Punitive Damages are awarded to Punish Liable Persons for Reprehensible Conduct

As defined in a landmark case, Whiten v. Pilot Insurance Co., 2002, “The purpose of the [tort law] part of our legal system remains to make good the loss suffered, no less, no more.”  This objective is considered to be fulfilled when an accident victim who was seriously injured by a negligent party receives fair compensation to allow them to function, as much as possible, the way they did prior to their injury.  By contrast, the objective in a punitive damage award is “retribution, deterrence and denunciation”.

In a landmark case, Whiten v. Pilot Insurance Co., [2002], The Supreme Court of Canada awarded a punitive damage of $1 Million against the insurer in recognition of their failure to meet an obligation of good faith and fair dealing. This $1 Million punitive damage award restored the amount initially awarded by the Provincial Court in a trial by jury, but which the Ontario Court of Appeal reduced to $100,000. The Supreme Court concluded that the insurer’s actions in this instance were exceptional and, although the $1 Million amount is unusually high, it is within acceptable limits.  The decision to award punitive damages was considered rational in this case, given the evidence that the claimants were exploited and unfairly opposed in settling their claim after having purchased a fire insurance policy in good faith.

In January 1994, the Whiten family home in Haliburton County, Ontario, burned down during the night in minus 18 Celsius temperatures.  The husband, wife and their daughter escaped in their pajamas, but lost all the contents of their home and their three cats. Mr. Whiten suffered severe frostbite on his feet, for which he was hospitalized.  Pilot Insurance made a one-time $5000 payment for living expenses and covered their rent in a winterized cottage for a few months, then discontinued paying without informing the family. The family’s financial situation became increasingly desperate over the more than two years, during which Pilot delayed settling their claim. This situation led to a prolonged eight week trial in which the insurer alleged that the family burned down their own home, although experts including the fire chief and insurer’s own investigator found no evidence of arson.

Pilot’s case was discredited during the trial.  The Whiten family was awarded compensatory damages by the Jury as well as $1 million in punitive damages. The Court concluded “the insurer’s conduct towards the [Whitens] was exceptionally reprehensible.” The family was forced to accumulate $320,000 in legal costs they did not have.  It was held that denial of the claim was deliberate with the intention to force the family to take an unfair and undervalued settlement. The Jury also concluded that the insurer knew all along that arson was not the cause of the fire and were counting on the fact that the devastated family would be unable to challenge the wrongful dismissal of their claim.

The Supreme Court found that the Jury’s response to the facts presented in the initial trial was rational in their conclusion that Pilot should not get away with paying only the amount of the claim that was originally due (plus costs), after having dragged out the claim for so long. The Supreme Court found no good reason to challenge the original Jury decision that something more was needed (in the form of a substantial punitive award) to show the insurance company that dealing in bad faith with the loss claim was not a profitable or wise course of action.

In 1996, a young McMaster University student was struck by a car while she was walking along the curb with friends after attending the campus pub. The young woman was a competitive athlete prior to the accident, but the physical (including a head and brain injury, soft tissue damage and multiple orthopaedic injuries) as well as psychological injuries resulting from the car accident had a devastating impact on her physical capabilities and mental health. Mr. Grigg, the driver of the vehicle, was intoxicated and allegedly speeding when he recklessly turned a corner and struck Ms. Mcintyre. A breathalyser test revealed a blood alcohol concentration (BAC) three times the legal limit. Mr. Grigg had been drinking at the campus pub, but this was apparently the third bar he had attended that evening.  The McMaster Student Union responsible for managing the pub was named as a joint defendant for their role in serving alcohol to the intoxicated driver. The $20,000 in punitive damages were payable solely by the Griggs, and $250,000 in general damages were to be shared by the co-defendants.

Gordon Pate was Chief Building Official for Galway-Cavendish Township until it amalgamated with Harvey Township, when he became a building inspector for the amalgamated Townships. Soon after the amalgamation, Mr. Pate was fired by his employer who alleged that they discovered discrepancies with building permit fees.  Prior to being fired, Mr. Pate was pressured to resign to avoid criminal charges, but he was never provided details on the alleged discrepancies. He refused to resign and was subsequently terminated, and some information was turned over to the Ontario Provincial Police (OPP).  OPP were reluctant to lay charges but were allegedly pressured to do so by the Township.  In a four day criminal trial in 2002, Mr. Pate was acquitted of all charges, after having endured much negative local media attention. Mr. Pate did not obtain municipal employment after the trial and passed away in 2011.

In a Dec 2009 trial, Mr. Pate sued the Township for wrongful dismissal, malicious prosecution, injuries to his reputation and other charges. The judge rejected the malicious prosecution claim but awarded Mr. Pate special damages and costs of almost $280,000, excluding the wrongful dismissal settlement paid by the Township. This decision was appealed, the result of which was to order a re-trial. Upon re-trial, the judge found significant misconduct on behalf of the defending municipality, which persisted over a ten year period.  The municipality’s actions, which were deemed intentional and foreseeable against the plaintiff, had a devastating effect on Mr. Pate’s life including his marriage and employability.  These findings were the basis of the $550,000 punitive damages award.