





CITATION:
McQueen v. Echelon General Insurance
          Company, 2011 ONCA 649



DATE: 20111018



DOCKET: C51165



COURT OF APPEAL FOR ONTARIO



Gillese, Armstrong and Karakatsanis JJ.A.



BETWEEN



Janey McQueen



Plaintiff (Respondent)



and



Echelon General Insurance Company



Defendant (Appellant)



Jamie R. Pollack and Daniel M. Himelfarb, for the appellant



Jane Poproski, for the respondent



Heard: August 25, 2011



On appeal from the judgment of Justice C. Raymond Harris of
          the Superior Court of Justice dated September 28, 2009, with reasons reported
          at [2009] I.L.R. I-4890.



Gillese J.A.
:




[1]

Janie McQueen (Ms. McQueen or the
    plaintiff) was injured in a rollover motor vehicle accident on January 31,
    2004.  Her vehicle was destroyed in the accident.

[2]

At the time of the accident, Ms.
    McQueen was 35 years old and unemployed. She had been receiving benefits under
    the Ontario Disability Support Program for 10 years.  She had two children,
    then aged 14 and 20.  She lived with her husband and daughter, Chelsi, the
    younger of the two children.

[3]

Following the accident, Ms.
    McQueen suffered from a significant number of physical and psychological
    problems, including chronic pain, difficulty walking and lifting, jaw pain,
    anxiety related to driving, and memory loss. She saw a number of physicians, in
    addition to her own family doctor, Dr. Picketts, in the years following the
    accident.

[4]

Ms. McQueen applied for statutory accident benefits from her insurer,
    Echelon General Insurance Company (Echelon or the appellant).  She received
    very limited benefits from Echelon.

[5]

From January 31, 2004, (the date of the accident) to July 30, 2004,
    Echelon gave Ms. McQueen approximately $43 per week for housekeeping expenses. 
    This amount was for six hours of housekeeping at the rate of $7.15 per hour.

[6]

During that same time period, Echelon arranged for Ms. McQueen to have a
    direct account with a taxi company, which she could use for travel to her various
    medical appointments.

[7]

In May 2004, Echelon received a disability certificate from Dr. Picketts
    in which he stated that Ms. McQueen suffered from a complete inability to
    carry on a normal life  that is, that Ms. McQueen was substantially disabled
    from performing her pre-accident housekeeping tasks.

[8]

As a result of having received the disability certificate, Echelon hired
    Ms. Lori Foster, an occupational therapist, to attend at Ms. McQueens home and
    conduct an assessment.  Ms. Foster conducted the assessment in June 2004 and
    prepared a report, dated July 14, 2004.
[1]
Among her findings, Ms. Foster noted that Ms. McQueen had difficulty performing
    various household tasks.  Ms. Foster recommended that Ms. McQueen continue to
    receive housekeeping assistance for six hours per week.

[9]

In her report, Ms. Foster said this in respect of Ms. McQueens
    transportation needs:

Ms. McQueens home is currently not on a bus
    route.  As such, she would be required to walk to a main street (at least 3
    blocks) to access the nearest bus stop.  Given the location of Vitality Health
    Care [where Ms. McQueens physiotherapist was located], the client would also
    be required to make a transfer to a different bus to attend her appointments.

Based upon the clients limited tolerance for
    walking, decreased balance, increased level of fatigue, difficulty with stairs
    and the opinion of Dr. Lin, it is this therapists opinion that the client
    would experience difficulty taking a bus to/from her appointments at Vitality
    Health Care.

[10]

In July 2004, Echelon retained Dr. Kwok, an orthopaedic surgeon, to examine
    Ms. McQueen.  Echelon did not give Dr. Kwok a copy of Ms. Fosters report.

[11]

Dr. Kwok wrote a report dated July 23, 2004, in which he stated that Ms.
    McQueen was capable of conducting her own housekeeping, was not disabled from driving
    a motor vehicle and was able to take public transportation.

