669 O.R.:
As insurer and insured, New Hampshire and Plaza were parties to a contract of insurance. Such contracts have long been classified as contracts uberrima fides -- contracts in which the utmost of good faith is required of the parties. A higher duty is exacted from parties to an insurance contract than from parties to most other contracts in order to ensure the disclosure of all material facts so that the contract may accurately reflect the actual risk being undertaken.
[75] The duty to act in good faith is distinct from the nature of the relationship between insurer and insured. Robins J.A. made it clear that the mutual obligations of good faith do not import fiduciary obligations [at p. 669 O.R.]:
The fact that a contract is one of utmost good faith does not however mean that it gives rise to a general fiduciary relationship. The relationship between insured and insurer is not akin to the relationship between, say, guardian and ward, principal and agent, or trustee and beneficiary. In these latter instances, the inherent character of the relationship is such that the law has traditionally imported general fiduciary obligations. The insurer-insured relationship is contractual; the parties are parties to an arm's-length agreement. The principle of uberrima fides does not affect the arm's-length nature of the agreement, and, in my opinion, cannot be used to find a general fiduciary relationship. The insurance contract, as noted above, imposes certain specific obligations on its parties. These obligations, however, do not import general fiduciary duties to each and every insurance relationship. Before such fiduciary obligations can be imported there must be specific circumstances in the relationship that call for their imposition.
[76] The implied obligation to act in good faith has been extended beyond mutual disclosure requirements in relation to the nature of the risk being undertaken. In particular, the courts have recognized that the insured, having suffered a loss, will frequently be in a vulnerable position and largely dependent upon [page504] the insurer to provide relief against the financial pressure occasioned by the loss underlying the claim. Hence, the obligation to act in utmost good faith requires an insurer to act promptly and fairly at every step of the claims process. See, in particular, the judgment of Laskin J.A. of this court in Whiten v. Pilot Insurance Co. (1999), 42 O.R. (3d) 641, 170 D.L.R. (4th) 280 (C.A.) and that of O'Connor J.A. in 702535 Ontario Inc. v. Lloyd's London (2000), 184 D.L.R. (4th) 687, [2000] I.L.R. 1-3826 (Ont. C.A.). In 702535 Ontario Inc., O'Connor J.A. provided a useful analysis of the insurer's duty of good faith during the claims process. He stated as follows (at paras. 28-30):
The first part of this duty speaks to the timeliness in which a claim is processed by the insurer. Although an insurer may be responsible to pay interest on a claim paid after delay, delay in payment may nevertheless operate to the disadvantage of an insured. The insured, having suffered a loss, will frequently be under financial pressure to settle the claim as soon as possible in order to redress the situation that underlies the claim. The duty of good faith obliges the insurer to act with reasonable promptness during each step of the claims process. Included in this duty is the obligation to pay a claim in a timely manner when there is no reasonable basis to contest coverage or to withhold payment.
[Citations omitted]
The duty of good faith also requires an insurer to deal with its insured's claim fairly. The duty to act fairly applies both to the manner in which the insurer investigates and assesses the claim and to the decision whether or not to pay the claim. In making a decision whether to refuse payment of a claim from its insured, an insurer must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured's economic vulnerability or to gain bargaining leverage in negotiating a settlement. A decision by an insurer to refuse payment should be based on a reasonable interpretation of its obligations under the policy. This duty of fairness, however, does not require that an insurer necessarily be correct in making a decision to dispute its obligation to pay a claim. Mere denial of a claim that ultimately succeeds is not, in itself, an act of bad faith: Palmer v. Royal Insurance Co. of Canada (1995), 27 C.C.L.I. (2d) 249 (Ont. Gen. Div.).
What constitutes bad faith will depend on the circumstances in each case. A court considering whether the duty has been breached will look at the conduct of the insurer throughout the claims process to determine whether in light of the circumstances, as they then existed, the insurer acted fairly and promptly in responding to the claim.
[77] Although the insurer's duty to act in good faith during the course of the claims process has figured more prominently in recent jurisprudence, it is clear that the obligation of utmost good faith required of parties to a contract of insurance is a mutual one: see Whiten at para. 83.
[78] A breach of the duty to act fairly and in good faith gives rise to a separate cause of action that is distinct from the cause of [page505] action founded on the express terms of the policy and that is not restricted by the limits in the policy. Hence, it may result in an award of consequential damages distinct from the proceeds payable under the policy. It is important to note, however, that the duty to pay promptly, as a component of the duty of good faith, must be considered in that context; it is not an absolute obligation giving rise to an automatic claim for consequential damages in the event of any failure to make a timely payment in accordance with the policy. The latter contention was made by the insured in 702535 Ontario Inc. and rejected by this court. O'Connor J.A. stated as follows (at para. 37):
. . . the broader interpretation urged by the appellants could have far-reaching effects for the insurance industry. In some cases, the risk of being found liable for consequential damages resulting from unsuccessfully contesting a claim under a policy would constitute a substantial disincentive for insurers to deny claims, even those which they reasonably and in good faith consider to be either unfounded or inflated. In a general sense, insurers and insureds have a common interest in ensuring that only meritorious claims are paid. Increased payments by insurers lead to increased premiums for insureds. In order to effectively screen claims, insurers must be free to contest those claims which in good faith they have reason to challenge, without running the risk that if they are ultimately found to be wrong, they will be liable to indemnify the insured for losses not underwritten in the policy contracted for by the insured.
[79] In addition, in an exceptional case where the insurer's misconduct is sufficiently malicious, vindictive or reprehensible so as to warrant punishment in addition to compensation, a breach of the duty to act fairly and in good faith can also found a claim for punitive damages.
(c) Application to this case
[80] Two issues are raised in relation to the award of punitive damages: the first is whether the jury was properly instructed; the second is whether the award of punitive damages is reasonably supported by the evidence. The question to be answered on the second issue is whether a reasonable jury, properly instructed, could have concluded on the evidence that an award in the amount of $750,000, and no less, was rationally required to punish Grenville's misconduct. If the answer to this question is no, there is no need to deal with the first issue. I will therefore first consider the reasonableness of the award of punitive damages in light of the principles discussed earlier.
