Damages for Mental Distress and Bad Faith in Disability Claims

This article examines recent changes in the law in Canada in relation to the court’s willingness to acknowledge the significance of, and award compensation for, intangible loss arising from breach of contract. When a claim for benefits is wrongly refused in a disability contract, a primary goal of the contract, which is to provide peace of mind, is unrealized. Where this causes mental distress, Canadian courts are now willing to award compensation. Similarly, if an insurer conducts itself in such a manner as to attract a punitive damages award, a consideration in assessing the quantum of the award is the vulnerability of the insured. The evidentiary basis for these claims will often include expert psychological opinion. Various considerations for determining the existence, nature, and scope of the psychological issues relevant to a claim for damages for mental distress and/or punitive damages are covered in this article.