IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20140917

Docket: S66615

Registry:
Nanaimo

Between:

Barbara Frank

Plaintiff

And

Lucy Kalokina, Sun
Life Assurance Company of Canada and in French, Sun Life Du Canada, Compagnie
D’Assurance Vie

Defendants

Before:
The Honourable Mr. Justice Baird

Oral Reasons for Judgment

[1]            
THE COURT: The defendants, Lucy Kalokina and Sun Life Assurance
Company of Canada, have brought this application pursuant to Rule 9-6 of the
Supreme Court Rules for an order dismissing the plaintiff’s tort action against
them. The surrounding facts are as follows.

[2]            
The plaintiff is a 53-year-old, long-time employee of Sears Canada
working in commissioned sales. As part of her employment package, Sears Canada
provides short- and long-term disability insurance coverage. On September 10,
2011, the plaintiff was involved in an accident on her bicycle which resulted
in traumatic brain injury. She intended to return to work thereafter, but her
injuries prevented her from doing so successfully.

[3]            
Between October 1, 2011, and January 24, 2012, the plaintiff received
short-term disability benefits. Counsel were not able to tell me if this
coverage was provided by Sun Life, and for present purposes, I will assume that
it was not.

[4]            
Once the plaintiff reached the limit of her eligibility for short-term
disability, she made an application for long-term disability under a group
policy provided by the defendant Sun Life Assurance. The adjuster on her file
was the defendant Kalokina. I will refer to these parties hereafter as
"Sun Life" and "Ms. Kalokina."

[5]            
The plaintiff’s long-term disability application was denied by Ms.
Kalokina on February 21, 2012. On two occasions, the plaintiff appealed this
decision in writing, but on each occasion, Ms. Kalokina dismissed her arguments
and found that there was insufficient medical evidence to sustain her claim.

[6]            
On an application such as this where I am asked to consider the
materials filed and to determine, essentially, if there is any case to be
answered, it would be wrong of me to weigh the evidence on a balance of
probabilities or to make observations that could give rise to the apprehension
that findings of fact have been made.

[7]            
It will be sufficient for the present purposes for me to say that the
medical and other information provided by the plaintiff to Sun Life in aid of
her original application for long-term disability benefits, and repeated in her
two appeals for reconsideration of the decision to deny them, was such that it
might have caused an objective adjuster, acting uberrima fides, to
believe that the plaintiff had been seriously injured and was incapable of
working.

[8]            
However, this was not the view of the matter taken by Ms. Kalokina on
behalf of Sun Life. She flatly denied coverage. Her conclusion was that the
plaintiff had not shown a "severely disabling diagnosis and/or any
significant underlying medical condition causing continuing severe functional
impairment that would result in total disability precluding [her] from resuming
the essential duties of [her] occupation."

[9]            
Defendants’ counsel argues that this decision was reasonable even if,
later on, it was determined to be mistaken, relying on Fidler v. Sun Life
Assurance Company, 2006 SCC 30. He submits that Ms. Kalokina’s evaluation
of this claim accorded with the procedure set out in the policy; her
interpretation of the insurer’s obligations was reasonable; and her good faith
was shown by her later decision, on receipt of further relevant information not
included in the original claim or the appeals, to reverse her original denial
of benefits and to pay the claim retroactively to the date on which it was
originally made.

[10]        
In short, the defendants argue that in this case, all that occurred was
the ordinary back and forth of insurance adjustment in which a claimant sought
coverage under the policy and the insurer took appropriate steps to ensure that
the claim was meritorious. There was no breach of the insurance contract, in
the absence of which a claim for breach of the duty of good faith must fail: Andreychuk
v. RBC Life Insurance, 2008 BCSC 286.

