Aggravated damages overturned in benefits communications case

A B.C. company has scored a partial victory in its battle against a ruling that ordered it to pay $90,000 in damages to an employee who lost out on long-term disability benefits.

The case, Feldstein v. 364 Northern Development Corp., dealt with an employee, Cary Feldstein, who suffered from cystic fibrosis. In the course of his pre-employment discussions with 364 Northern Development in 2012, Feldstein specifically asked about the company’s disability benefits and coverage for pre-existing conditions. The plan brochure provided to Feldstein by the company indicated there was a requirement to provide proof of good health to receive benefits above $1,000 per month. The company’s chief information officer, Eugene Nizker, told him he’d satisfy the requirement if he worked for three months without illness.

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After more than a year into his employment, Feldstein’s health began to deteriorate. When he applied for long-term disability benefits, the insurer denied his claim for payments above $1,000 per month because he hadn’t filled out a medical questionnaire when he enrolled in the plan. Full coverage at 66.7 per cent of his $84,000 salary would have meant benefits of $4,667 per month.

In a ruling last year, B.C. Supreme Court Justice Jennifer Power ruled the statement by the chief information officer regarding the requirement to provide proof of good health was a negligent misrepresentation. Power ordered damages for 30 months of lost benefits, less the payments Feldstein had received, for a total of $83,336. She also ordered an additional $10,000 in aggravated damages for mental distress.

The company appealed, and earlier this month, the B.C. Court of Appeal ruled in its favour in regards to its challenge of the aggravated damages award. Key to appeal court Justice Gregory Fitch’s finding was the absence of high-handed conduct by the employer in making the negligent misrepresentation to Feldstein. “While I have no doubt that Mr. Feldstein suffered mental distress due to the negligent misrepresentation, the judge did not find that any of 364’s representatives acted in a high-handed, dishonest or morally reprehensible way,” wrote Fitch on behalf of a three-judge panel.

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“Assuming, without deciding the issue, that an award of aggravated damages could be made in the context of a negligent misrepresentation case, I am nevertheless of the view that some form of offensive conduct by the defendant is a necessary prerequisite to the granting of such relief. In my respectful view, there is no basis in the factual findings made by the trial judge for an aggravated damages award.”

The findings, however, still leave 364 Northern Development on the hook for the damages for the negligent misrepresentation. While the company argued Nizker’s statement to Feldstein wasn’t inaccurate since he did, in fact, receive some long-term disability benefits, Fitch rejected that part of its appeal. “The impugned statement by Mr. Nizker was not true and accurate,” wrote Fitch.

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“He was asked what ‘proof of good health’ meant in relation to LTD coverage. He responded that ‘proof of good health’ was synonymous with the three-month waiting period that new employees had to complete before benefits came into effect. That is clearly inaccurate and misleading. ‘Proof of good health’ had nothing to do with the three-month waiting period. It was a specific requirement for obtaining ‘approval’ for full LTD coverage. The fact that Mr. Feldstein became eligible for some LTD coverage after three months of continuous work does not make the impugned statement true.”

Carman Overholt, counsel for 364 Northern Development, noted the option to further appeal the ruling remains open. “We are within the time frame for seeking leave to appeal the decision to the Supreme Court of Canada. No application has been filed at this time.”