[12]

After receiving Dr. Kwoks report, Echelon immediately stopped paying
    Ms. McQueen housekeeping and transportation benefits.

[13]

Ms. McQueen requested, and Echelon sought, the advice of an independent
    medical occupational therapist.  That therapist advised that Ms. McQueen
    required assistance with her housekeeping but that an in-home assessment should
    be performed first.  Echelon told Ms. McQueen that the assessment would cost
    $620.11 but it refused to pay for the assessment because it was not reasonable
    and necessary.

[14]

Despite Ms. McQueens repeated entreaties for the SABS benefits, and the
    provision of additional medical documentation showing that she needed them, Echelon
    refused to reinstate the benefits.  The trial judge found that in a three-year
    period, Ms. McQueen received 21 denials for 16 separate benefits.

[15]

After Echelon refused to give Ms. McQueen transportation benefits, she went
    to Operation Lift, a bus service for people that are disabled or in a
    wheelchair or walkers.  She was tested, passed its criteria as being disabled
    enough to use the service and was told she could begin using the service
    immediately.  She attempted to use it but without success because the bumpy,
    rough ride caused her pain.

[16]

Ms. McQueen visited a number of medical specialists who requested that
    she undergo various assessments.  Three such assessments are of concern in this
    appeal: 1) a psychological and neurological assessment by Dr. Gouws at a cost
    of $2,259.91; 2) a neurological assessment by Dr. McComas at a cost of $1,391.52;
    and 3) the previously mentioned in-home assessment by Ms. Dyk, an occupational
    therapist, at a cost of $620.11.

[17]

The first two assessments were recommended by a number of physicians.

[18]

Echelon refused to pay for any of the assessments.

[19]

Ms. McQueen filed two separate Statements of Claim in which she alleged
    that Echelon had breached various provisions of the
Statutory Accident
    Benefits Schedule  Accidents on or after November 1, 1996,
O. Reg. 403/96
    (SABS) by refusing to pay her certain SABS benefits.  She also alleged that
    Echelon caused her mental distress and engaged in bad faith conduct, and she sought
    aggravated, punitive and exemplary damages.

[20]

In a lengthy and comprehensive report dated March 23, 2007, Dr. Dinesh
    Kumbhare, a physiatrist, concluded that Ms. McQueen suffered from chronic pain
    and that her prognosis for recovery was guarded.

[21]

At trial, Ms. McQueen testified on her own behalf.  Ms. Laurie Walker,
    an independent insurance claims adjuster, testified for Echelon.

[22]

Following a seven day trial in May 2009, the trial judge issued a judgment
    dated September 28, 2009, as amended on November 25, 2009 (the Judgment), in
    which he awarded Ms. McQueen:

·

$7,800 for housekeeping benefits, calculated at $100/week
    for 78 weeks following the period for which Echelon had
    already paid;

·

$7,500 for transportation benefits;

·

$4,271.54 for the three s. 24 assessments;

·

$25,000 for mental distress; and

·

interest on the first three awards.

[23]

Echelon appeals.  It challenges all but the interest award.

[24]

Echelon raised some fifty grounds of appeal.  The essence of the alleged
    errors in respect of each head of damages is as follows.  In ordering housekeeping
    and transportation benefits, Echelon says the trial judge erred because the plaintiff
    failed to establish entitlement to, and the quantum of, the benefits awarded. 
    In respect of the s. 24 assessments, Echelon submits that the trial judge erred
    by failing to properly weigh all of the evidence relating to whether the
    recommended assessments were reasonable.  As for the award for mental distress,
    apart from alleging numerous errors in findings of fact, Echelon makes a number
    of submissions as to why the trial judge lacked jurisdiction to make such an
    award.

[25]

For the reasons that follow, I would dismiss the appeal, with the
    exception of ordering a variation in the amount awarded for transportation
    benefits.