[11]        
The defendants rely on the principles set out in Ferme Gérald
Laplante & Fils Ltée v. Grenville Patron Mutual Fire Insurance Co.,
2002 CanLII 45070 (ON CA). In that case, the court accepted that the duty to
act fairly and in good faith constitutes a separate cause of action distinct
from the one based upon an alleged breach of the terms of an insurance policy,
and that such a claim, if successful, would not be restricted by the limits of
the policy. However, the court held, at paragraph 78, that:

[T]he duty to pay promptly, as a component of the duty of
good faith . . . is not an absolute obligation giving rise
to an automatic claim for consequential damages in the event of any failure to
make a timely payment in accordance with the policy. The latter contention was
made by the insured in 702535 Ontario Inc. and rejected by this court. O’Connor
J.A. stated as follows (at para. 37):

. . . the broader interpretation urged by the appellants
could have far-reaching effects for the insurance industry. In some cases, the
risk of being found liable for consequential damages resulting from
unsuccessfully contesting a claim under a policy would constitute a substantial
disincentive for insurers to deny claims, even those which they reasonably and
in good faith consider to be either unfounded or inflated. In a general sense,
insurers and insureds have a common interest in ensuring that only meritorious
claims are paid. Increased payments by insurers lead to increased premiums for
insureds. In order to effectively screen claims, insurers must be free to
contest those claims which in good faith they have reason to challenge, without
running the risk that if they are ultimately found to be wrong, they will be
liable to indemnify the insured for losses not underwritten in the policy
contracted for by the insured.

[12]        
At this early stage in these proceedings, I would merely observe that on
a trial of the matter this argument might very well succeed.

[13]        
Plaintiff’s counsel counters that, among other things, Ms. Kalokina’s
reasons for denying coverage, which were repeated in the same terms on each of
the plaintiff’s appeals, revealed a misunderstanding of the criteria for
eligibility contained in the contract of insurance itself. Her denial of
coverage, at the risk of repetition, was based on her conclusion that the
plaintiff’s claim failed to show a "severely disabling diagnosis" or
a "severe functional impairment that would result in total
disability," whereas the insurance policy stipulated merely that the
plaintiff had to establish that she was "continuously incapable due to an
illness to do the essential duties of her own employment."

[14]        
In other words, the decision to refuse payment was based on an
unreasonable interpretation of an insurer’s obligations under the policy. The
plaintiff says that she was put to a higher standard of proof in attempting to
establish her claim than the insurance contract required. This amounted not
only to a breach of contract under the policy in question but constituted a
separately actionable breach of the duty of fairness and good faith owed to
her.

[15]        
In the initial and both appeal decisions, furthermore, the plaintiff was
told by Ms. Kalokina that Sun Life would require further medical information
before reconsidering their denial of coverage. At no time did Ms. Kalokina
indicate with any specificity what additional medical information might be
required. The plaintiff was simply told that she needed to get more medical
information together and that she would have to pay for it herself. The
plaintiff says that Ms. Kalokina never took the initiative to speak to the
plaintiff’s doctors, or to commission an independent medical examination, or to
speak to any of the collateral sources of information contained in her
application for benefits or her appeals or, indeed, to do anything positive to
fully and fairly investigate the plaintiff’s claim.

[16]        
The plaintiff argues, furthermore, that Ms. Kalokina’s personal failure
to conduct herself fairly and in good faith continued even after the plaintiff
engaged counsel to argue her case. On March 13, 2012, counsel wrote a letter to
the defendants, which read, in part:

As you can no doubt imagine, Ms. Frank is in need of her
disability payments. We would appreciate hearing from you immediately as to the
following:

1.     The
specific reason(s) that you have denied payment of her long term disability
benefits;

2.     The
specific gap in the medical evidence that she has provided to you which allows
you to deny benefits;

3.    
What further medical evidence you require?

[17]        
I was told that no response to this request for information was
received.

[18]        
On June 22, 2012, some five months after applying for long-term
disability coverage, the plaintiff filed a notice of claim against both
defendants for breach of insurance contract and for breach of their duty to
deal in good faith and fairly with the plaintiff. She also claimed against Ms.
Kalokina for inducement of breach of contract and interference with contractual
relations.

[19]        
A number of days after this claim was filed and served on the
defendants, for reasons which the defendants say are unrelated to the litigation,
the plaintiff’s application for long-term disability benefits was granted
retroactive to the date it was first made.