[81] It is clear from the jury's verdict that it found that Grenville failed to indemnify Laplante for its loss to the full extent of the coverage under the policy. The failure to pay the moneys that remained owing constituted a breach of contract for which [page506] Laplante was fully compensated in damages, interest, and costs. In order to substantiate its claim for punitive damages, in addition to the claim for compensatory damages, it was incumbent on Laplante to show that Grenville breached its duty to act fairly and in good faith in its investigation, assessment and negotiation of the claim.
[82] As set out earlier, Laplante makes three specific allegations about Grenville's conduct in support of its submission that Grenville acted in flagrant disregard of its duty of fairness and good faith. First, it is submitted that Grenville failed to pay promptly even those amounts that it recognized itself as payable under the policy, and that it did so with the intention of forcing Laplante to settle for less than the amount to which it was legally entitled. Second, it is submitted that Grenville reneged from its undertakings to the Laplante family and applied more onerous conditions than those contained in the policy in order to avoid paying moneys that were clearly owed under the policy. Third, it is submitted that Grenville refused to follow the advice of its own experts on the amount owed under the policy.
[83] I will begin with the first allegation, the failure to pay what Grenville reasonably believed was owing under the policy. On the loss of earnings, Laplante took the position throughout that the quantum of the loss had been agreed to between the parties' respective accountants as early as November 1993 at approximately $38,700 a month and that there was no reason why payments should not have commenced shortly thereafter. Laplante argues further that, even if there were a basis to support Grenville's dispute of Lavictoire's initial estimate of the loss, Grenville should nonetheless have promptly paid the amount it contended it owed. Instead of doing that, Grenville made no payment towards this part of the claim until almost ten months after the fire and, Laplante submits, only after having been advised of Laplante's intention to complain to the Superintendent of Insurance. Laplante also submits that Grenville failed to pay what it reasonably believed was owing with respect to the loss of the livestock and the damage to the silos until August 1997, almost four years after the fire. Laplante submits that Grenville refused to pay even those moneys that it reasonably believed were due in order to force Laplante to accept less money than what it was legally entitled to, and that this conduct constitutes bad faith.
[84] The second allegation in support of the claim for punitive damages relates more specifically to Grenville's duty to act fairly. In particular, Laplante submits that Grenville twice reneged from the position taken by its representative during the course of its assessment of the loss, and that it did so to the detriment of [page507] Laplante which had acted in reliance on certain undertakings. The first incident concerns the sale of the culled livestock. Laplante was adamant throughout that Bellinger, on behalf of Grenville, had agreed to pay for the initial 13 cows and three bulls that were sold and also agreed to pay for any other livestock that would be sold on the basis of a veterinarian's certificate. The second incident concerns Grenville's approval of Laplante's decision to sell its remaining herd. Laplante submits that Grenville had agreed that this sale would not affect the quantum on the loss of earnings and that it later reneged from this agreement when it took the position that the loss of earnings were to be calculated taking into account the revenue that Laplante would have earned had it continued in the dairy business.
[85] Finally, the third allegation in support of the claim for punitive damages concerns Grenville's refusal to accept the advice of its own expert, Lavictoire, on the quantum of loss of earnings. Rather than accepting the figure of $38,700 initially agreed upon by Gratton and Lavictoire, Grenville asked Lavictoire to recalculate the loss of earnings based on the assumption that Laplante would have continued in the same business. Again, this is an assumption, Laplante contends, that ran contrary to Grenville's approval of the sale of the remaining herd and its approval of the change of business.
[86] Having considered the evidence as a whole and the respective positions of the parties, it is my view that a reasonable jury, properly instructed, could have concluded, in its assessment of the conduct of the insurer throughout the claims process, that Grenville had breached its duty to act fairly and in good faith in failing to pay promptly those amounts it reasonably believed were owing under the policy. As such, Grenville could be made liable to pay any consequential damage resulting from such breach. No such damage is in question in this appeal. However, it is my view that no reasonable jury, properly instructed, could conclude that the conduct in question was so outrageous or extreme as to warrant punishment. Before setting out my reasons for this conclusion, I find it convenient to comment on the trial judge's instructions to the jury on punitive damages at this point.
[87] There is no question that the jury was properly instructed on the exceptional nature of the remedy, its underlying purpose, and the egregious and extreme nature of the misconduct that can found an award for punitive damages. However, the jury was never instructed on the nature and extent of Grenville's obligation to act fairly and in good faith in processing Laplante's claim, as distinct from its obligation to pay what was owed under the [page508] policy. In my view, such an instruction would have been necessary in order to convey to the jury some understanding of the legal requirement for an independent actionable wrong.
[88] Further, the jury was provided no assistance in relating the law on punitive damages to the evidence. In my view, it would not have been obvious to the jury that the focus on the question of punitive damages was not the ultimate success or failure of the parties' respective arguments on the various aspects of the claim but, rather, the overall conduct of the insurer during the whole claims process. The conduct of the insurer should be considered fairly with some understanding of its right to investigate and assess the claim and its duty to do so fairly and in good faith. It is obvious from the award on the various items of compensatory damages that the jury took a very favourable, and on certain items most generous, view of Laplante's case. Hence, the jury may have felt strongly against Grenville for what it found to be its wrongful denial of Laplante's claim for substantial amounts. The jury may simply have equated an insurer's denial of an ultimately successful claim with the type of misconduct that can found an award for punitive damages.
[89] There is some merit to Grenville's submission that it may have been helpful in this case if the jury had been asked to briefly specify what conduct merited punishment if it decided that punitive damages were appropriate. In any case, it will be up to the trial judge to determine whether this question should be asked. In the circumstances of this case, it is my view that a question along the lines suggested by Grenville would have been entirely appropriate. It would have assisted the jury in better focusing on the nature of Grenville's conduct. However, this additional question alone would not have provided the jury with the further guidance it needed on the issue of punitive damages. In any event, in light of my conclusion on the reasonableness of the award, I need not decide whether the inadequacy of the instructions, in and of itself, would constitute reversible error.
[90] I make the following observations in support of my conclusion that this case does not fall in the category of cases that call for punishment in addition to compensation for any breach of the duty to act fairly and in good faith.
[91] Grenville never denied coverage under the policy. It commenced its investigation of the claim and assessment of the loss immediately. The claim was handled from the start by experienced and senior representatives. Laplante's representatives agreed in their evidence that Bellinger had been helpful and to them and that their dealings, on the whole, had been fairly amicable. They agreed that a fair amount of time had been spent in [page509] an attempt to settle the issues between the parties. Grenville paid promptly for those items of loss with respect to which there was no issue. As stated earlier, within two months of the fire, a total of $612,923 had been paid.
