If your insurance company has wrongfully denied or unfairly delayed your long-term disability (LTD) benefits, you might be eligible for more than just compensation for lost benefit payments. Canadian courts recognize additional damages—known as aggravated and punitive damages—when insurers act in bad faith or engage in particularly harmful behaviour causing financial or mental distress.
At Verkhovets Law, our experienced legal team specializes in securing these additional damages, holding insurers accountable for their misconduct and ensuring you receive overall fair compensation.
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Important Canadian Court Cases on Aggravated and Punitive Damages
When Are Aggravated and Punitive Damages Awarded in LTD Claims?
When your insurer breaches the terms of your LTD policy—usually by unfairly denying or delaying your claim—the most common remedy is compensatory damages. These damages are designed to repay you for the financial losses incurred due to the withheld benefits.
However, Canadian law recognizes situations where insurers go beyond simply denying claims and behave egregiously. In such cases, the courts may award additional damages, specifically:
Aggravated Damages
Punitive Damages
These special forms of damages acknowledge the emotional, psychological, and financial distress as well as punish insurers who act in bad faith in handling your claim.
Aggravated damages are awarded in long-term disability lawsuits when the insurer’s breach of contract causes significant emotional, psychological, or financial harm beyond the financial loss of benefits alone.
For example, if your insurer's denial of LTD benefits has resulted in severe stress, anxiety, or emotional turmoil, aggravated damages might be awarded to acknowledge and compensate you for this additional suffering.
In Canada, aggravated damages generally range from $10,000 to $100,000, with many cases resulting in awards toward the lower or mid-range of this spectrum.
Key point: Unlike punitive damages, you don’t have to prove a separate wrongful act beyond the insurer’s breach of contract to receive aggravated damages, making them more accessible in LTD cases.
Punitive damages, also known as exemplary or extra-contractual damages, differ from aggravated damages because their purpose is not compensation. Instead, they exist to:
Punish insurers who engage in seriously unethical or malicious practices.
Deter insurance companies from repeating the misconduct in the future.
Send a strong message that courts will not tolerate bad-faith behaviour.
Punitive damages in Canada’s LTD lawsuits are awarded only in exceptional cases where the insurer’s actions severely breach the duty of good faith owed to policyholders. Examples of conduct that may justify punitive damages include:
Deliberately misinterpreting or exaggerating surveillance evidence.
Ignoring critical medical reports or cherry-picking evidence to unfairly deny claims.
Employing aggressive tactics intended to pressure or intimidate claimants.
Deliberately delaying claims to exploit financial vulnerability.
While punitive damages awards vary greatly, Canadian courts typically grant between $30,000 and $500,000 depending on the seriousness of the insurer’s misconduct.
In this landmark case, Connie Fidler, who suffered from fibromyalgia and chronic fatigue syndrome, faced wrongful termination of her LTD benefits by Sun Life. Despite overwhelming medical evidence supporting her claim, Sun Life relied on questionable surveillance and refused to pay. While Fidler initially received $20,000 in aggravated damages for emotional distress, a punitive damages award of $100,000 was ultimately overturned by the Supreme Court. This case set the precedent that punitive damages require exceptionally egregious conduct.
Mrs. Fraser was unjustly denied LTD benefits despite an independent medical examiner recommending further psychiatric evaluation—an evaluation the insurer deliberately ignored. The court awarded Fraser $10,000 in aggravated damages and an exceptional $150,000 in punitive damages due to the insurer’s reckless disregard for expert medical advice and severe bad faith.
After sustaining significant back injuries, Mr. Fernandes was denied LTD benefits despite strong medical documentation. The insurer relied on weak surveillance footage; unfairly portraying Fernandes as capable of working. Ultimately, Fernandes received approximately $236,000 in compensatory damages, $25,000 in aggravated damages, and an impressive $200,000 in punitive damages, highlighting the court’s intolerance of insurers treating claimants unfairly.
Aggravated damages are available as additional compensation, beyond payment of the benefits owing, if it is established that the denial of entitled benefits resulted in harm such as mental distress or financial hardship.
Punitive damages, however, are less predictable and depend entirely on the severity and nature of the insurer’s misconduct. Insurers may face punitive damages if they:
Deny claims without proper medical evidence.
Conduct inadequate investigations or ignore mental health aspects of claims.
Employ delay tactics or pressure claimants unfairly.
Use biased or misleading medical evaluations.
At Verkhovets Law, we understand the immense stress and anxiety that arise from unfairly denied LTD claims. Our experienced legal team is committed to holding insurers accountable by pursuing all available damages, including aggravated and punitive damages. Here’s how we help:
Detailed Case Analysis: Our lawyers thoroughly review your medical records, correspondence with insurers, and the complete history of your LTD claim to identify instances of bad faith.
Fierce Negotiation: We firmly negotiate on your behalf to secure fair compensation quickly and effectively.
Litigation Expertise: If negotiation fails, we are ready to take your case to court, leveraging our extensive litigation experience to protect your rights.
Maximizing Your Claim: Beyond securing your withheld benefits, we ensure you receive any additional damages warranted by insurer’s misconduct.
If your LTD claim has been unfairly denied, schedule your free consultation with Verkhovets Law today to explore your options for obtaining full justice.
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Insurance companies have a legal obligation to handle LTD claims fairly and in good faith. When insurers act in bad faith, Canadian courts provide pathways for holding them accountable through aggravated and punitive damages.
If you believe your insurer wrongfully denied or mishandled your long-term disability claim, don’t wait—contact Verkhovets Law today. We’re committed to standing by your side, fighting for the justice and compensation you deserve.
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Mariya Verkhovets
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421 Allen, Mexico 4233
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