2005 BCSC 103err1.doc Strikaitis v. RBC Travel Insurance

Before: The Honourable Mr. Justice Williams

Reasons for Judgment

Counsel for the Appellant:	V.L. Milne
Counsel for the Respondent:	D. Dley
Date and Place of Hearing:	August 17, 2004
	Kamloops, B.C.

OVERVIEW

[1] This is an appeal of a decision of the Small Claims Division of the Provincial Court awarding the claimant/respondent, Laureen Strikaitis (the “respondent”), damages for breach of contract and negligent misrepresentation, and punitive damages and costs. At issue is whether the respondent is entitled to coverage under a travel insurance policy that was purchased from the defendant, Uniglobe Freedom Travel Ltd. (“Uniglobe”) and underwritten by the defendant/appellant, RBC Travel Insurance Company (the “appellant”), and further, whether the conduct of the appellant warranted awarding the respondent punitive damages.

FACTS:

[2] By way of background, the respondent was diagnosed with cancer of the breast in or about 1990. She was treated by her primary physician, Dr. Donaldson. Her treatment included a partial mastectomy, chemotherapy and radiation treatment. She responded well and her cancer went into remission. She relapsed once between the conclusion of her treatment and March 2001.

[3] In March 2001, the respondent presented to Dr. Donaldson with a small amount of fluid her in right chest. Ultrasound testing indicated malignant cells consistent with or similar to breast cancer cells. Dr. Donaldson prescribed the plaintiff a medication known as Arimidex which is intended to reduce or prevent the production of estrogens in the body. By December 2001, the respondent’s cancer was in remission again.

[4] In April 2002, the respondent developed a cold and a cough. Examination revealed an increased amount of fluid in her right chest but test results were satisfactory. Dr. Donaldson concluded she was in “good clinical condition” and continued to manage her treatment with the prescription of Arimidex. The respondent was next seen for a follow-up visit on July 11, 2002, and her general condition was described as “excellent”.

[5] On August 27, 2002, the respondent was seen by Dr. Donaldson because she had developed symptoms including “pain in her right arm, a dry cough and a slight increase in breathlessness”. An urgent chest x-ray was arranged. At this time, Dr. Donaldson elected to switch the respondent’s prescription from Arimidex to the drug known as Femara. According to Dr. Donaldson, although Arimidex and Femara are manufactured by different companies, both drugs are prescribed for the same purpose and treatment, namely as enzyme inhibitors to reduce body production of estrogens in order to reduce the risk of cancer cells in the breast, and both drugs have the same efficacy rates. The switch from one drug to the other is typically done in an attempt to reduce the side effects that a patient may be suffering.

[6] Dr. Donaldson testified that the two drugs are very similar; that they have a different formula; that they act on the same enzymatic process; and that they have slightly different side effects. (Transcript: October 31/04 p. 20). At p. 12 of that same transcript, he stated:

...it’s not the same as saying that some people prefer gin and some people prefer vodka, but, and I’m not meaning to trivialize it like that, but it is very close to that, that one man’s meat is another man’s poison and some people prefer one to the other, and the drug may work better.

[7] On or about September 28, 2002, the respondent and her spouse booked a vacation to Australia through Uniglobe and its representative, Drina Duncan. The respondent had previously discussed the matter with Dr. Donaldson and he advised that she was stable and fit to travel. Payments for various aspects of the trip, including airfare, accommodation and so forth, were processed on the respondent’s credit card between September 28, 2002 and October 10, 2002. The scheduled departure date for the vacation was November 4, 2002.

[8] As part of her travel planning, the respondent purchased a travel insurance policy from Uniglobe which was underwritten by the appellant. According to Ms. Duncan, who sold the respondent the policy, she was aware that the respondent had cancer and recalled that the respondent purchased the “deluxe package” of trip cancellation insurance in order to provide herself with some “peace of mind”. Ms. Duncan mailed the invoice and insurance package to the respondent on September 28, 2002, and the transaction date for the insurance policy was October 1, 2002.

[9] On October 30, 2002, the respondent was seen by Dr. Donaldson and described as experiencing “severe pain to the right side” and needing to have her “lung drained”. Dr. Donaldson arranged for an urgent bone scan, ultrasound of the liver, and blood tests. These tests were apparently necessary in order to make a decision regarding chemotherapy. The respondent then attended at the hospital emergency department and was held overnight. When she was discharged the following day, the respondent was given a prescription for morphine, told she had “pleurisy” and advised to cancel her forthcoming vacation.