THE ISSUES

[26]

The issues raised in this appeal are whether the trial judge erred in ordering
    Echelon to pay Ms. McQueen:

(a)    housekeeping benefits of $7,800;

(b)    transportation benefits of $7,500;

(c)    the cost of the three s. 24 assessments of
    $4,271.54; and

(d)    damages for mental distress of $25,000.

ANALYSIS

1.         The Housekeeping
    Benefits

[27]

Entitlement to a housekeeping and home maintenance benefit is governed
    by s. 22 of SABS.  The relevant parts of s. 22 read as follows:

22.
(1)  The insurer shall pay for
    reasonable and necessary additional expenses incurred by or on behalf of an
    insured person as a result of an accident for housekeeping and home maintenance
    services if, as a result of the accident, the insured person sustains an impairment
    that results in a substantial inability to perform the housekeeping and home
    maintenance services that he or she normally performed before the accident.

(2)  The amount payable under this section
    shall not exceed $100 per week.

[28]

The trial judge was fully alive to the requirements in s. 22 and to fact
    that Ms. McQueen was required to prove both her entitlement to, and the quantum
    of, SABS benefits on a balance of probabilities.

[29]

There was ample evidence in the record that Ms. McQueen was substantially
    unable to perform the housekeeping and home maintenance services that she had
    performed prior to her accident.  The evidence included her testimony, the disability
    certificate that Dr. Picketts had prepared, Ms. Fosters in-home assessment and
    Dr. Kumbhares report.  Indeed, Echelon provided Ms. McQueen with housekeeping
    benefits until discontinuing the benefit, based on Dr. Kwoks assessment.  In
    discontinuing such benefits, it acted against the recommendations of its own
    occupational therapist, Ms. Foster, who had attended at Ms. McQueens home,
    conducted an assessment and found that Ms. McQueen had difficulty performing 
    housekeeping tasks.  The trial judges finding that Echelon failed to give Dr.
    Kwok a copy of Ms. Fosters report is worthy of note.

[30]

Ms. McQueen testified that after the accident she was bedridden for two
    months and her husband had to leave his employment to take care of her, their
    teenaged daughter and the household generally.  Prior to the accident, Ms.
    McQueen did the cooking, house cleaning, shopping and the like.  After the
    accident, she could no longer cook meals, clean bathrooms, change bedding or do
    any heavy cleaning  - her husband and daughter had to do virtually all of the
    housekeeping.

[31]

The trial judge was entitled to accept Ms. McQueens evidence that she
    was unable to perform virtually all aspects of the housework that she had
    performed prior to the accident.  He was also entitled to reject Dr. Kwoks
    report on the matter.  It is significant in this regard that the trial judge found
    as a fact that Dr. Kwoks assessment was made after a 30 minute, superficial
    examination and without reference to the occupational therapy report or the neurological
    and psychiatric testing that Dr. Kwok himself recommended.

[32]

Although Ms. McQueen did not have particularized receipts for the housekeeping
    services that were provided, in my view, this does not disentitle her to housekeeping
    benefits.  It would be an absurd result and unfair to allow only those
    persons who could pay for services in advance to be allowed to recover for
    housekeeping services:  see
Belair Insurance Co. v. McMichael
(2007), 86
    O.R. (3d) 68 (Div. Ct.), at paras. 20 and 23.  The evidence that the trial
    judge accepted, as already noted, satisfied him that housekeeping benefits were
    necessary.  It was for him to decide what amount was reasonable, based on the
    evidence before him.

[33]

I see no basis on which to interfere with the trial judges finding that
    $100 per week for an additional 78 weeks was reasonable.  Section 22(2) of SABS
    (set out above in para. 27)

limits the amount payable to $100 per week. 
    The trial judge was satisfied that Ms. McQueen was unable to do virtually any of
    the housekeeping and house maintenance services that she had performed prior to
    the accident.  Given the nature of housekeeping services that needed to be
    provided, allowing Ms. McQueen two hours per day of assistance is very
    reasonable.  On that basis, the $100 weekly allowance would provide
    compensation to her family members at a rate of approximately $7.15 per hour,
    the same rate at which Echelon had earlier provided the housekeeping benefit.