[20]        
The plaintiff alleges that this reversal was not based on new medical
information, such as Ms. Kalokina had long been insisting was required, or on a
good faith reassessment of her application. She maintains, to the contrary,
that her lawsuit forced the defendants to abandon a series of patently
indefensible, bad faith decisions denying coverage, resulting in financial and
psychological hardship to her for which she seeks an award of damages,
including punitive damages.

[21]        
The defendants submit that they have complied with the terms of their
contract to provide disability coverage to the plaintiff and maintain that all
of their decisions on the file were bona fide and unimpeachable.

[22]        
Ms. Kalokina has deposed in sworn evidence that the plaintiff’s initial
application for coverage contained insufficient proof of disability or, once
again, to use her words, of a “severely disabling diagnosis and/or any
significant underlying medical condition causing continuing severe functional
impairment that would result in total disability.”  Furthermore, said Ms.
Kalokina, the plaintiff’s two appeals contained nothing new by way of medical
information.

[23]        
Eventually, however, on June 5, 2012, the plaintiff’s store manager, a
person named Thomas Gemma, telephoned Ms. Kalokina. He did this on his own
initiative, apparently, not because Ms. Kalokina had made inquiries of him. I
infer that he was concerned about the plaintiff and wanted to tell Ms. Kalokina
about a recent meeting that he had with her. Ms. Kalokina’s note of the
conversation was that Mr. Gemma had "spoken to the plaintiff and he did
not believe the plaintiff could return to work based on how she presented and
her reported symptoms."

[24]        
An objective observer might have difficulty understanding why this
conversation with Mr. Gemma should have tipped the balance in favour of the
plaintiff. He is a layperson, after all, and his opinions were less emphatic
than others referred to in the plaintiff’s application and appeals, including
those of medical practitioners, that had been in Ms. Kalokina’s hands for
months.

[25]        
For example, there was a letter from the plaintiff’s GP, Dr. Nicolaas
Janssen, addressed to Ms. Kalokina and dated February 1, 2012. In that letter,
Dr. Janssen expressed his dismay at the defendants’ denial of coverage and
confirmed his advice contained in the original application that the plaintiff
was suffering from concussion with severe post-concussion symptoms, rendering
her unable to perform the functions of her job. He also said that the
defendants’ denial of coverage was causing stress to the plaintiff and was
setting back her recovery. He urged the defendants to reconsider their decision
or at least to arrange an independent medical examination.

[26]        
Curiously, while the defendants dismissed Dr. Janssen’s professional
medical opinion, and the plaintiff’s claim and appeals were denied, ostensibly
on the basis that more medical information would be required, after five months
or so delay, Mr. Gemma’s lay assessment inexplicably broke the impasse. Mr.
Gemma’s voluntary non-medical telephone intervention caused Ms. Kalokina to
refer the entire file, including the medical documentation, to what she
referred to as one of Sun Life’s "health partners," a person called
Dr. Sandor, for a review. Within 10 days, Dr. Sandor offered a written opinion
that the medicals on file were consistent with the "severity of the
reported intolerance for occupational demands."

[27]        
I pause here to emphasize that these various steps were taken before the
plaintiff filed her lawsuit. The decision to allow her claim retroactively,
though, was made afterwards.

[28]        
As previously mentioned, the defendants are seeking summary judgment
dismissing all of the plaintiff’s claims pursuant to Rule 9-6(4) which
provides:

In an action, an answering party may, after serving a
responding pleading on a claiming party, apply under this rule for judgment
dismissing all or part of a claim in the claiming party’s originating pleading.

[29]        
Such an application will be granted only if the claim is bound to fail
or there is no bona fide triable issue: Skybridge Investments Ltd. v. Metro
Motors Ltd. (2006), 61 B.C.L.R. (4th) 241 (CA).

[30]        
To illustrate the heft of the burden that must be discharged on such an
application, the Court of Appeal has gone so far as to suggest that it amounts
to an obligation to establish beyond a reasonable doubt that there is no
triable issue: Montroyal Estates Ltd. v. D.J.C.A. Investments Ltd.
(1984), 55 B.C.L.R. 137.

[31]        
On the present hearing, extending the criminal law analogy, counsel for
the defendants agreed that the task before me is analogous to a motion for a
directed verdict. In other words, I must ask myself whether there is any
evidence upon which a properly instructed trier of fact acting reasonably could
find the defendants, or either of them, liable for the various civil wrongs
alleged by the plaintiff in this lawsuit.