[10] After cancelling her vacation and advising the appellant of same, the respondent filed a claim under the travel insurance policy. She was notified of the denial of her claim on November 22, 2002. The respondent disputed this finding and the appellant reviewed the claim. The respondent’s disputation of the claim was unsuccessful and the appellant provided the respondent with the following reasons for the final denial of her claim by way of a letter dated February 13, 2003:

For your reference, please see page 31 of your policy under the “What is not covered?” section. This insurance does not pay for any expenses incurred directly or indirectly as a result of:

1. i) Your or your spouse’s medical condition or related condition, if at any time in the 3 months before your effective date, your or your spouse’s medical condition or related condition has not been stable.

2. a) Cancellation or interruption when you are aware, on the effective date, of any reason that might reasonably prevent you from travelling as booked.

The “Definitions” section (specifically page 9) of your insurance policy states:

Stable – any medical condition or related condition (including any heart condition or any lung condition) for which there have been:

no new treatment or new prescribed medication; and

no change in treatment or change in prescribed medication (including the amount of medication to be taken, how often it is taken, the type of medication or change in treatment frequency or type); and

no new symptom, more frequent symptom or more severe symptom experienced; and

no test result showing a deterioration; and

no hospitalization or referred to a specialist (made or recommended) or the results of further investigations not yet completed.

[11] Following this final denial of her claim, the respondent brought an action against the appellant for breach of the insurance contract, and against Uniglobe for negligent misrepresentation of the travel insurance policy she purchased.

DECISION AT TRIAL

[12] At trial, Sundhu Prov. Ct. J. considered both the evidence of Dr. Donaldson and the principles of interpretation in respect of insurance policies that the Supreme Court of Canada set out in Reid Crowther & Partners Ltd. v. Simcoe & Erie General Insurance Co., [1993] 1 S.C.R. 252 and concluded that a reasonable interpretation of the travel insurance policy in this case did not support a finding that there was a “change of medication” warranting exclusion. In his view, the evidence was that there was a change of brand name as opposed to a change for a new or different condition, treatment or symptoms, and that this did not constitute a change of medication.

[13] Sundhu Prov. Ct. J. also found that the actions of Uniglobe’s representative, Ms. Duncan, in recommending and selling a travel insurance policy to the respondent without taking into consideration the respondent’s stipulations or concerns, and her failure or omission to make any mention of the policy’s exclusion clauses to the respondent constituted actionable negligent misrepresentation.

[14] Finally, Sundhu Prov. Ct. J. concluded that the appellant breached its duty to deal fairly and in good faith with the respondent by disagreeing or disregarding the medical opinion of Dr. Donaldson without adducing any medical or expert evidence challenging same, and ordered the appellant to pay the respondent punitive damages in the amount of $750.00. Similarly, Sundhu Prov. Ct. J. concluded that Uniglobe acted in bad faith and dishonestly by allowing its representative, Ms. Duncan, to be untruthful with the court in her testimony, and by making unfounded allegations regarding the respondent’s credibility. On this basis, Sundhu Prov. Ct. J. ordered Uniglobe to pay the respondent the sum of $750.00 as punitive costs or, in the alternative, as penalty costs pursuant to Rule 20(5) of the Small Claims Rules.

ISSUES:

[15] The appellant raises the following issues on appeal:

1. Did the trial judge err in fact by finding that the respondent did not have a medication change during the 90 day period before purchasing the insurance policy?

2. Did the trial judge erroneously fail to find a change in symptoms of the respondent which would further render her ineligible for coverage under the travel insurance policy?

3. Did the trial judge err at law by finding that the respondent was entitled to cancellation coverage under the travel insurance policy?

4. Did the trial judge err at law by awarding punitive damages without properly establishing that the appellant’s conduct represented a breach of a duty of good faith or an actionable wrong?

[16] The appellant takes no position, however, regarding the trial judge’s finding that Uniglobe’s representative negligently misrepresented the travel insurance policy purchased by the respondent.

