Is Payment of Past Benefits Enough Compensation?
If you have been wrongly denied or cut off Long Term Disability Benefits by the disability insurance company, you may bring an action in court to obtain a declaration as to your disability and to claim payment of past benefits owing to the date of trial with prejudgment interest.
You may also claim for other losses including an award for mental distress damages.
An award from the court for mental distress damages is to compensate the beneficiary for the failure of the insurer to provide the psychological security and peace of mind they expected to receive from the disability insurance policy in the event they were too sick to work or earn income.
If the peace of mind is not there because the insurer wrongly denies or cuts off the benefit, then the court may make an award to compensate the beneficiary for such psychological injury.
The court is not obligated to make such an award, but it those cases that proceed to a trial, the successful beneficiary is more often than not granted an award ranging from $10,000 to as high as $300,000.
In Branco v. American Home Assurance, 2013 SKQB 98, the plaintiff, Branco, worked as a welder for a mining company operating in Kyrgyzstan, and suffered serious injury at work to his foot, leaving him permanently disabled and unable to work.
The short term insurer, American Home Assurance Company (“AIG”), initially paid income replacement benefits to Branco but thereafter suspended and delayed payment repeatedly and tried to make Branco take a low ball settlement.
Branco applied for long term disability benefits from Zurich Life Insurance Company (“Zurich”) and was denied a single payment for nine years despite being approved for the benefit. Zurich also tried a low ball settlement despite admittedly owing many years of past benefits.
Branco sued both insurers for benefits. The court found both insurers deliberate actions to be malicious, abhorrent, and deserving of punishment. Branco was awarded mental distress damages of $150,000 against AIG, and $300,000 against Zurich.
In addition, the court also made a punitive damage award of $1.5 million against AIG and $3 million against Zurich noting that, “Insurers must discontinue exploiting the vulnerability of insureds in times of disaster.”
This decision reflects a trend towards ensuring fairness and good faith behavior concerning insurance benefits.