2.         The Transportation
    Benefits

[34]

Echelon knew that pursuant to s. 14 of SABS, it was obliged to pay all
    reasonable and necessary costs of transportation for Ms. McQueens attendance
    at medical appointments.  In fact, until Dr. Kwok issued his report saying that
    Ms. McQueen did not need this benefit, Echelon had provided her with this
    benefit by means of a direct account with a taxi company.

[35]

As has been noted, the trial judge found Dr. Kwoks report to be
    seriously flawed.  Even Echelons own occupational therapist advised that Ms.
    McQueen needed to be provided with transportation benefits and she was under
    the mistaken belief that Ms. McQueen had a working vehicle available to her at
    the material times.

[36]

I see no reason to interfere with the trial judges implicit finding
    that Ms. McQueen proved entitlement to transportation benefits.  A short review
    of the evidence shows that this finding was fully open to him.  This evidence
    includes: the nature of Ms. McQueens health problems, her lack of access to a
    car, the opinion of Echelons occupational therapist that Ms. McQueen needed
    such transportation, Ms. McQueens attempts to use transportation for disabled
    persons, and the distance from her home to the nearest bus stop.

[37]

However, I do accept that the trial judge gave inadequate reasons for
    how he quantified the amount of transportation benefits to which Ms. McQueen
    was entitled.  Simply put, the trial judge gave no reasons or rationale for
    arriving at a figure of $7,500 for transportation benefits.

[38]

In my view, it would not serve the interests of justice to remit this
    matter for a second trial.  The amount in question is small and the plaintiff
    is of limited means and fragile health.  Thus, it falls to this court to
    quantify the transportation benefits.  Unfortunately, the record provides
    little help on the matter of transportation costs for medical appointments and
    otherwise.  For example, there is no evidence of the number and cost of the
    trips to medical appointments that Echelon paid for by means of the direct
    account with a taxi company in the period January to July 2004.

[39]

The little evidence on point comes from a report dated November 24,
    2005, following a failed mediation.  The report indicates that Ms. McQueen
    claimed $500 for transportation expenses to and from medical appointments for
    the period September 1, 2004 to the date of the mediation.  September 2004 to
    November 2005 is a period of approximately 13 months so the claim was for approximately
    $40 per month.  Ms. McQueen testified that the cost of a taxi to a medical
    appointment was $20 each way.  In other words, the claim at mediation appears
    to be for a single trip each month to a medical appointment.  Based on the
    evidence relating to her medical needs, this claim appears to be very modest
    and, in my view, reasonable.

[40]

Echelon ceased providing Ms. McQueen with transportation benefits at the
    end of July 2004.  There are 57 months in the period from August 2004 to trial
    (early May 2009).  Transportation benefits of $40 per month for 57 months would
    total $2,280.

[41]

Accordingly, I would allow the appeal on this issue and reduce the
    amount for the transportation benefit from $7,500 to $2,280.

3.         The Section 24 Assessments

[42]

I would not give effect to this ground of appeal.

[43]

Pursuant to s. 24 of SABS, an insurer is required to pay reasonable fees
    charged for, among other things, the preparation of assessments and reports by members
    of a health profession.

[44]

The trial judge thoroughly canvassed the medical evidence and Ms. McQueens
    testimony and made a finding of fact that the neuro/psychological assessments
    were both reasonable and necessary. There was significant evidence by a number
    of doctors that such examinations were required.  Indeed, Dr. Kwok as the insurance
    assessor recommended a neurological as well as a psychiatric/psychological
    assessment of Ms. McQueen.

