In Branco v American Home Insurance, Zurich Insurace was order to pay $3 Million in punitive damages and AIG was ordered to pay $1.5 Million in punitive damages and $450,000 in aggravated damages. The Plaintiff was injured and his disability insurers failed to honor their contracts in paying the Plaintiff temporary total disability benefits and long term disability benfits. Disability insurance is know as a "peace of mind" contract. When one is injured, you are supposed to have peace of mind because you have insurance for income replacement. In this case, Zurich insurance waited 10 years before making a disability payment.
There was, in the insurer's file, a memo that said:
"I called the claimant and he did not accept our offer and said that he was going to get an attorney. I hope he re-considers because he lives in Portugal and he will have to go back to Canada to get an attorney and this whole process is going to take years to settle. Here we go CANADA!!!!!"
In their reasons the Court alluded to the fact that insurance iindustry practice of not paying disability benefits is all to common, and only a few people have the ability to fight the insurance companies, wondering how many others there are out there. The Court said:
197 The goal of punitive damages is deterrence. Insurers must discontinue exploiting the vulnerability of insureds in times of disaster. The court must also consider the fact that previous awards such as $60,000 in Sarchukand and $1,000,000 in Whiten appear to have done little or nothing to deter insurance companies from their actions.
208 The words of Binnie J. quoted previously in the Whiten case at para. 131 are most appropriate and a perfect summation of the actions of Zurich wherein he states at paragraph 131 The respondent also argues that at the end of the day, it did not profit financially from its misbehaviour. This may also be true, but if so, that result was not for want of trying. The respondent clearly hoped to starve the appellant into a cheap settlement. ... That it failed to do so is due in no small part to appellant's counsel who took a hotly contested claim into an eight-week jury trial on behalf of a client who was effectively without resources of her own; and who obviously could have been starved into submission but for his firm's intervention on her behalf.
215 Although Canadian courts may have believed that the $1 million award in the Whiten case would catch the attention of the insurance industry and the court's disapproval of such actions, it is apparent that the $1 million was not sufficient. These decisions were rendered during the same time period that AIG and Zurich were continuing their pattern of aggressive non-activity on the claim of Branco.
216 The court is cognizant of the fact that a punitive damages award of $3 million may not be particularly significant to the financial bottom line of a successful worldwide insurance company. It is hoped that this award will gain the attention of the insurance industry. The industry must recognize the destruction and devastation that their actions cause in failing to honour their contractual policy commitments to the individuals insured.
217 Both AIG and Zurich failed to deal with Branco's claim in good faith. Each tried to take advantage of Branco's economic vulnerability to gain leverage in negotiating a settlement. The fact that Branco was able to continue to withstand this pressure for so many years from two different fronts is truly remarkable and almost superhuman, even though his resistence may have resulted in irreparable mental distress which may last for the remainder of his lifetime.
218 The court has grave concerns as to how often this type of action occurs in dealing with insurance claims. The court is only cognizant of the cases such as Sarchuk, Whiten and Branco which come before them. If Whiten (in the Whiten case) and Branco, in this case, had not been able to withstand the unbelievable pressure to settle on the terms and conditions originally offered these cases would not have received the attention of the courts either. The question remains: how many individuals have been unable to withstand the financial and psychological pressure of these tactics?
219 The court has earlier quoted extensively from the decision of Binnie J. in the Whiten decision. It is noted that the discussion of the Whiten circumstances and his eloquent statements show an eerily stark similarity to the current situation but to a much lesser degree and over a shorter period of time than the Branco situation.