Ian Mulgrew: Insurers slammed for tossing travel claim over drinking

Credit to Author: Ian Mulgrew| Date: Sun, 29 Sep 2019 21:03:11 +0000

A 65-year-old man who fainted while on holiday in Reno only to wake in hospital writhing in agony, later got a bigger shock: his travel insurers rejected his claim, leaving him with a massive tab because he had been drinking.

B.C. Supreme Court Justice Barbara Norell, however, has excoriated the insurers for putting Christopher Stewart through a wringer of financial and emotional hardship for nearly four years using a clause in his travel insurance policy.

She said the insurers did not fulfill their “duty of good faith and fair dealing,” their investigation of the claim was “overwhelmingly inadequate,” and other behaviour was “high-handed, malicious, arbitrary or highly reprehensible misconduct” requiring punitive damages.

Nevertheless, Stewart’s lawyer said the court’s bark was worse than its bite and people buying travel insurance should beware.

“She specifically finds in her reasons that they profited to the tune of $214,000 from this behaviour and then she hits them with a $100,000 damage award,” Richard Parsons complained.

“How is that ever going to correct the behaviour of a corporation like this that is selling millions of these policies? I’m also licensed in Washington State and if an insurance company is found in breach of fair dealings, the damages are three times the savings by statute. If you think about it … $100,000 for $214,000 in savings? They’d do it all over again.”

On the afternoon of May 31, 2015, Stewart, a mortgage broker and manager from Victoria, checked into a Reno, Nevada, hotel for an annual golf tournament.

At about 9:30 p.m., he lost consciousness while sitting at a bar and fell, hitting his head. His blood alcohol concentration tested at the hospital was 0.07 per cent.

Over 12 days, he had a pacemaker inserted and later underwent surgery to correct a slippage of a vertebra. He made a slow recovery.

Still, before travelling, Stewart, now 69, had purchased travel medical insurance from Industrial Alliance Insurance and Financial Services Inc./Industrielle Assurance et Services Financiers Inc., and Lloyd’s Underwriters (the insurers).

North American Air Travel Insurance Agents Ltd., now doing business as TuGo, issued the policy and One World Assist Inc., now doing business as Claims at TuGo (Claims), administered the claims for the insurers.

Stewart was denied coverage on the basis of the following clause: “In addition to the exclusions specified in each Insurance coverage, this Insurance does not provide payment or indemnity for expenses incurred directly or indirectly as a result of … your abuse of (prior to or during your trip), or intoxication due to alcohol, drugs or medication.”

This is not the case of a rogue agent, the justice noted: “The defendants filed joint pleadings and were represented by one law firm. No distinction was made in evidence between Claims and the insurers, nor did the insurers attempt to distance themselves from the acts of Claims.”

She was particularly upset at the way the health-care bills were ultimately settled.

The cost of treatment amounted to US$293,127.60 — Health Insurance B.C. paid US$3,574.63 and the insurers paid US$15,500 to have Stewart flown to a hospital in B.C., leaving a balance of US$274,052.97.

On Dec. 18, the insurers reversed their decision denying coverage, but negotiated a settlement of the outstanding medical bills without revealing that.

“Of the total US$274,052.97 outstanding on the invoices, the insurers paid $56,429.81, or approximately 21 cents on the dollar,” Norell explained.

The manner of settling the claims, without advising the health care providers that coverage was now granted, appears to have been motivated solely by the economic interests of the insurers, and is reprehensible and the most egregious of the circumstances. … The defendants did not involve Mr. Stewart in the negotiations and as a result took advantage of his vulnerability. … The alleged satisfaction of the health care bills is shocking.”

She said the insurers failed “to carry out a balanced and reasonable investigation, giving as much attention to Mr. Stewart’s interests as their own.”

A “significant factor” in her decision, Norell emphasized, was the “profit” the insurers pocketed by initially denying and later settling the claim.

“When they settled health care bills three and a half years later, they were able to obtain enormous discounts,” she said.

“I find they would not have obtained those discounts if they had admitted coverage in 2015 or advised the health care providers that coverage was granted in 2018. The uncontroverted evidence was that the typical discount was 20 per cent. … Instead, they settled the bills for approximately US$56,000 and received a US$162,000 or roughly C$214,000 benefit.”

The insurers are liable to pay the $100,000 punitive damages, she said, as well as $10,000 for Stewart’s anxiety: “In my view, Mr. Stewart endured the worry of financial ruin at a time when he was trying to recover from potentially devastating injuries. He feels it had an effect on his recovery. This hung over Mr. Stewart’s head for nearly four years. He had reminders two or three times a week for two years with calls from creditors which caused him distress.”

The insurers were also ordered to indemnify Stewart if he is pursued for any health care bills. The claims against TuGo and Claims were dismissed.

Elizabeth Segal, of Singleton Urquhart LLP representing the defendants, had no comment.