CANADA Law and Practice Contributed by: Chris McKibbin, Avi Sharabi, Alex Valova and Douglas Treilhard, Stieber Berlach LLP
geous that punitive damages were rationally required to function as deterrence. In those atypical cases in which claims handling has exceeded even this high threshold, courts have been prepared to award (or uphold) significant puni- tive damages awards. In one recent decision involv- ing a long-term disability benefits insurer, the Court of Appeal for Ontario noted evidence that the insurer disregarded evidence from the plaintiff’s treating phy- sicians; engaged in 375 hours of surveillance which did not show the plaintiff engaging in activities incon- sistent with the symptoms of her stroke; failed to clar- ify or address obvious flaws in a medical assessor’s form; selectively relied on evidence that supported the denial of benefits and ignored conflicting medical evidence; distorted a neuropsychological assessment report in a way that supported the denial of benefits; and distorted a Transferable Skills Analysis report in a way that supported the denial of benefits. The Court of Appeal upheld the jury’s punitive damages award of CAD1.5 million. Thankfully, such fact scenarios are exceedingly uncommon. 4.7 ESG and Climate-Related Coverage Environmental, Social and Governance (ESG) and climate-related risks are giving rise to new types of coverage disputes, typically in the Directors and Offic- ers’ (D&O) liability and Commercial General Liability (CGL) contexts.“Greenwashing” and similar forms of claims alleging that companies or their directors and officers misled consumers or investors regarding ESG targets or achievements trigger disputes con- cerning the effect of alleged misrepresentations on policy validity or coverage in respect of a particular claim. Certain insurers exclude or limit the availability of coverage in their D&O offerings in respect of con- sumer or shareholder litigation alleging greenwash- ing or regulatory fines arising from misrepresentations. CGL insurance typically excludes intentional misrep- resentation, deceptive trade practices and regulatory fines and penalties. With respect to environmental risks, Canadian insur- ers have typically relied on pollution exclusions in their main liability offerings. Several Canadian insur- ers instead offer discrete Environmental Impairment Liability coverage to address these risks.
Canadian insurers have also noted an increase in class proceedings by employees seeking remedies for alleged systemic barriers to inclusion and advance- ment in the workplace. 4.8 Delegated Authority and Claims Responsibility Coverage disputes involving Managing General Agents (MGAs) and Third Party Administrators (TPAs) fall into two general categories: the scope of authority conferred by the insurer and the conduct of the MGA or TPA. Where an MGA or TPA has exceeded its authority vis- à-vis the insurer in policy issuance or claim disposition, a Canadian court may nevertheless hold the insurer liable on the basis that the insurer cloaked the MGA or TPA with apparent or ostensible authority, leaving the insurer and its agent to resolve any authority disputes separately. In one 2023 decision, an insured sued the MGA, but not his insurers, prior to the expiration of the policy’s limitation period. The Court permitted an amendment to substitute the insurers via misnomer, in part because the adjuster had erroneously identified the MGA as the insurer. Where an MGA has incorrectly prepared an applica- tion for coverage, there may be disputes as to whether erroneous representations bind the applicant, notwith- standing that the MGA is arguably acting on behalf of the insurer. Interesting challenges arise when a TPA manages claim investigation and disposition and there is an allegation of lack of good faith in claim handling – is the insurer liable for a breach of its duty of good faith, having delegated claim adjudication to the TPA? Recently, it was alleged that the principal of TruStar Underwriting, an Ontario-based MGA, perpetrated a fraud whereby he collected and pocketed premi- ums for insurance policies purported to be issued by TruStar on behalf of carriers, but which policies nev- er, in fact, existed. In several cases, defence counsel appointed on TruStar’s instructions negotiated set- tlements on behalf of insureds on the understanding that liability coverage was in place to fund those set- tlements. In one 2026 decision, the Ontario Superior Court of Justice enforced a CAD600,000 settlement against a defendant that believed it was insured under
50 I NSURANCE L I T IGATI O N 2026
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