[45]

With respect to the in-home assessment recommended by Ms. Dyk, an
    occupational therapist and thereby a member of a health profession, the trial
    judge accepted as a fact that it was reasonable and necessary in the
    circumstances and that its denial may have led Echelon to prematurely and
    incorrectly terminate the plaintiffs housekeeping benefits.  The trial judge
    was entitled to make this finding.

[46]

Accordingly, I see no reason to disturb the trial judges order in
    relation to the s. 24 assessments.

4.        Damages for Mental
    Distress

a)        Some initial comments

[47]

I begin by dismissing Echelons two initial submissions on this issue.

[48]

First, Echelon submits that there was procedural unfairness because, in
    deciding this issue, the trial judge considered conduct that related to matters
    other than rejected claims for statutory accident benefits.

[49]

It is clear from the statements of claim, however, that Ms. McQueen
    sought to recover damages for more than SABS benefits.  She alleged bad faith
    and mental distress and sought aggravated, punitive and exemplary damages.  In
    particular, she sought the following damages in both of the two statements of
    claim that were before the trial judge:

-

damages in the amount of $100,000 (reduced to $20,000 in the opening
    address by Ms. McQueens counsel at trial) for Echelons wrongful infliction of
    mental distress by the use of unlawful claims practices;

-

damages in the amount of $100,000 (also reduced to $20,000 at trial) for
    bad faith and unreasonable conduct in the claims process; and

-

aggravated, punitive and exemplary damages in the amount of $1,000,000
    (reduced to $35,000 at trial).

[50]

It should have come as no surprise to Echelon that evidence of the
    alleged wrongful conduct was adduced at trial.  Had Echelon wished to explore
    the allegations prior to trial, it could have done so through the discovery
    process.

[51]

Second, this recitation of the damages sought also disposes of Echelons
    argument that Ms. McQueen reduced her claim for mental distress to $20,000. 
    She reduced her claims to $20,000 per claim for a total of $40,000, in addition
    to her claim for $35,000 for aggravated, punitive and exemplary damages
.

b)        More than a simple denial of benefits

[52]

Echelon also submits that this is merely a case about the denial of
    benefits and the simple denial of benefits does not amount to bad faith.

[53]

I accept that a lack of good faith is not to be inferred simply because
    an insurer does not pay a claim.  However, based on the findings of the trial
    judge, it cannot be said that this case was one in which Echelon simply denied
    benefits.

[54]

The reasons of the trial judge must be read as a whole.  The specific
    section of the judgment in which he deals with damages for bad faith and mental
    distress cannot be separated from the balance of the judgment in which he makes
    findings in relation to Echelons conduct.  It is evident that those findings lay
    the foundation for his reasoning on damages.

[55]

As early as para. 12 of the reasons, the trial judge refers to
Fidler
    v. Sun Life Assurance Co. Ltd.
, 2006 SCC 30, [2006] 2 S.C.R. 3 (
Fidler)
,
    noting that in
Fidler
, the Supreme Court of Canada held that an insurer
    owes a common law duty to act in good faith in all its dealings with an insured
    and has an additional duty not to inflict unnecessary mental distress.  He
    returns to
Fidler
in paras. 51 and 52 of the reasons, stating that in a
    case of alleged mental distress, the court must be satisfied that:

a)

an
    object of the contract was to secure a psychological benefit that brings mental
    distress upon breach within the reasonable contemplation of the parties; and

b)

the
    degree of mental suffering caused by the breach was of a degree sufficient to
    warrant compensation.

[56]

Throughout the reasons, the trial judge repeatedly notes that Echelon refused
    to provide benefits on the basis that they were not reasonable and necessary
    but Echelon gave no reasons for why they were not reasonable and necessary:
    see, for example, para. 33.