[92] This was a complex commercial matter and Grenville had the right, and indeed a duty, to investigate the claims made by Laplante. Regardless of Grenville's approval of Laplante's change of business, the fact remains that this decision added to the complexity of some of the issues. The issues that arose with respect to the contentious items of loss were real and there was a reasonable basis for Grenville's position with respect to each one of them. I will comment on each briefly.
[93] With respect to the loss of livestock, while there was no doubt that Laplante was entitled to be indemnified for the cow and the bull that died in the fire, it wasn't at all clear at the time, or even later on the evidence at trial, that Laplante was entitled to the full insured value of $2,100 per cow and $2,000 per bull as it contended. However, there is also no doubt that Grenville should have paid what it reasonably believed was the actual cash value for the two animals long before August 1997. Grenville's only explanation for not doing so was that the amount was not significant relative to the magnitude of the claim and the matter got lost in the shuffle.
[94] Grenville's failure to pay for the 13 cows and three bulls that were sold within days after the fire must be considered in the overall context of the dispute with respect to coverage, not only for those animals, but for the 30 additional cows that were sold on the basis of the veterinarian's certificate stating that they were not fit to be sold as dairy cows. Grenville's position that coverage under the policy for death or total destruction was not for loss of use but more akin to life insurance, although ultimately rejected by the jury, was not unreasonable. Nor was its position on the value of these animals unreasonable. Further, on my review of the evidence, I did not find the contention that Grenville reneged on Bellinger's undertaking to pay for these animals very convincing. The evidence about the conversation between Bellinger and the Laplantes, even taken from Laplante's point of view, seemed to me to demonstrate no more than a misunderstanding between the parties on the meaning of the words "totally destroyed" in the policy.
[95] On the loss of earnings, it is not at all clear on the evidence that Grenville's rejection of Lavictoire's initial estimate of $38,700 a month was unreasonable or made in bad faith. Lavictoire herself, in a revised opinion made a few months later, estimated the loss at a substantially lower amount. Forbes provided yet another [page510] opinion at trial. Grenville was entitled to investigate the matter further and was not bound by the opinion of the expert it retained. I note that it would have been clear, if not to Laplante, certainly to its counsel, that Lavictoire had no authority to bind Grenville. In this respect, Laplante's firm position throughout the negotiations that there had been an "agreement" on the $38,700 figure did not appear to leave much room for discussion.
[96] Further, Grenville was not obligated to make an immediate payment on the loss of earnings in the amount it considered reasonable without first investigating the matter further and attempting to negotiate a settlement. However, it was open to the jury to find that some form of initial payment should have been made before August 1994 and that the subsequent payment, based on the opinion of a second expert, should have been made long before August 1997. It is difficult to understand why it took so long for Grenville to consult its second expert.
[97] Grenville's position on the applicability of the co- insurance clause with respect to the loss to the silos was entirely reasonable. Its position that the auction sale price for the remaining herd represented the actual cash value of the animals was also reasonable. Indeed, on those two items, Laplante's position, although ultimately accepted by the jury, was a more difficult one to maintain. However, Grenville should have paid the amount it reasonably believed that it owed on those items long before August 1997.
[98] Based on my review of the evidence, I also find little support for Laplante's further contention that Grenville reneged from an undertaking not to take the sale of the remaining herd into account in the calculation of the loss of earnings. Laplante relies on Grenville's letter of November 9, 1993 in support of its contention that there was such an undertaking. However, it is difficult to read any clear undertaking from the words in the letter. As set out earlier, the letter simply states the following:
We understand your circumstances, and are in agreement that dispersal of your milking herd is warranted under these conditions. Although we are unable to make any definitive guarantee regarding the earnings insurance coverage on your policy at this time, settlement will be made in accordance with the terms and conditions of your insurance policy. It is our understanding that the accountants will be meeting on November 17th, 1993.
(Emphasis added)
[99] Although it may have been open to the jury to accept Laplante's position that there was some unfairness resulting from Grenville's apparent change of position on certain matters related to the loss of earnings during the course of the investigation and assessment of the claim, the conduct in question was certainly not of the kind to attract punishment. [page511]
[100] On any reasonable review of the evidence, it seems to me that the only possible basis for the jury's award of punitive damages is Grenville's failure to make a prompt payment of those amounts it reasonably believed were owing. The jury was asked to draw an inference from this conduct that Grenville abused its superior position and purposely set out to force Laplante into settling for a lesser amount than that to which it was entitled. The jury was also asked to infer that Grenville's position on this claim was indicative of a pattern of reprehensible conduct that called for punishment and deterrence. This approach was most apparent during the course of the cross-examination of Grenville's General Manager, Alton Whitehorne.
[101] However, there was little evidence beyond speculation to support the contention that Grenville abused its position of power and purposely set out to force Laplante into an unreasonable settlement. As noted earlier, the matter was in the hands of the parties' respective solicitors within a few months of the fire and the negotiations handled by counsel. I did not see any evidence on the record of such undue pressure. The record suggests, rather, that this was a hard-fought commercial dispute between two sophisticated parties.
[102] The evidence of Laplante's circumstances, as noted to the jury, was also relevant on the question whether Grenville had taken advantage of a vulnerable insured. It was summarized as follows in Grenville's theory of the case that was read to the jury by the trial judge:
In addition to Grenville's conduct, the plaintiff's circumstances must be considered in determining whether there should be an award of punitive damages. In the first full year after the fire, the Laplantes had the same amount of net equity in their business as before the fire, $2,200,000. In the year after the fire, the Laplantes' net earnings increased by $10,000. And family members were given a $10,000 salary increase. Within three months of the fire, essentially all of the long term debts was paid off. In May 1994, the Laplantes had a term deposit of $1,100,000 in their bank account. Within a year of starting the broiler operation, the plaintiff had diversified and begun a hog operation worth another $400,000.