[32]        
I am not satisfied that there are no triable issues between the
plaintiff and the defendant Sun Life, or that the plaintiff’s claim is bound to
fail as against Sun Life, or that there is no evidence upon which a properly
instructed trier acting reasonably might find Sun Life liable on the
allegations of breach of contract or breach of the duty of good faith. I am
persuaded that the record of evidence gives rise to legitimate issues
concerning Sun Life’s performance of its contractual obligations, and whether
the alleged breach of those obligations might amount, in the circumstances, to
a separate and distinct finding that there has been a breach of their duty
recognized in tort law to treat the plaintiff fairly and in good faith.

[33]        
On the issue of whether Ms. Kalokina might, in her personal capacity, be
held liable for breach of the duty of fairness and good faith, the law is
unsettled. Burke v. Buss, [2002] O.J. No. 2938, holds that an insurer’s
acknowledged duties in this connection do not extend to its employees, but
Jennings J. referred to two earlier decisions of the same court in which such
an extension had been recognized and approved. He hoped that the Divisional
Court would settle the matter. So far, apparently, this has not happened.

[34]        
Counsel referred me to no other pertinent authority. I conclude that, as
a matter of law, a personal lawsuit against Ms. Kalokina for breach of duty may
not be barred. If it proceeds, I am unable to say, on the tests articulated
above, that it is bound to fail.

[35]        
Accordingly, both defendants’ applications for dismissal of the claim
based on the alleged breach of contract and the duty of fairness and good faith
are dismissed. Whether these claims, if successful, could form the basis of an
award for ordinary damages, much less punitive damages, which, as the Supreme
Court of Canada affirmed in Fidler, requires conduct constituting
"a marked departure from the ordinary standards of decency", will be
for the trial judge to decide after a trial on the merits.

[36]        
As far as I am concerned, however, it is plain and obvious that the
plaintiff’s claims against Ms. Kalokina for inducement of breach of contract
and interference with contractual relations are bound to fail. I say this for
two reasons. First of all, the plaintiff has not pled any material facts
necessary to support either cause of action. Secondly, in my view, both torts are
restricted to what Cromwell J. in A.I. Enterprises Ltd. v. Bram Enterprises
Ltd., 2014 SCC 12, called "three party situations." The
tortfeasor in such situations must interfere with or induce the breach of
contractual relationships between the plaintiff and a third party.

[37]        
With the greatest respect to those who think otherwise, in the situation
under consideration here there is no third party. There is only the plaintiff
and Sun Life, which acts or omits to act through employees and agents like Ms.
Kalokina. The claim, properly construed, is not that Ms. Kalokina induced Sun
Life to breach its contract, or interfered with contractual relations between
Sun Life and the plaintiff, but rather that she carried out Sun Life’s breach
of contract as its agent. While I read with interest the case of Walsh v.
Nicholls, 2004 NBCA 59, I consider myself bound, on this point, to follow
this court’s decision in XY, Inc. v. International Newtech Development
Incorporated, 2012 BCSC 319.

[38]        
Accordingly, Ms. Kalokina’s application for dismissal of the claims
against her for inducement of breach of contract and interference with
contractual relations is allowed.

[39]        
All right. That is my ruling. Costs?

[40]        
MR. DINELEY:  Well, My Lord, given that the success was mixed, I would
submit that each party bears their own costs.

[41]        
THE COURT:  Mr. Falkenberg?

[42]        
MR. FALKENBERG:  I would be seeking costs. I think the plaintiff has
largely been successful on this, and I had pointed out to my friend that it was
my view that the summary judgment application was doomed to fail because it
wasn’t plain and obvious, so I think the plaintiff should get the costs. They
were successful, of course, on the one small issue, but as you can see, quite a
bit of work has gone into this for what I say should have been obvious to them
was not going to be successful in the main.

THE COURT:  All right. Thank you
for those comments. In my view, the plaintiff has been prevailingly successful
herein, and she will have costs on Scale B.

“Baird J.”