[57]

It is also clear that the trial judge was critical of Echelon for
    relying on Dr. Kwoks report, which was based on a superficial examination
    lasting only 30 minutes (para. 39), especially as Echelon had not given Dr.
    Kwok a copy of the report its own occupational therapist, which was favourable
    to Ms. McQueen (paras. 34 and 36).

[58]

In the section of the reasons in which the trial judge concludes that
    damages for mental distress are warranted, he begins by pointing out a number
    of claims that Echelon denied, contrary to medical recommendations.  He then refers
    to internal notes from Echelons files that were in evidence.  He finds that
    the expressions in the notes connote an outmoded attitude that runs against the
    reasoning in
Whiten v. Pilot Insurance Co
., [2002] 1 S.C.R. 595, and
Fidler
. 
    At paras. 58-9 of the reasons, he makes key findings of fact:

[58]   I find that the Echelon file notes are
    evidence of an adversarial approach to the Plaintiff
ab initio
and in
    behaving in this manner, the Defendant has breached its contract of insurance
    with the Plaintiff.

[59]     Echelons adversarial position poisoned
    the process very early on, notwithstanding that it owed the Plaintiff a duty of
    good faith throughout.  Early on there was a negative predisposition toward the
    Plaintiff by the Defendant and these notes were the clarion call to the file
    going forward.

[59]

The trial judge found that one object of the insurance contract was to
    secure the plaintiffs peace of mind and that it was within the reasonable
    contemplation of the parties that breach of the peace of mind promise would
    bring about mental distress.

[60]

The trial judge went on to find that Ms. McQueen had suffered and that
    the suffering was of a degree that warranted compensation.  He notes that some
    indication of Ms. McQueens mental state in the period following the accident
    emerges from the clinical records of her treating psychiatrist, Dr. Prayaga. 
    He said there were some two dozen reports in evidence in this regard.  Between
    2003 and 2007, Dr. Prayaga reported to Dr. Picketts (Ms. McQueens family
    doctor) ten times regarding her mental distress over the accident and the
    difficulties she was encountering with Echelon.

[61]

The trial judge went on to canvas the extensive medical evidence
    during the relevant period before concluding that Echelon created an
    adversarial relationship with Ms. McQueen that was likely to create mental
    distress and that, in fact, it did cause such mental distress.  He found that
    her distress was palpable and accepted her evidence that the change in her
    emotional and psychological conduct was the result of her relationship with
    Echelon (para. 71).

[62]

The trial judge then concluded with a brief summary of instances in
    which Echelon had terminated or denied her benefits even though the medical
    evidence demonstrated that those benefits were reasonable and necessary.  This
    included Echelon: terminating housekeeping benefits in the face of medical
    documentation stating that Ms. McQueen required housekeeping assistance; failing
    to pay transportation expenses to medical assessments and treatments in the
    face of clear medical evidence that she needed taxi transportation; and, repeatedly
    delaying access to medical treatments.

[63]

To the extent that Echelon argues that the trial judge was unaware of
    the differences between a claim for SABS benefits and for damages for mental
    distress and that he erred in his various factual findings, I reject these
    arguments.  The brief summary of his reasons shows that he was alive to the
    issues and that his findings were fully available on the record.

c)         An award for mental
    distress was available

[64]

In arguing that the trial judge lacked jurisdiction to make an award for
    mental distress, I understand Echelons key submission to be as follows.  Ms.
    McQueen was not a party to the insurance contract; it was her husband who was
    the named insured.  Echelon accepts that Ms. McQueen was an insured person for
    the purposes of claiming benefits under the insurance policy.  However, it
    contends that because she was not actually a party to the insurance contract,
    she was not entitled to claim damages for mental distress.  In a related
    argument, Echelon says that
Fidler
is distinguishable from the present
    case because
Fidler
dealt with a policy for long term disability
    benefits, not statutory accident benefits.  Consequently, Echelon contends,
    peace of mind cannot have been a term contemplated by the parties when the
    motor vehicle liability policy was purchased.