[103] Although it was open to the jury to disapprove of the position taken by Grenville in the overall negotiation of the contentious parts of the claim, and even to find that in some respects it had breached its duty of good faith in failing to pay what was clearly owed under the policy, it is my view that the evidence could not reasonably support the finding that an award of punitive damages, let alone in the amount of $750,000 was rationally required to punish the misconduct. I would therefore set aside the award. [page512]
Disposition
[104] For these reasons, I would allow the appeal, set aside the award for punitive damages, and confirm the judgment in all other respects. Grenville shall file its bill of costs and written submissions on costs within ten days of the release of this judgment and Laplante shall file its responding submissions.
[105] WEILER J.A. (dissenting in part): -- I have had the benefit of reading the reasons of Charron J.A. I agree that the appeal should be dismissed on the evidentiary and other issues. I respectfully disagree with her conclusion that it was not open to the jury to make an award of punitive damages.
[106] As stated by the Supreme Court in Whiten v. Pilot Insurance Co., 2002 SCC 18, at para. 96, 209 D.L.R. (4th) 257". . . [T]he standard of appellate review applicable to punitive damages ultimately awarded, is that a reasonable jury, properly instructed, could have concluded that an award in that amount, and no less, was rationally required to punish the defendant's misconduct . . ." (emphasis in original). At the same time, punitive damages that are higher than required to fulfil their purpose are irrational: Whiten, supra, at para. 110. The applicable standard of appellate review, rationality, applies both to whether an award of punitive damages should be made at all and to the quantum of those damages.
[107] The requirement that punitive damages must be rational is derived from Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130, 126 D.L.R. (4th) 129 in which, at para. 197, Cory J. described the misconduct of the defendant as ". . . so outrageous that punitive damages [are] rationally required to act as a deterrence". While affirming and elaborating on the requirement that punitive damages serve a rational purpose, the court in Whiten held that the incantation of time-honoured pejoratives describing the conduct as high- handed, oppressive etc. provides insufficient guidance. A more principled and less exhortatory approach is desirable: Whiten, at para. 70. That approach is described by Binnie J. in Whiten, at para. 36 as "misconduct that represents a marked departure from ordinary standards of decent behaviour". An award of punitive damages need not be an inevitable or unavoidable response to be rational: Whiten, at para. 103.
[108] The rational purposes served by punitive damages are deterrence, retribution and denunciation: Whiten, at paras. 66-76. In stating the purposes served by punitive damages, the court also recognized that compensatory damages to some extent punish and may be all that is required in many cases: Whiten, at [page513] para. 123. Thus, punitive damages are to be awarded only where compensatory damages are insufficient to deter the wrongdoer and others from engaging in misconduct that represents a marked departure from ordinary standards of human behaviour in the future. When an award of compensatory damages would, instead, amount to a licence fee to the wrongdoer it is rational to award punitive damages: Whiten, at para. 72.
[109] I am respectfully of the opinion that it was rational for the jury to make an award of punitive damages in this case. The evidence that was open to the jury to accept, especially concerning Grenville's conduct in relation to Laplante's claim for loss of income, establishes a rational purpose for awarding punitive damages. Grenville was not entitled to wait almost nine months before making any initial payment for loss of income and to delay a further three years before obtaining the report of a second expert as to loss of income. Nor was Grenville entitled to go back on its word to Laplante. Having represented to Laplante that it was entitled to enter the chicken broiler business, Grenville's position, maintained until and throughout trial, that income loss should be calculated instead on the basis that Laplante had continued in the dairy business, was unreasonable. In these circumstances, it was open to the jury to conclude that an award of compensatory damages only would not deter Grenville's handling of a claim for loss of business income in the future. It was open to the jury to decide that it did not wish to license Grenville to breach its duty of good faith in this manner and to denounce this marked departure from ordinary standards of decent behaviour by awarding punitive damages.
[110] With respect to the quantum of punitive damages, the amount of punitive damages given should be no greater than necessary to rationally accomplish their purpose. The balance between a rational and irrational award is struck by regard to the proportionality test. An award of punitive damages will only be rational if it is proportionate. Binnie J., at paras. 111-26 of Whiten, set out six factors governing a proportionate award. They are: (i) the blameworthiness of the defendant's conduct; (ii) the degree of vulnerability of the plaintiff; (iii) the harm directed at the plaintiff; (iv) the need for deterrence; (v) any other penalties likely to be inflicted on the defendant; and (vi) the advantage wrongfully gained by the defendant. Having regard to these factors, the award of $750,000 in punitive damages by the jury is not proportionate and is therefore irrational. I would allow the appeal to the extent of setting aside the award of $750,000 in punitive damages and, in its place, would substitute an award of $200,000. [page514]
[111] The appellant further submitted that the jury was not properly instructed on the issue of punitive damages and that the verdict should be set aside on this basis. In view of her conclusion that it was not open to the jury to award punitive damages, Charron J.A. did not need to resolve this issue although she did comment on it. My conclusion that it was open to the jury to award punitive damages requires me to resolve the question of the adequacy of the trial judge's charge to the jury. I have concluded that the charge adequately addressed the requirements for an award of punitive damages and I propose to begin with this issue.
- The Adequacy of the Jury Charge
[112] The trial judge's charge to the jury on the law relating to punitive damages is found at para. 59 of the reasons of Charron J.A. and I need not repeat it here.
[113] Before an award of punitive damages may be made, three requirements must be met: the conduct giving rise to the award of punitive damages must constitute a separate actionable wrong; the plaintiff must show that the conduct is a marked departure from ordinary standards of decent behaviour; and the award of punitive damages must serve a rational purpose in the sense that punitive damages are required to act as deterrence, denunciation or retribution. See Whiten, at paras. 79, 36, 71 and 74.
[114] Charron J.A. is of the opinion that the trial judge's charge to the jury did not properly address the first requirement for punitive damages, namely the nature and extent of the separate actionable wrong. She writes that the jury was never instructed on Grenville's obligation to act fairly and in good faith in processing Laplante's claim, as distinct from its obligation to pay what was owed under the policy. In her opinion, such an instruction would have been necessary in order to convey to the jury some understanding of the legal requirement for an independent actionable wrong.
