Understanding punitive and aggravated damages in LTD claims

Understanding Punitive and Aggravated Damages in LTD Claims

By Nainesh Kotak

If someone has been improperly denied long-term disability (LTD) benefits in a way that caused additional harm to their financial, emotional or mental wellbeing, they may be entitled to receive compensation over and above the past benefits owing. Not every case gives rise to these extracontractual damages — more commonly known as punitive and aggravated damages — but some certainly do.

Punitive damages

Punitive damages are punishment-oriented and act as a denunciation issue of the bad faith conduct of the insurance company. Essentially, punitive damages are awarded to deter the insurance company from engaging in similar behaviour with other claimants.

To be awarded punitive damages, a plaintiff must prove an independent actionable wrong — essentially, that the insurer was acting in a high-handed or malicious manner. Bad faith conduct goes well beyond the insurance company making an honest mistake. It’s important to note that not all bad faith conduct gives rise to punitive damages, but all punitive awards involve bad faith conduct.

Punitive damages are rarely awarded in Canada, but there have been some significant cases where plaintiffs have been awarded anywhere between $10,000 to $1 million, depending on the conduct. But, again, just because an insurance company acts in bad faith doesn’t mean a claimant will be awarded damages. They are the exception rather than the rule — but could apply in specific circumstances.

Aggravated damages

Aggravated damages are compensatory and arise out of the failure of an insurance company to pay disability benefits or for their conduct that resulted in a failure to pay.

For example, if your insurance company’s refusal to pay benefits resulted in mental distress and financial hardship, you could seek aggravated damages. However, it’s worth noting that in Canada, the awards for aggravated damages are in the range of $10,000 to $100,000, and most are on the lower end of the scale.

What distinguishes aggravated damages is that you don’t have to prove an independent actionable wrong. Although both damages are not readily awarded in Canada, aggravated damages are easier to obtain than punitive damages.

In one recent case, the Ontario Superior Court of Justice felt the plaintiff met the test for disability concerning her “own occupation.” She was awarded $10,000 for the mental distress caused by the insurer’s breach of the duty of good faith.

In another decision out of the British Columbia Court of Appeal, the appellant challenged the trial judge’s decision not to award her a lump sum payment of future long‑term disability benefits or punitive damages after finding her insurance company had breached its duty of good faith.

While the appeal was dismissed, the injured women did receive $30,000 in aggravated damages for mental distress at the trial level. Although it’s a mixed result, it’s still a win for the plaintiff because she received aggravated damages in addition to the payment of the “own occupation” benefits.

Proving damages

When our firm meets with individuals who have been denied LTD benefits, one of the first things we do is look through the claims file. This is an essential part of the process because the file — which contains all the comments, emails, and notes about your claim — gives us insight into the mindset of the person who has been handling our client’s claim. We get a sense of their attitude and any biases they may have in terms of how they treated our client throughout the process.

During discovery — the pre-trial procedure where each party obtains evidence from the side — the person who decided to deny your LTD benefits is significant. Rather than discovering a litigation specialist from the insurance company, who is essentially a professional witness, we like to discover the decision-maker in your case. This is often the point where we find conduct that could give rise to punitive damages.

With aggravated damages, we look at the impact the denial of LTD benefits had on your financial, emotional and mental wellbeing. For example, what steps did you take to make ends meet? Did you have to sell your home? Did you lose relationships? It’s important to detail the extent of mental distress because you will be compensated for the level of your damage — although it won’t be to the full extent.

Seek legal assistance early

If your LTD claim has been denied or terminated, contact an experienced disability lawyer right away. Your insurance company may offer an internal appeal process, but it’s akin to the right hand judging the left. These appeals rarely result in a different decision.

Not every case gives rise to these damages, but some certainly do. At Kotak Law, we start the process of reviewing your claim file early on. We know the red flags to watch for and can marshal the evidence required to support your claim.


We understand that being denied short-term disability or long-term disability benefits can be devastating. Your time to fight your disability insurance company is limited. Please do not delay in calling a short- and long-term disability claim lawyer at Kotak Personal Injury Law. We have successfully sued numerous disability insurance companies including Manulife, Sunlife, Desjardins, Cigna, Great-West Life, Equitable Life, Empire Life, London Life, Blue Cross, AIG, SSQ, RBC, Industrial Alliance, Canada Life, Fenchurch, OTIP, Teachers Life and more.

Call your trusted long-term disability lawyers at 1-888-GOKOTAK (Toll Free for all of Canada), or (416) 816-1500 (Local Number for Ontario Residents), (403) 319-0071, (587) 414-1010 (Local Numbers for Alberta Residents). Our consultation is free, and we don’t get paid until you do. We represent disabled people throughout Ontario and Alberta, including Toronto, Mississauga, Brampton, Milton, Georgetown, Orangeville, Oakville, Burlington, Hamilton, St.Catharines, Niagara Falls, Stoney Creek, Kitchener/Waterloo, Cambridge, London, Windsor, Markham, Pickering, Oshawa, Peterborough, Keswick, Kingston, Ottawa, Banff, Brooks, Calgary, Edmonton, Fort McMurray, Grande Prairie, Jasper, Lake Louise, Lethbridge, Medicine Hat, Red Deer, Saint Albert and other locations.