A recent decision of Justice Perell (Burns v. RBC Life Insurance Co., 2019 ONSC 6977) provides some welcome clarity on the issues of whether insurance adjusters owe a duty of good faith to an insured independent of any duty owed by the insurer and the personal liability of insurance adjusters. Although claims of this nature have diminished markedly in recent times, they remain a concern and a vexing issue for claims adjusters (and the insurers who employ them).
In Burns, the plaintiff sued RBC Life (“RBC”) and two of its employees (the “adjusters”), who administered the disability claim, for a declaration of entitlement under the policy, payment of long-term disability benefits, special damages of $100,000.00 and punitive damages of $1 million. The Statement of Claim pleaded RBC was vicariously liable for the acts or omissions of its employees. One adjuster advised Burns his benefits were terminated after five years of payment, the other denied his internal appeal of termination. The pleadings alleged all defendants (RBC and the adjusters) owed Burns a duty of utmost good faith. The collective conduct of the defendants was alleged to amount to bad faith, negligence and/or negligent misrepresentation.
The adjusters brought a motion to strike the claims against them under Rule 21. Justice Perell summarized the threshold for success of such a motion: On a pleadings motion, there is generally no evidence beyond the pleading and for the purpose of the motion, the court accepts the pleaded allegations of fact as proven, subject to some very limited exceptions. The moving party must show that it is plain, obvious and beyond doubt that the plaintiff cannot succeed with the claim. Matters of law that are not fully settled should not be disposed of on a motion to strike, and the court’s power to strike should be exercised only in the clearest of cases.
The allegations in Burns’ Statement of Claim are set out in great detail in the decision. With two limited exceptions, the allegations against the adjusters are grouped with those against RBC, collectively as the “defendants”. There were some 38 allegations against the defendants collectively with additional allegations against RBC only. It cannot be said that the allegations were bald-faced or boilerplate pleadings as they contain a reasonable degree of particularity.
In addressing the law with regard to personal liability of employees, officers and directors of corporations, Justice Perell acknowledged that a corporation must act through human agency. The acts of those employed by a corporation or acting on behalf of an corporation are a manifestation of the acts of the corporation. A corporation acts, or omits to act, through its employees and its agents. That, however, is not sufficient to establish personal liability on these individuals. Rather, in order for employees to be liable in tort for conduct in the course of their employment, the Court of Appeal has found[1] their actions must be in and of themselves tortious or they must exhibit a separate identity or interest from those of the employer. In other words, the actions have to be the actions of the employee personally, separate and apart from those of their employer. An employee who carries on discussions and makes decisions related to the business carried on by the corporation, acting within the scope of their authority as an agent for the corporation, is simply causing the corporation itself to act and form legal relationships. Those actions are not actions by individuals in their personal capacity and on their own behalf. As a rule of pleading, in order to properly plead a case of personal liability against an employee, the plaintiff must plead a specific cause of action against that individual in their personal capacity.
In order to survive a motion to strike, there must be sufficient particulars pleaded to disclose a basis for attaching liability to the adjusters in their personal capacity. The material facts giving rise to personal liability must be specifically pleaded because an employee is otherwise not personally liable for the acts of their employer unless their acts manifest a separate identity or interest from the employer and the actions of that employee are in and of themselves tortious conduct.
Justice Perell found there were no material facts pleaded which would support a claim against the employees personally and so struck those claims.
Justice Perell helpfully distinguished Sataur v. Starbucks Coffee Canada Inc.,[2] in which the Court of Appeal (in reversing the motion judge’s decision to dismiss against two individually named employees) confirmed there is no general rule that an employee acting in the course of their employment cannot be sued personally for breaching a duty of care owed to a customer. In other words, an employer’s vicarious liability does not shield employees from their own tortious conduct. Justice Perell found the adjusters were not relying on vicarious liability as a shield, rather they were relying on Court of Appeal authority which permitted the claims against them to be struck unless their acts manifested a separate identity or interest from the employer and their actions were of themselves tortious. The pleadings as against the adjusters, one in denying the disability claim and the other in dismissing an internal appeal, could attract vicarious liability on RBC, but those actions would not expose the adjusters to personal liability. According to Justice Perell, the allegations in the Statement of Claim simply did not manifest a separate identity or interest of the adjusters and the allegations were not of tortious acts of the adjusters in their personal capacity.
In perhaps the most helpful portion of the decision, Justice Perell addressed the proposition that individual adjusters owe a duty of good faith to the insured and can be found liable for such a breach. This proposition emanated from the contentious decision of Justice Cavarzan in Spiers v. Zurich.[3] Justice Perell noted Spiers was rejected in Burke v. Buss,[4] a decision of Justice Jennings who specifically found Justice Cavarzan provided no authority for finding an independent duty of good faith on adjusters. Justice Jennings agreed that an employee can be found liable in tort but opined the breach of duty of good faith arose from a contract between the insurer and the insured and was not one for which an employee of the insurer could be sued. To this, Justice Perell added Spiers did not reference the “strong line of authority” from the Court of Appeal which delineates how and when an employee can be individually liable for their tortious conduct when engaged in the activities of the employer. Justice Perell noted he was not bound by Spiers and further stated, in his opinion, Spiers was wrongly decided on the issue of liability of employees. This strong wording will no doubt bring comfort and hopefully closure to the issue despite the absence of appellate rulings. Notably, Justice Jennings had expressed hope the issue would be considered by the Divisional Court.
In sum, the decision in Burns is helpful in providing clarity on the issue of personal liability of employed adjusters, finding Spiers to be wrongly decided. The decision will hopefully put an end to claims against insurance adjusters in their personal capacity (which generally add nothing but time and cost and detract from the real issues). There still may be the odd exceptional case where pleadings will allege sufficient material facts to generate liability of an adjuster in their personal capacity, sufficient to show an adjuster was manifesting an identity separate to the insurer, but those should be extremely rare.
Furthermore, in the context of accident benefits disputes, the Court of Appeal’s decision in Stegenga v. Economical[5] held claims against the insurer, including for bad faith/punitive damages, were subsumed in section 280 of the Insurance Act, which confers exclusive jurisdiction on the LAT to resolve disputes in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of those benefits. Disputes concerning the amount of benefits, the timeliness of payment of benefits, and the conduct and process of the insurer in providing benefits (the handling or administration of the claim) are disputes in respect of a person’s entitlement to benefits or the amount of benefits which have now been taken away from the courts. As such, claims for bad faith are claims which flow from the denial of benefits and are thus within the exclusive jurisdiction of the LAT, effectively barring further court actions for bad faith.
Although not dealt with by the Court of Appeal in Stegenga, any claims alleged against individual adjusters would also be subsumed in the dispute resolution sections and subject to the LAT, where the parties are the insured person and the insurer.
The combination of Burns and Stegenga significantly narrow the scope of individual adjuster liability and any perceived benefit in pursuing these type of claims.
[1] Lobo v. Carleton University, 2012 ONCA 498; Tran v. University of Western Ontario, 2014 ONSC 617.
[2] Sataur (Litigation Guardian of) v. Starbucks Coffee Canada Inc., 2017 ONCA 1017.
[3] Spiers v. Zurich (1999), 24 O.R. (3d) 726 (Gen. Div.), leave to appeal to Div. Ct. denied [1999], O.J. No. 4912 (Div. Ct.).
[4] Burke v. Buss, 2002 CarswellOnt 4381 (ONSC).
[5] Stegenga v. Economical, 2019 ONCA 615.