[115] In Whiten, the jury was not told that it must find a separate actionable wrong in order to award punitive damages, yet the trial judge's instructions to the jury were considered to be adequate by the Court of Appeal, and upheld, albeit with some hesitation, by the Supreme Court. (See Whiten v. Pilot Insurance Co. (1999), 42 O.R. (3d) 641, 170 D.L.R. (4th) 280 (C.A.).) Indeed, as noted by Binnie J., at para. 91 of his reasons, even the statement of claim was "somewhat deficient in failing to relate the plea for punitive damages to the precise facts said to give rise to the outrage". The conduct subsequently found to constitute a separate actionable wrong by the Supreme Court, namely the insurance company's breach of its duty of good faith towards its insured, had, however, been pleaded and the evidence to support [page515] this assertion led at trial. Here, Laplante led evidence at trial to support the allegation at para. 18 of its statement of claim. It alleged"As a result of the delays and refusals of the Defendant to make payments clearly and unequivocally owed to the Plaintiff, and its callous behaviour with respect to this matter and its wanton and reckless disregard of the contractual rights of the Plaintiff, the Plaintiff suffered considerable financial hardship."
[116] In Whiten, Binnie J. observed that the charge on punitive damages ought not to be an afterthought and listed some 11 points to assist judges in charging a jury on punitive damages in the future. He concluded, however, at para. 95: "What is essential in a particular case will be a function of its particular circumstances, the need to emphasize the nature, scope and exceptional nature of the remedy, and fairness to both sides."
[117] In this case, the trial judge carefully reviewed the positions of the parties on the issue of punitive damages in his charge to the jury. In relating Laplante's position under the heading "punitive damages" in his charge, he told the jury the insurer had not paid the sums clearly owing as a result of the fire although the insurance contract obliged the insurer to make the payments and to act with the utmost good faith. In relating Grenville's position under the heading "punitive damages", he told the jury Grenville's position was it had acted in good faith throughout the claim, paid amounts that were clearly owed and attempted to resolve outstanding issues. He also told them: "If the jury finds that additional amounts are owing to the Laplantes pursuant to the policy, this is not sufficient reason to award punitive damages."
[118] In addition, in his charge on the law, the jury was told that to support an award of punitive damages there must be evidence of "malice". The trial judge defined malice as a wanton and reckless disregard of the rights of another. He said that this was more than mere negligence or want of sound judgment. By defining malice as a wanton and reckless disregard of the rights of another, the trial judge described the type of conduct alleged to constitute the separate actionable wrong alleged in this case. The jury would have understood that any award of punitive damages it made depended on its decision as to whether Grenville had acted in good faith or with malice towards Laplante. In order to award punitive damages, the jury had to accept Laplante's position that Grenville had failed to pay what it clearly owed and that Grenville had done so with malice.
[119] Considering the charge as a whole, the jury would have understood from the trial judge's instructions that punitive damages could not be awarded simply because Grenville disputed Laplante's entitlement to payment of its claim. [page516]
[120] With regard to the second requirement for punitive damages, as Charron J.A. states at para. 87 of her reasons"There is no question that the jury was properly instructed on the exceptional nature of the remedy, its underlying purpose, and the egregious and extreme nature of the misconduct that can found an award for punitive damages." The trial judge told the jury that punitive damages should be imposed only if there had been high-handed, malicious conduct that "offends your sense of decency", thereby signalling that the conduct must be a marked departure from ordinary standards of decent behaviour.
[121] With respect to the third requirement, that punitive damages serve a rational purpose, the trial judge told the jury that the purpose of punitive damages was not to compensate but to punish the plaintiff. He said that they were like a fine"which is meant to act as a deterrent to the defendant and to others from acting in the same manner". The jurors were clearly told that punitive damages were a form of discipline against Grenville for malicious conduct that flagrantly disregarded the rights of Laplante.
[122] Considering the charge as a whole, the jury was adequately instructed on the three requirements for an award of punitive damages. The trial judge fairly reviewed the positions of the parties and related the conduct in issue, payment of sums clearly owed in a timely manner, to the issue of punitive damages. Contrary to the appellant's submission that the charge to the jury was inadequate with respect to whether punitive damages should be awarded, I am of the opinion that the charge was fair to both parties and was adequate.
- Was it Open to the Jury to Award Punitive Damages?
[123] Grenville's position is that this was simply a commercial case about the interpretation of a contract of insurance and the amounts to be paid under it. Grenville submits that, as it committed no independent actionable wrong, there is no basis for an award of punitive damages. It further submits that, even if it did breach its duty of good faith, its conduct was not so exceptionally bad as to offend the court's sense of decency, thereby justifying an award of punitive damages.
[124] As I have indicated, on the pleadings and the evidence led at trial it was open to the jury to conclude that Grenville failed to promptly pay amounts that were reasonably owing under the policy. My colleague, Charron J.A., also concludes as much at paras. 86, 97 and 100 of her reasons. As she notes at para. 76 of her reasons, the insurer's obligation to act in the [page517] utmost good faith requires an insurer to act promptly and fairly at every step of the claims process.
[125] The fire occurred on October 27, 1993. Laplante claimed a total of $460,421 loss of income, or approximately $38,700 a month for 12 months. (The new barn was completed in October 1994.) Grenville rejected its own expert's report agreeing with Laplante's figure, which it was entitled to do, and the report was revised in March 1994. That report placed loss of income at between $17,150 and $23,340 per month. At para. 23, in her recitation of the facts, Charron J.A. states that Grenville was of the view that a proper amount for loss of income would be $15,000 a month. Still, Grenville paid nothing. Laplante questioned why Grenville did not at least pay those amounts it agreed were owing in June 1994 and complained to the Superintendent of Insurance. In August 1994, an initial payment towards business losses of $50,000 was made. Following this, Grenville made no payment for business losses and did not retain another expert until preparation for trial. On August 8, 1997, Grenville finally paid a further $86,324 on a without- prejudice basis. The jury awarded Laplante an additional $246,910 for loss of income, for a total of $383,234.
[126] Charron J.A. concludes that it was open to the jury to find that some form of initial payment for loss of income should have been made before August 1994, over nine months after the fire. She also concludes that the subsequent payment made before trial in August 1997, after Grenville had consulted a second expert, should have been made long before that. She states at para. 96: "It is difficult to understand why it took so long for Grenville to consult its second expert."
