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How Are Punitive Damages Calculated?

When a person is diagnosed with a medical condition that prohibits them from performing the duties of their job for an extended period of time, they may find themselves worrying about how they’re going to pay their bills while still prioritizing their recovery. People with serious medical problems who can’t work may find some financial security in the form of long-term disability benefits.

Long-term disability benefits may be available to injure or ill people who pay into a group insurance plan through their employer or have coverage through a private insurance policy. When applying for long-term disability benefits, eligible policyholders will need to show thorough medical evidence that they are unable to perform the duties of their own job.

Insurance companies assessing individual claims for long-term disability benefits have a contractual obligation to deal with claimants in good faith. This means they must assess claims promptly, and in a reasonable manner. If an insurer breaches that contractual duty by acting in bad faith, then you can seek punitive damages from them to help punish their wrongful conduct, in addition to collecting the long-term disability benefits payments you may be owed.

Punitive damages are awarded in rare cases. However, if your claim for benefits was denied even after providing sufficient, credible evidence of your disability, a long-term disability lawyer may be able to negotiate a lump-sum settlement for you, and, if you’re eligible, secure additional money for punitive damages.

If awarded, the cost of punitive damages is determined by a number of factors. Each case is different. The Court will consider several factors, including:

  • The harm caused to the victim (unable to pay rent or mortgage, mental distress, financial distress, going into debt, etc)
  • The severity of the insurance company’s misconduct
  • The relative vulnerability of the victim
  • Any advantage or profit gained by the insurance company as a result of misconduct
  • And possibly more

The cost of punitive damages awarded may also be determined in relation to other fines or penalties the insurance company has already been issued as a result of their misconduct.

When Are Punitive Damages Awarded?

In long-term disability benefits claims disputes, awarding punitive damages is the exception, not the rule.

However, if it is proven that an insurance company was not honouring their contract with a policyholder by assessing their claim in bad faith, a judge or jury may decide that the insurer’s behaviour constitutes an “actionable wrong.” In these situations, an unfairly denied claimant may be awarded punitive damages in addition to the long-term disability benefits payments to which they’re entitled.

By awarding punitive damages, Courts are, in effect, publicly denouncing the insurance provider’s behaviour. Punitive damages are meant to avenge wrongdoings and to deter other bad actors from engaging in this kind of behaviour in the future.

In long-term disability claims disputes, punitive damages are not meant to compensate an unfairly treated victim, but to punish and deter bad behaviour.

Establishing Grounds to Pursue Punitive Damages

When insurance companies engage in misconduct beneath the standards of good behaviour, they may be required to pay punitive damages as a result.

In one such case, a plaintiff’s insurance company unfairly denied benefits. The insurance provider alleged that the victim’s claim was fraudulent even though it wasn’t, and even though experts testified otherwise. By doing so, the insurance company forced a vulnerable person to decide between incurring hefty lawyer fees to continue defending themselves through protracted legal proceedings, or to give up their right to the full settlement amount to which they were entitled.

To reprimand the insurance company for this behaviour, which would otherwise have gone unpunished, the Court awarded the plaintiff punitive damages in addition to the benefits payments they were owed.

One benefit that Preszler Injury Lawyers offers is contingency fee agreements. This means that people wrongfully denied long-term disability benefits can hire a full legal team with no money upfront, and no fees owed if they do not receive compensation. This can help level the playing field against giant insurance companies.

Limitations Set by Ontario Regulations

In long-term disability benefits disputes, punitive damages are only awarded in rare circumstances. Punitive damages will be awarded if the insurance company has acted unfairly and their conduct deserves to be denounced and punished.

Currently, the Supreme Court of Canada has suggested that the upper end of punitive damages can be around $1,000,000.00 – although there is no formal cap per se. However, damages are only awarded in an amount that will rationally accomplish the goals of denunciation, retribution, and deterrence.

Although there’s no fixed amount of punitive damages that could be awarded, the amount must also be considered reasonable, and proportional to the level of the insurance company’s misconduct.

Sadly, while punitive damages are uncommon, wrongful denials by insurance companies are not. Preszler Injury Lawyers regularly handles insurance denials on behalf of our clients and regularly advances punitive damages claims in order to denounce misconduct and seek the compensation our clients are rightfully owed.

Contact Personal Injury Lawyers Today

If you believe your claim for long-term disability benefits was unfairly denied, Preszler Injury Lawyers may be able to provide you with useful legal assistance and advice. To discuss the circumstances of your claim and the legal options that may be available to you, call Preszler Injury Lawyers today at 1-800-JUSTICE today.

Call us now at

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