Insurer must pay punitive damages for withholding payment.

On May 3, 2022, the BC Supreme Court ordered that a homeowner’s insurer pay PUNITIVE DAMAGES for withholding payment of the undisputed parts of a fire loss claim.

In Green Estate v. Sonnet Insurance Co., 2022 BCSC 709, an executor brought an application against the estate’s insurance company for breach of statutory condition 12 and breach of the implied duty of good faith in failing to indemnify the estate for losses arising out of a house fire.  Statutory condition 12 requires the insurer to pay or reject a claim 60 days after proof of loss. 

The insurer initially agreed to pay the cost of rebuilding the house, but continued to dispute the contents claim.  In response to the adjuster’s request for receipts and other supporting documentation for lost contents and related costs, the executor prepared two proofs and schedules of loss.  The insurer continued to not pay the contents claim, citing the matter remained under investigation pending receipt of further information.  The executor responded that the receipts were not kept or were lost in the fire.  The insurer then stopped funding the reconstruction of the home, causing construction to stop for a year until the insurer reversed its decision.  The executor submitted a third proof and schedule of loss for the contents claim but the insurer continued to refuse to pay the claim.

Millman J. held that the insurer breached statutory condition 12 in failing to pay the outstanding contents claim within 60 days of receipt of the third proof of loss.  The estate was also awarded $30,000 in punitive damages.  The basis for the award was that the insurer delayed its investigation of the contents claim indefinitely, and improperly withheld payment on the other parts of the claim that were undisputed pending the outcome of that investigation.