[65]

In my view, the Supreme Courts decision in
Fidler
supports the
    conclusion that damages for mental distress may be awarded to a person who is
    insured under a standard automobile policy, whether that person is the named
    party to the insurance contract or not.  Mental distress to anyone insured
    under the policy upon breach would have been within the reasonable
    contemplation of the insurer and the insured and, thus, damages are recoverable
    pursuant to the basic principle of compensatory damages for breach of contract.

[66]

Fidler
lies at the heart of my conclusion, therefore, I begin
    with a consideration of that case.


[67]

Ms. Fidler was a bank
    receptionist covered by a group long-term disability (LTD) policy.  After a
    serious kidney infection, she developed chronic fatigue syndrome and
    fibromyalgia.  She received LTD benefits for six years. Video surveillance
    showed her engaged in activities that the insurer considered to be inconsistent
    with her inability to perform light work. There was medical evidence that she
    was not yet capable of doing any work, but the insurer relied on its own
    consultants and experts to deny benefits. Shortly before the trial began, the
    insurer reversed its denial of coverage and paid Ms. Fidler all of the arrears
    plus interest. The trial and subsequent appeals proceeded on the question of whether
    an award of aggravated damages for mental distress was appropriate and whether
    punitive damages were also warranted.

[68]

At para. 44 of
Fidler
,
    McLachlin C.J. and Abella J., writing for the court, held
:

[D]amages for mental distress for
    breach of contract may, in appropriate cases, be awarded as an application of
    the principle in
Hadley v. Baxendale
.  The court should ask what
    did the contract promise? and provide compensation for those promises. The
    aim of compensatory damages is to restore the wronged party to the position he
    or she would have been in had the contract not been broken ... The measure of
    these damages is, of course, subject to remoteness principles.  There is
    no reason why this should not include damages for mental distress, where such
    damages were in the reasonable contemplation of the parties at the time the
    contract was made.  This conclusion follows from the basic principle of
    compensatory contractual damages:  that the parties are to be restored to
    the position they contracted for, whether tangible or intangible.  The
    laws task is simply to provide the benefits contracted for, whatever their
    nature, if they were in the reasonable contemplation of the parties at the time
    the contract was made.  [citations omitted]

[69]

The court explained, at para.
    45, that mental distress of the type that would support a compensatory damages
    award will not likely be within the expectation of the parties in normal
    commercial contracts but they will be when the object of the contract is to
    secure a particular psychological benefit:

It does not follow, however, that all mental
    distress associated with a breach of contract is compensable. In normal
    commercial contracts, the likelihood of a breach of contract causing mental
    distress is not ordinarily within the reasonable contemplation of the parties.
    It is not unusual that a breach of contract will leave the wronged party
    feeling frustrated or angry. The law does not award damages for such incidental
    frustration.
The matter is otherwise, however, when the parties enter into a
    contract, an object of which is to secure a particular psychological benefit.
In
    such a case, damages arising from such mental distress should in principle be
    recoverable where they are established on the evidence and shown to have been
    within the reasonable contemplation of the parties at the time the contract was
    made. The basic principles of contract damages do not cease to operate merely
    because what is promised is an intangible, like mental security. [Emphasis
    added.]

[70]

At para. 47, the court stated that in order for the court to
award compensatory damages for mental distress, it must be satisfied:

(1) that an object of the contract was to secure a
    psychological benefit that brings mental distress upon breach within the
    reasonable contemplation of the parties; and (2) that the degree of mental
    suffering caused by the breach was of a degree sufficient to warrant
    compensation.

[71]

The court added, at para. 48, that as
    long as the promise in relation to state of mind is a part of the bargain in
    the reasonable contemplation of the contracting parties, mental distress
    damages arising from its breach are recoverable. The promise for peace of mind
    need not be the dominant or sole object of the contract.