ANALYSIS:

1. Statutory Framework

[17] Appeals to the Supreme Court from the Small Claims Division of the Provincial Court are governed by Part 2 of the Small Claims Act, R.S.B.C. 1996, c. 430. Section 12, in particular, provides that:

An appeal to the Supreme Court under this Act

(a) may be brought to review the order under appeal on questions of fact and on questions of law, and

(b) must not be heard as a new trial unless the Supreme Court orders that the appeal be heard in that court as a new trial.

2. Standard of Review

[18] The standard of review on appeal from the Small Claims Division of the Provincial Court was considered in Stewart v. Strutt, [1998] B.C.J. No. 636 at para. 10 (S.C.), where Blair J. stated that:

In an appeal on the record, I would normally have to determine that the learned trial judge was clearly wrong in his apprehension of the facts or in his application of the law before I would be prepared to intervene…

[19] Similarly, in IBI Group v. LeFevre & Co. Property Agents Ltd., [2004] B.C.J. No. 433 (S.C.) Rice J. held that:

The test to be applied on an appeal from Provincial Court pursuant to s. 12 of the Small Claims Act is whether the trial judge was “clearly wrong” on the facts or law. It is akin to the standard applied by the Court of Appeal, which provides that findings of fact made at trial, though not immutable, are not to be reversed unless it can be established that the trial judge made some palpable and overriding error which affected his or her assessment of the facts. Accordingly, my duty is to re-examine the evidence in order to be satisfied that no such error occurred, but not to substitute my own assessment on the balance of probabilities…

3. Application of Standard of Review in this Case

(a) Issue One – Did the Switch of the Respondent’s Prescription Constitute a “Change of Medication” Sufficient to Trigger the Exclusion Clause?

[20] The issue of whether the switch of the respondent’s prescription from Arimidex to Femera constituted a “change of medication” such as to trigger the exclusion clause of the travel insurance policy is a question of fact.

[21] The evidence before the court with respect to this issue and the allegation of a change in symptoms was that of the respondent and her treating physician, Dr. Donaldson. Both, and particularly the latter, were thoroughly examined and cross-examined. It is fair to say that the issues were fully and squarely addressed. The appellant did not call medical evidence on these issues.

[22] Dr. Donaldson was presented as an expert witness, qualified to provide “opinion evidence regarding medical treatment for cancer and associated drugs”. Appellant’s counsel voiced no objection and the court found the doctor was qualified. As indicated, the appellant called no evidence to challenge that of the respondent and her doctor.

[23] On the basis of this evidence, the trial judge concluded that the switch of medications constituted a change of brand name as opposed to a change of medication for a new or different condition, treatment or symptoms, and thus did not trigger the exclusion clause.

[24] In my view, it cannot be said that the trial judge was clearly wrong in apprehending the facts or in reaching the foregoing conclusion. Whether or not this Court would have reached the same conclusion if presented with the issue at first instance is immaterial since this Court’s role is not to substitute its own assessment of the facts for that completed by the trial judge. This ground of appeal must therefore fail.

(b) Issue Two – Did the Respondent Experience a Change in Symptoms that Would Render her Ineligible for Coverage?

[25] The issue of whether the respondent experienced a change of symptoms that would further render her ineligible for coverage under the travel insurance policy is a question of fact.

[26] Taking into consideration all the circumstances of this case, it cannot be said that the trial judge was clearly wrong in declining to find that the respondent experienced such a change in symptoms. The trial judge thoroughly set out and considered both the respondent’s medical history, including several prior occurrences where the respondent experienced potentially problematic symptoms that were subsequently resolved without incident, and the events that took place on or about August 27, 2002. It is apparent that the trial judge concluded that the events of August 27, 2002 were minor in nature, an occurrence which is unfortunately part and parcel of the cancer recovery process, and there is nothing in the record to contradict or question his apprehension of the facts. Accordingly, this ground of appeal must also fail.

[27] In view of the conclusions reached in respect of the two foregoing issues, it cannot be said that the trial judge erred at law in finding that the respondent was entitled to cancellation coverage under the travel insurance policy. Specifically, if the court is satisfied that the respondent did not have a “medication change” sufficient to trigger the application of the exclusion clause or a change in symptoms rendering her ineligible for coverage, there is no reason why the respondent is not entitled to cancellation coverage under the travel insurance policy at issue. There is no suggestion that the respondent failed to pay the premium or that there were any defects in the claim she made against the policy. It follows that the appellant’s position under this head cannot succeed.