[127] The second component to the loss of income claim is the number of months over which loss of income should have been paid. Mr. Gratton, the agent, told the Laplantes that they could rebuild in whatever aspect of farming they chose. Laplante advised Grenville that it had decided to go into the chicken broiler business. Grenville then told Laplante that a special exemption from the "similar use" requirement of the rebuilding clause in the policy was required in order to convert its operations from dairy to poultry. Laplante made this request on December 10, 1993. Grenville's response illustrates its ambivalent position towards Laplante. Grenville's Board of Directors turned down the request but the General Manager, Mr. Whitehorne, exempted Laplante from the requirement on his own initiative on January 14, and the Board subsequently ratified his decision in February 1994. Grenville admitted that it was not unreasonable for Laplante to wait until spring to rebuild. The [page518] ground was frozen solid and construction was impossible. When spring arrived construction proceeded promptly. Grenville took the position, however, that loss of income was to be calculated on the basis that Laplante had continued in the dairy business and that a dairy barn had immediately been constructed following the fire in October 1993. Grenville's change of position is particularly striking considering that, in reliance on Grenville's approval, Laplante sold its milk quota. At para. 99 of her reasons, Charron J.A. concludes: "Although it may have been open to the jury to accept Laplante's position that there was some unfairness resulting from Grenville's apparent change of position on certain matters related to the loss of earnings during the course of the investigation and assessment of the claim, the conduct in question was certainly not of the kind to attract punishment." As part of its duty of good faith, Grenville had a duty to treat Laplante fairly. It was open to the jury to find that it was unfair for Grenville to wait three years before consulting a second expert respecting the calculation of income loss and that the change in its position respecting the basis for the calculation of income loss should not go uncensored.
[128] In addition to the loss of income claim, Grenville breached its duty of good faith towards Laplante in other respects as well. It took almost four years to pay the $2,178 clearly owed for the cow and the bull that died in the fire. Charron J.A. finds that this payment should have been made long before August 1997. Grenville's only explanation for not doing so was that this amount was not significant and "got lost in the shuffle".
[129] Two silos were damaged in the fire. A proof of loss was filed with respect to the damage in February 1994. The insurer received a report from its expert respecting the loss in April 1994. The insurance contract required that the amount of the loss be paid within 60 days of the proof of loss being filed. The amount the insurance company reasonably believed it owed was only paid in August 1997, over three years later. At para. 97, Charron J.A. concludes that, although Grenville's position on the co-insurance issue respecting the silos was reasonable, Grenville should have paid the amount it reasonably believed it owed, namely $22,450, long before August 1997.
[130] Overall, Charron J.A. concludes that, although it was open to the jury to find Grenville had breached its duty of good faith, no jury properly instructed could conclude that this breach was so outrageous or extreme as to warrant punishment. Thus, while rejecting the appellant's position that it did not breach its duty of good faith, she has accepted the appellant's subsidiary [page519] position that its breaches of good faith are not sufficient to warrant punishment.
[131] In my opinion, the award of punitive damages (leaving aside the issue of quantum for now), although not inevitable or unavoidable, was rational. The jury was obviously incensed at Grenville's handling of Laplante's loss of income claim and in the other subsidiary areas I have discussed. The jury was in a much better position than we are to assess the nuances of the evidence and the inferences that might reasonably be drawn from the cumulative effect of Grenville's conduct and to conclude, as it must have, given the trial judge's charge, that Grenville acted with malice. The jury's finding of malice distinguishes this case from the decision in 702535 Ontario Inc. v. Lloyd's London (2000), 184 D.L.R. (4th) 687, [2000] I.L.R. 1-3826 (Ont. C.A.) where the court declined to award punitive damages. At para. 72, O'Connor J.A. wrote:
There is nothing in the evidence to show that Lloyd's was motivated by malice or that it acted vindictively. Lloyd's conduct does not offend a sense of decency nor, in my view, is it deserving of punishment.
[132] A further reason the court in 702535 Ontario Inc. declined to award damages was because the breach of the insurer's duty of good faith did not cause damage to the appellants. At the time, the Supreme Court had not released its decision in Whiten and the court considered the state of the law to be that the defendants must have committed an independent actionable wrong causing damage to the plaintiff. Since then, the Supreme Court has held in Whiten, at para. 117, that an award of punitive damages must be proportionate taking into account as one factor the harm or potential harm directed specifically at the plaintiff. It is not essential that the independent actionable wrong actually cause financial damage to the plaintiff. Although Pilot did not profit financially from its misbehaviour in the end, the court held, at para. 131, it was not for want of trying to get the Whitens to enter into a cheap settlement. Nor is it necessary that the defendant's conduct cause emotional distress. Indeed, emotional distress is not the proper subject of punitive damages because punitive damages are not compensatory. (The appropriate vehicle is aggravated damages.) See para. 116, Whiten.
[133] Having said this, I must address the reasons my colleague gives for her conclusion that it was not open to the jury to award punitive damages in paras. 91 and 92 of her judgment and on which she expands in the paragraphs that follow.
[134] The first is that Grenville never denied coverage under the policy and within two months of the fire Grenville had paid [page520] $612,923 with respect to capital losses. I agree that this case differs from Whiten in that the conduct by Grenville is not as extreme. However, the performance by Grenville of its duty of good faith respecting much of the capital loss does not mean that Grenville should not be censured for its unfair conduct towards Laplante concerning loss of income and in other subsidiary areas. The jury's decision is entitled to deference. Insofar as the quantum of punitive damages is concerned, however, I do agree that Grenville's performance respecting its capital obligations under the contract is a factor to be taken into account in assessing the harm directed at Laplante.
[135] Charron J.A. also refers to the evidence that Grenville assigned experienced and senior representatives to deal with the claim and that Laplante agreed its head adjuster, Bellinger, had been helpful to Laplante. The fact that some of Grenville's representatives dealt fairly with Laplante does not excuse its unfair treatment of Laplante in other respects. It was open to the jury to conclude that Laplante was not treated fairly in relation to Grenville's handling of its loss of income claim. Settlement negotiations are no excuse for non- payment of what is clearly owing when the non-payment drags on over years. More importantly, there is no evidence that Grenville's delay of nine months in making an initial $50,000 payment, its excessive delay in seeking the second report respecting loss of income and in making a second payment of $86,324 were linked to settlement negotiations. If anything, such a report may have furthered the negotiations. Nor do the negotiations have any relation to Grenville's change of position in insisting that damages for loss of income be calculated as though Laplante had continued in the dairy business.
[136] A further reason why Charron J.A. is of the opinion that punitive damages are inappropriate is that this was a complex commercial matter and she is of the opinion that there was a reasonable basis for Grenville's position in relation to the claims made, including the claim for loss of business earnings and the sale of the 13 cows no longer able to give milk and the 30 cows also declared not fit to be sold as dairy cows.
