EDITORS NOTE: This entry was written by one of our arcticling students, Anisa Arra.
In April of 2016 Justice Braid was faced with a Statement of Claim disclosing a novel cause of action arising out of a motor vehicle accident in 2003. Timothy Watkins was 15 years old when his mother was involved in a car accident. He was not present at the scene. His mother claimed accident benefits from her automobile insurer, Western Assurance Company. The claim was settled in 2007.
In 2010, the lawyer who handled the mother’s accident benefits case sent a letter to Western stating that as a result of the insurer’s failure to pay certain benefits to her, Watkins was unable to succeed in school and as a result Watkins would apply for accident benefits. Watkins never submitted an OCF-1.
In 2012 (7 years after reaching the age of majority), Watkins brought an action for non-earner benefits for mental distress caused from the use of unlawful claims practices and bad faith in Western’s handling of his mother’s AB claim. In addition, he was deprived of his mother’s care, guidance and companionship, and as a result was unable to acquire a post-secondary degree and achieve his goals. The insurer brought a motion for summary judgment to strike the derivative claim.
The derivative claim was brought under the Insurance Act for breach of contract and the Family Law Act. For the purposes of the motion, the insurer agreed it was negligent or malicious in handling the mother AB claim. That this caused mental distress to the mother and deprived Watkins of her care and guidance and sabotaged his future. Justice Braid held that it is not “plain and obvious” that the pleading discloses no reasonable prospect of success, provided the allegations are ultimately proven at trial. Watkins is an “insured person” within the meaning of the SABS under his mother’s policy.
The Ontario Court of Appeal held in McQueen v Echelon General Insurance Company, 2011 ONCA 649, that a person insured under a standard automobile policy may be entitled to damages for mental distress for breach of contract. McQueen proclaimed that “the contract of insurance is a contract for peace of mind.” This psychological benefits of a motor vehicle insurance contract makes mental distress a foreseeable harm. Further, in Shepherdson v Echelon, October 5, 2011 (unreported, leave to appeal denied), the Superior Court of Justice ruled on a motion the claimant’s husband may sue the insurer for monetary loss and psychiatric injury resulting from the insurer’s bad faith administration of his wife’s claim. The insurer’s duty of care to the husband was recognized to be a novel cause of action. Following this decision, the Court allowed Watkins’s action to proceed to trial.
This does not mean the action is likely to succeed. On the contrary, Justice Braid voiced concerns whether harm to Watkins was foreseeable and the relationship between the parties sufficiently proximate to warrant a duty of care. In addition, arguably there are good policy reasons for negating the duty of care, such as the legislative intention to limit the remedies to those exhaustively provided under the Insurance Act and the Family Law Act.
Although such cases will be rare, the decision stands as a cautionary tale that mental distress to a dependant of the named insured who was not involved in the accident, resulting from a breach of contract, may be a foreseeable harm. This issue has not yet been litigated on the merits in Ontario.