(d) Issue Four – Did the Trial Judge err in law by awarding the respondent punitive damages on the basis that she had to proceed through trial, and had to do so with the stresses of health challenges?

[28] In determining that an award of punitive damages was warranted, the court found that the appellant had disagreed with or disregarded the opinion of Dr. Donaldson, and had then taken the matter to trial without presenting any medical or expert evidence challenging his opinion. He found that further more diligent enquiries by the appellant would have got to the bottom of the issue, and that the claimant was required to proceed through trial with the strain and stresses of health challenges.

[29] The principles governing the awarding of punitive damages, particularly in the context of an insurance claim, are found in Whiten v. Pilot Insurance Co. [2002], 1 S.C.R. 595 (S.C.C.) and Fidler v. Sun Life Assurance Co. of Canada, 2004 BCCA 273. These authorities establish that the awarding of punitive damages is an extraordinary measure. It cannot be justified on the basis of a mere denial; it will be necessary to examine all the circumstances of the situation. In my view, the cases make clear that there is a threshold standard that must be met, notably, that the conduct of the insurer must be significantly improper or egregious.

[30] In the context of an insurance claim case, there must be found a breach of the insurer’s duty to act in good faith in dealing with the insured’s claim. That determination will necessitate a consideration of the facts of the conduct. There must be present a high-handed, malicious, arbitrary or reprehensible misconduct which markedly departs from accepted standards of decent behaviour. The analysis must recognize the relative strength and vulnerabilities of the parties, and it must recognize that the insured has purchased the policy in order to have a measure of peace of mind, not to have a battle with an unreasonable foe. The misconduct should be such as to warrant censure by the court and to justify acting on the objectives of retribution, deterrence and denunciation.

[31] In short, such an award is not applicable in most cases; it does not follow routinely upon a denial of a claim and the necessity of resort to litigation. Entitlement to the award will be determined judiciously and with a reasonable measure of caution.

[32] The facts of both Whiten and Fidler present substantially different facts, not only in type but also in degree. Quite frankly, the conduct of the insurers in each of those cases was prolonged and quite indefensible. It is difficult to find parallels between the facts of those cases and the matter at bar.

[33] In the present case, it is my respectful conclusion that the learned Provincial Court judge fell into error in deciding that the appellant’s decision to contest the claim of the respondent constituted the bad faith necessary to warrant the imposition of the award of punitive damages.

[34] The medical records disclosed that the respondent had previously been prescribed the medication Arimidex. When she encountered apparent complications of her condition, the records indicate that the medication was changed to Femara. On the face of the matter, the medication had been changed. In response to an enquiry made by the appellant, Dr. Donaldson provided a letter, wherein he stated that the two drugs are “… different agents made by different companies, their mode of action is essentially identical”. He went on to say that it would be “splitting hairs to say that there was a significant change in her treatment”.

[35] In my view, the appellant’s decision to consider that there had been a change of medication was not unreasonable. To my knowledge, there was and is no body of case law that should have caused the appellant to conclude that its position was untenable.

[36] No doubt, from a tactical perspective, and with the benefit of hindsight, it may well have been in the interests of the appellant to adduce expert medical evidence at trial. However, that was a decision that was made by trial counsel.

[37] In all the circumstances, it is my view that the decision of the appellant to deny the claim and put the respondent to the necessity of proving that claim in court cannot be fairly characterized as a breach of a duty of good faith. Given the outcome of the litigation, there is a basis to feel sympathy for the respondent; that sympathy may be exacerbated by the fact that the rules of the Small Claims Division generally do not permit an award of costs to be made. Nevertheless, on an application of principle, for an award of punitive damages to be made, there must be a basis upon which a breach of good faith can be found. That was not present in the facts of this case.

[38] In summary, it is my conclusion that the learned Provincial Court judge clearly erred in determining that the appellant had breached its duty to deal fairly and in good faith with the respondent. The award of punitive damages cannot stand and is set aside.

[39] In view of the mixed outcome of this appeal, each party will bear its own costs.

“J.W. Williams, J.”
The Honourable Mr. Justice J.W. Williams

January 31, 2005 – Revised Judgment

Please note that the citation for Fidler v. Sun Life Assurance Co. of Canada, 2003 BCCA 273 in paragraph 29 should read Fidler v. Sun Life Assurance Co. of Canada, 2004 BCCA 273.