[137] The fact that this is a commercial case is not, in itself, a basis for the rejection of punitive damages. In Whiten, at para. 67, the court affirmed its rejection of any limitation of punitive damages based on the category of the case. I am, however, mindful that in Whiten, Binnie J. also cautioned at para. 115 that, in most commercial situations". . . particularly where the cause of action is contractual and the problem for the Court is to sort out the bargain the parties have made" an award of punitive damages will not be appropriate because it will not be proportionate [page521] to the vulnerability of the plaintiff. "Most participants enter the marketplace knowing it is fuelled by the aggressive pursuit of self-interest." This case has some of those elements. The dispute concerning whether Laplante had agreed to the insertion of the co-insurance clause respecting the silos under the policy and whether the amount Laplante received for the sale of the remaining herd of 156 cows at auction represented the fair market value for the herd are examples. But this was certainly not all that this case was about. Insurance contracts for the replacement of income loss are sold by the insurance industry and purchased by people for peace of mind. It is fundamental that an insured be able to rely on the word of its insurer. The loss of income claim had a potential direct effect on the personal well being of Mr. and Mrs. Laplante. The fact Laplante managed to survive the loss of income in the year following the fire does not detract from the fact Grenville's conduct was a marked departure from ordinary standards of human behaviour. It is the conduct of the wrongdoer that is the focus in awarding punitive damages. As stated in Whiten, at para. 92". . . punitive damages are directed to the quality of the defendant's conduct, not the quantity (if any) of the plaintiff's loss."
[138] An award of punitive damages may be rare and an award of punitive damages in a commercial case even more so. Such an award has, nevertheless, been upheld in circumstances where a commercial entity has acted unfairly towards its client. See: Royal Bank of Canada v. W. Got & Associates Electric Ltd., [1999] 3 S.C.R. 408, 178 D.L.R. (4th) 385 and more recently in Khazzaka (c.o.b. E.S.M. Auto Body) v. Commercial Union Assurance Co. of Canada, [2002] O.J. No. 3110 (Quicklaw) (C.A.), a decision of this court released August 14, 2002.
[139] Although Grenville's position respecting certain aspects of the claim was reasonable, respecting other aspects it was at least open to the jury to conclude that it was not. Grenville's delay in making any initial payment towards loss of income and its excessive delay in obtaining a second report concerning the amount of loss of income per month cannot be said to be reasonable. It was open to the jury to conclude that Grenville acted unfairly because it changed its position towards Laplante in insisting that damages for loss of income be calculated as though Laplante had continued in the dairy business. Similarly, it was open to the jury to conclude that Grenville's conduct amounted to a marked departure from ordinary standards of human behaviour.
[140] In relation to the sale of the initial 13 cows no longer able to give milk and then the 30 cows condemned pursuant to the [page522] veterinarian's report, I am of the opinion that it was open to the jury to conclude that Grenville also acted unfairly. Originally, Grenville may have been entitled to take the position that as a matter of contract interpretation the term "totally destroyed" in the policy meant the cow had to be killed as opposed to its income producing capability being totally destroyed. The jury may, however, have accepted Laplante's position that Grenville agreed to pay for these dairy cows on the basis that a veterinary report condemning them be obtained, then changed its position after the report was obtained and the cows sold. If so, it would have been open to the jury to conclude that Grenville's change of position was a further breach of its duty of good faith and not simply an issue of contract interpretation. There was no reasonable basis for Grenville's failure to deliver its payment of $2,178 until August of 1997, almost four years after the claim, for the amount it believed due for the cow and bull destroyed in the fire. I note that it took even longer for Grenville to make, just prior to trial, a without prejudice payment for the cattle sold as beef in the amount of $34,393 plus interest and costs.
[141] As noted by Charron J.A., Grenville did not pay what it reasonably believed was owing for damage to the silos totalling $22,450 until just before trial on August 30, 1997. It was also open to the jury to conclude that Grenville did not act fairly towards Laplante in relation to Laplante's claim for damage to the produce in the silos. The produce in the silos was sold in the spring of 1994 but the purchaser discovered the presence of mycotoxin in the produce. This meant the produce could not be used. Laplante made a claim for the produce. Grenville obtained a report stating that the feed was of good quality but no testing was undertaken to determine the presence of mycotoxin. Grenville did not perform any further testing for the presence of mycotoxin and refused to pay for the produce. At trial, Grenville relied on its deficient report and also alleged that the damage to the produce could have resulted from other causes. The jury may have concluded that Grenville's refusal to test the produce for the presence of mycotoxin and its refusal to pay the claim was part of the cumulative effect of Grenville's unfair conduct towards Laplante.
[142] A breach of the duty of good faith by an insurance company to its insured is always serious because it is fundamental to the relationship. The Ontario Law Reform Commission's Report on Exemplary Damages (Toronto: Ontario Law Reform Commission, 1991) at pp. 97-99, cited in Whiten, supra (C.A.), at para. 26, finds the arguments in favour of punitive damages to be compelling in cases where the defendant refused to tender compensation [page523] known to be owing to the plaintiff. Delay works in favour of the insurance company. It is the reasonable expectation of an insured that it is entitled to both capital and income replacement promptly when the insured's business is destroyed by fire. No one would faithfully pay insurance premiums for loss of business income knowing they would be faced with an unreasonable delay in payment. As noted by Laskin J.A. dissenting in part in Whiten, supra (C.A.), the objective of deterrence is particularly important in first party insurance cases given the vast number of claims handled by insurers every year. Further, as pointed out by Carthy J.A. in Khazzaka, supra, at para. 14, albeit in a different context"Unfairness compounded over and over again amounts to conduct that merits the condemnation of the court when visited by an insurer that owes a duty of good faith to its insured." It was open to the jury to conclude that Grenville had acted unfairly towards Laplante over and over again and that the cumulative effect of Grenville's conduct should not go uncensured.
[143] To summarize, whether the cumulative conduct of Grenville represented a marked departure from ordinary standards of human behaviour so as to warrant punitive damages was a question properly left to the jury. Here, a reasonable jury properly instructed could make a rational award of punitive damages.