[72]

McLachlin C.J. and Abella J.
    went on, at paras. 52-53, to explain what type of damages properly attract the
    label of aggravated damages.  They distinguished between damages for mental
    distress arising out of a breach of contract and true aggravated damages. The
    latter are not awarded for breach of contract but rather rest on an
    accompanying but separate cause of action  usually in tort  for things like
    defamation, oppression, or fraud.  The award of damages for mental distress in
    such cases arises from a separate cause of action, rather than out of the
    contractual breach itself (para. 52).

[73]

Having established that
    damages for mental distress are available in certain breach of contract cases,
    the court then turned to Ms. Fidlers case and asked, at para. 56:  whether an
    object of this disability insurance contract was to secure a psychological
    benefit that brought the prospect of mental distress upon breach within the
    reasonable contemplation of the parties at the time the contract was made?

[74]

The court explained, at
    paras. 56-58, that it was an object of the contract:

The bargain was that in return for the payment of
    premiums, the insurer would pay the plaintiff benefits in the case of
    disability. This is not a mere commercial contract. It is rather a contract for
    benefits that are both tangible, such as payments, and intangible, such as
    knowledge of income security in the event of disability. If disability occurs
    and the insurer does not pay when it ought to have done so in accordance with
    the terms of the policy, the insurer has breached this reasonable expectation
    of security.

Mental distress is an effect which parties to a
    disability insurance contract may reasonably contemplate may flow from a
    failure to pay the required benefits. The intangible benefit provided by such a
    contract is the prospect of continued financial security when a persons
    disability makes working, and therefore receiving an income, no longer
    possible. If benefits are unfairly denied, it may not be possible to meet
    ordinary living expenses. This financial pressure, on top of the loss of work
    and the existence of a disability, is likely to heighten an insureds anxiety
    and stress. Moreover, once disabled, an insured faces the difficulty of finding
    an economic substitute for the loss of income caused by the denial of benefits.


People enter into disability insurance contracts to
    protect themselves from this very financial and emotional stress and
    insecurity. An unwarranted delay in receiving this protection can be extremely
    stressful
.
Ms. Fidlers damages for mental distress flowed from Sun
    Lifes breach of contract.  To accept Sun Lifes argument that an independent
    actionable wrong is a precondition would be to sanction the conceptual
    incongruity of asking a plaintiff to show
more
than just that mental
    distress damages were a reasonably foreseeable consequence of breach.
    [Citations omitted. Emphasis in original.]


[75]

In my view, the reasoning in
Fidler
applies to the present case. 
    People purchase motor vehicle liability policies to protect themselves from
    financial and emotional stress and insecurity.  An object of such contracts is
    to secure a psychological benefit that brought the prospect of mental distress
    upon breach within the reasonable contemplation of the parties at the time the
    contract was made (
Fidler
, at para. 56).  As an insured person entitled
    to call on the policy, Ms. McQueen was entitled to that peace of mind and to
    damages when she suffered mental distress on breach.

DISPOSITION

[76]

Accordingly, I would allow the appeal in part and order that para. 1(b)
    of the Judgment be varied by substituting the amount of $2,280 for the amount
    of $7,500.  I would affirm the Judgment in all other respects.

[77]

Given that Ms. McQueen was largely successful, I would award costs of
    the appeal to her fixed at $6500, inclusive of disbursements and applicable
    taxes.  In light of the very limited success that the appellant enjoyed on
    appeal, it does not appear to me that any reduction in trial costs is
    warranted.  However, I understand from the parties that trial costs have not
    been fixed.  If they are unable to resolve that matter between themselves, they
    may raise the result on appeal when they take steps to have the trial costs
    fixed.

RELEASED: October 18, 2011 (E.E.G.)

E.E. Gillese
    J.A.

I agree Robert
    P. Armstrong J.A.

I agree
    Karakatsanis J.A.






[1]
Because the in-home evaluation was conducted on June 28, 2004, the trial judge refers
    to it by that date.


