In the first half of my career, I practised as defence counsel at a major Bay Street firm, representing insurance companies in a wide range of coverage and claims disputes. I then spent five years inside an American insurer that broke new ground in Canada by establishing the country’s first in-house law firm. Over the course of those years, I was tasked with writing many legal opinions on issues of insurer bad faith. I have followed the evolving case law closely since.

I was in-house defence counsel when the Supreme Court of Canada released Whiten v. Pilot Insurance Co., 2002 SCC 18^[1], the seminal decision on punitive damages against insurers, and that moment sharpened my focus on the courts’ treatment of claims handling. In Whiten, the Supreme Court reshaped the landscape of first-party bad-faith claims in Canada by sustaining a $1-million punitive award.

This blog reflects a longstanding interest in how Canadian courts continue to shape the boundaries of good and bad faith in the insurance relationship.

Supreme Court Anchors: Whiten and Fidler

The modern framework is anchored by two Supreme Court decisions.

In Whiten,  after a winter house fire destroyed the plaintiffs’ rural Ontario home, their insurer (Pilot) refused to pay by alleging arson without a proper basis and dragged the claim out with hard-ball tactics, forcing the family into prolonged hardship and litigation. The Court confirmed that punitive damages are available for “malicious, oppressive and high-handed” claims conduct—an exceptional remedy reserved to denounce and deter serious misconduct.

In Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30^[2], involving an LTD claimant with chronic fatigue syndrome and fibromyalgia whose benefits were terminated after Sun Life relied on surveillance to dispute disability, the Court held that mental-distress (aggravated) damages are available where a “peace-of-mind” insurance contract is breached and the resulting distress is reasonably foreseeable.

Together they set the baseline that prompt, fair adjustment is part of the bargain, and egregious departures can attract punishment.

Honest Performance Doctrine: Bhasin and Callow

The Supreme Court then clarified the duty of honest performance that runs both ways with all contracts.

Bhasin v. Hrynew, 2014 SCC 71^[3] and C.M. Callow Inc. v. Zollinger, 2020 SCC 45^[4] hold that parties must not lie or knowingly mislead one another about matters directly linked to performance. In the insurance context, that sits squarely over adjustment. Half-truths, strategic omissions, or shifting explanations in the claims process can be actionable beyond simple breach.

Ontario Signals: Fernandes and Baker

Ontario appellate decisions illustrate how these principles now bite in claims handling.

In Fernandes v. Penncorp Life Insurance Company, 2014 ONCA 615^[5], the Court of Appeal upheld punitive damages (while calibrating aggravated damages) where a disability insurer’s handling was found high-handed.

Nearly a decade later, in Baker v. Blue Cross Life Insurance Company of Canada, 2023 ONCA 842^[6], an LTD claimant whose benefits were cut off after years of selective, delay-ridden adjustment obtained a jury verdict finding the insurer’s claims handling reprehensible. The Court of Appeal upheld the $1.5-million punitive award, concluding that only a substantial sanction would denounce and deter the misconduct.

As of now, Baker, is the largest punitive damages award against an insurer in Canada upheld on appeal ($1.5M), topping Whiten’s $1M (SCC).

Ontario: Truong and Extra-Contractual Demands

Ontario has also signalled that punitive damages are available when an insurer advances an unjustified theory that effectively adds obligations the parties never agreed to.

In Truong v. Jeweler’s Mutual Insurance Company, 2024 ONCA 734^[7] the insureds claimed for six pieces of jewellery (about $502,100) stolen while travelling in Vietnam. The insurer refused to pay on the basis the insureds hadn’t proven they ever owned the items—an extra-contractual stance the trial judge found “purposeful and unreasonable,” awarding the full loss plus $45,000 punitive. The Court of Appeal dismissed the insurer’s appeal and left the punitive award intact.

British Columbia: Paying the Undisputed and Respecting Timelines

British Columbia decisions underscore that insurers can’t park files indefinitely or hold back what is plainly owing. In Green Estate v. Sonnet Insurance Company (often referred to as Lambright), 2022 BCSC 709^[8], Milman J. found the insurer dragged out the contents portion of a residential fire loss and withheld undisputed amounts contrary to the 60-day payment rule once a proof of loss was delivered, and awarded punitive damages. The message is simple. Pay the undisputed while you keep investigating the rest.

British Columbia: LTD Claims and Blinkered Investigations

BC has also punished blinkered LTD adjustments.

In Greig v Desjardins Financial Security Life Assurance Company, 2019 BCSC 1758^[9], the court awarded $200,000 punitive and $50,000 aggravated where the insurer ignored obvious medical evidence, including mental-health dimensions, amounting to an egregious breach of good faith in adjudicating benefits.

Saskatchewan: Proportionality in Punitive Awards

Saskatchewan provides an important note on calibration.

In Branco v American Home Assurance Company, 2013 SKQB 98^[10], very large trial-level punitive and aggravated awards against two insurers were cut down on appeal, but the Court of Appeal affirmed that substantial punitive damages remain available where the record supports truly high-handed claims conduct. The takeaway is not a retreat from punishment, but a reaffirmation of proportionality

Recurring Themes

Across these cases, I have observed a few themes recur.

Courts are prepared to punish systemic or repeated high-handedness, as in Baker, where the size of the punitive award was justified to deter conduct the jury found reprehensible.

They sanction goal-post shifting and extra-contractual demands, as in Truong, where the insurer tried to import requirements the policy didn’t contain.

They denounce delay and leverage tactics, insisting that undisputed amounts be paid now—as in Lambright.

And they respond to dishonesty and half-truths with the Supreme Court’s honesty doctrine front of mind. Conduct that misleads insureds about process or coverage is a separate wrong that can supercharge liability.

Practical Message for Both Sides

The practical message for both sides of the table is straightforward.

For insurers: pay what is clearly owed, on time. Build positions from the policy and the record (not from after-the-fact theories). Consider the whole medical and vocational picture in LTD claims. And train for honesty in performance. Silence and omissions can mislead just as surely as a false statement.

For insureds and their counsel, document the undisputed, press for reasons, and keep the focus on the contract’s wording and the insurer’s adjustment file—because courts increasingly treat delay and denial as conduct problems, not just coverage disputes.

Bottom Line

Canadian courts are increasingly willing to punish delay and denial in claims handling when the facts show unfairness, dishonesty, or leverage at odds with the contract.

The safest course remains the simplest. Investigate promptly and fairly, communicate honestly, pay the undisputed without delay, and reserve hard-edged positions for wording and evidence that truly support them.