- The Quantum of Punitive Damages
[144] The next question is whether the jury's award of $750,000 was rational in its amount. The test is a more interventionist one than in other jury awards where the court may only intervene if the award is so exorbitant or grossly out of proportion as to shock the court's conscience and sense of justice: Whiten, at paras. 107-08.
[145] In making a determination as to quantum, the court must consider the amount awarded as compensatory damages plus the amount awarded as punitive damages. Recognizing that punitive damages are discretionary, the jury must be given some leeway within which to do its work. As indicated, the test is whether a reasonable jury, properly instructed could have concluded that an award in that amount and no less was rationally required to punish the defendant.
[146] I turn now to the six factors to determine the proportionate amount of quantum. The first is the blameworthiness of the defendant's conduct. The level of blameworthiness may be influenced by a variety of factors. The factors listed by the court in Whiten, at para. 113 are: whether the misconduct was planned and deliberate; the intent and motive of the defendant; the length of time that the defendant persisted in the misconduct; [page524] whether the defendant conceded it had engaged in misconduct or attempted to cover it up; the defendant's awareness that what it was doing was wrong; whether the defendant profited from its misconduct; and whether the interest violated by the misconduct was known to be deeply personal to the plaintiff or irreplaceable.
[147] Grenville's conduct was, for the most part, deliberate. Charron J.A. finds that the motive or intent of the defendant was not proved. Similarly, in Whiten, the insurance company submitted that there was no evidence of a deliberate corporate strategy on its part as opposed to a "mishandled file that ran amok". The court commented that, although this was true, the insurance company had not called evidence to explain why the file had run amok and what steps, if any, were taken internally to prevent a recurrence. Here, Grenville has not offered any satisfactory explanation as to why it delayed so long in obtaining a second expert's report concerning loss of income nor for its change of position towards its insured. Nor is there evidence of any steps taken internally to prevent a recurrence. Given this, it was open to the jury to conclude that Grenville's conduct was intended to secure a benefit for itself. The benefit was that Laplante would settle its claim for loss of business income for much less than it was entitled to and that the other lesser items would be ignored. The conduct was persisted in over a lengthy period of time. Grenville had to have been aware that it was wrong in withholding payment of what was reasonably owed.
[148] The second factor is the degree of vulnerability of the plaintiff. In this case, we are dealing with a commercial entity in which there is generally less vulnerability. Overall, Grenville made significant payments under the policy which decreased Laplante's vulnerability from not receiving any money for loss of income. Once Laplante sold its milk quota and embarked upon building a chicken broiler barn, in reliance on the decision of Grenville's Board decision, it was, however, highly vulnerable to Grenville's change of position respecting the basis for calculating loss of income. Laplante did not have peace of mind with respect to its loss of income claim. Laplante had to draw upon its capital resources and borrow to survive.
[149] The third factor is the harm or potential harm directed specifically at the plaintiff. Unreasonable delay in payment of a claim for loss of business income has the potential to put a plaintiff out of business. Fortunately, in this case, Laplante could and did draw on other resources. As pointed out by Charron J.A., the amount paid by Grenville as of January 1995, approximately 14 months after the fire, was $980,000. By the time of trial in January 1998, $1.17 milion had been paid, albeit [page525] part of this on a without prejudice basis. These payments mitigated the potential harm to Laplante.
[150] The fourth factor, the requirement of proportionality to the need for deterrence is a significant factor here. The deterrence factor is important because the misconduct was known and participated in by Grenville's top management who took no corrective action. Deterrence over and above the award of compensatory damages is required because of the strong incentive for an insurer to use non payment of what is reasonably owed in a timely fashion as a negotiating tactic. However, punitive damages inevitably carry some stigma and, as stated in Whiten, at para. 94, moderate awards are generally sufficient. In this case, the jury was not cautioned that its award should be moderate. I consider this to be an important factor in assessing the rationality of the size of the jury's award.
[151] The fifth factor requires consideration of any other penalties. As indicated, the award of compensatory damages must be taken into account. Apart from compensatory damages, there were no other penalties. The jury awarded Laplante $488,389 of the additional $700,000 in compensatory damages sought by it, plus punitive damages of $750,000. The jury's decision is indicative of its conclusion that compensatory damages were not enough and that further punishment was warranted. As I have indicated, it was open to the jury to come to this conclusion. The compensatory damages were, however, generous respecting the sale of the remainder of the herd.
[152] The sixth factor is the advantage wrongfully gained by the defendant from the misconduct. Ultimately, Grenville did not gain from its misconduct but its failure to do so was only due to Laplante's determination to pursue its rights.
[153] The seventh and final factor involves the interest violated by the misconduct and whether it was known to be deeply personal to the plaintiff (e.g. professional reputation (Hill, supra)) or irreplaceable. While Grenville's delays undoubtedly created a great deal of stress for the Laplantes in their attempt to rebuild the family farm, the barns and livestock were replaceable assets (unlike the mature trees cut down by the real estate developer in Horseshoe Bay Retirement Society v. S.I.F. Development Corp. (1990), 66 D.L.R. (4th) 42, 3 C.C.L.T. (2d) 75 (B.C.S.C.)).
[154] Having regard to all of the foregoing factors, I am of the opinion that it cannot be said that an award of $750,000 in punitive damages and no less was rationally required to punish Grenville's misconduct. I must therefore decide what amount would be proportionately rational. [page526]
[155] Some guidance respecting damages may be derived from Got, supra, where punitive damages in the amount of $100,000 were awarded and upheld by the Supreme Court in circumstances where the bank filed a misleading affidavit in order to obtain a court appointed receiver. More recently, in Khazzaka, supra, a jury award of $200,000 in punitive damages was upheld where the insurer maintained a spurious defence of arson in relation to an autobody shop. In these cases, as it is here, deterrence is a major consideration. Having regard to the need for further deterrence and to the factors I have discussed above, I am of the opinion that an award in the amount of $200,000 would be proportionate and rational in this case.
[156] In conclusion, I would uphold an award of punitive damages as rational but am of the opinion that the amount of $750,000 awarded was not rational. Having regard to the factors that must be balanced to achieve a proportionate award, I would set aside the jury's award of $750,000 and in its place would substitute an award of $200,000.
Appeal allowed.
Notes
Note 1: A complaint was made, the matter was inquired into by the Office of the Superintendent and the file closed on the basis that this was a dispute as to quantum.