Baker v. Blue Cross Life Insurance Company of Canada, 2023 ONCA 842 

Full Decision

The recent Court of Appeal decision in Baker v. Blue Cross[1] upheld the jury award of $1.5 million in punitive damages, with the Court finding there was ample evidence to support an award of punitive damages and that Blue Cross effectively “created a closed loop of information that ignored contrary information and created a counter-narrative based on their misinterpretation of the relevant data”.[2] This amounted to a “pattern of misconduct that, at best, showed reckless indifference to its duty to consider the respondent’s claim in good faith and conduct a good faith investigation, and at worst, demonstrated a deliberate strategy to wrongfully deny benefits”.[3] There was no basis for the Court to interfere with the quantum of punitive damages because the award was “rationally connected to the evidence”, and the “purposes of punitive damages”, and was “required to deter similar misconduct”.[4]

The costs award of $1,083,953.50 on a full indemnity scale was upheld on the basis of the conduct of Blue Cross in disregarding its good faith obligations to Ms. Baker, and its litigation strategy, including its rejection of a “generous offer to settle”.[5]


The respondent, Ms. Baker, suffered a sudden stroke (“brain bleed”) while exercising in 2013, at age 38, at which time she had a successful career as a Director of Food Services at a Toronto hospital.[6] Blue Cross initially provided Ms. Baker with LTD benefits under the group disability insurance policy provided through her employer, however it terminated those benefits after assessing Ms. Baker did not meet the eligibility criteria for “total disability” under the policy.[7] The plaintiff commenced her lawsuit in 2017 seeking, among other things, a declaration that she met the definition of total disability, retroactive benefits, and aggravated and punitive damages. The matter proceeded by way of a 22-day jury trial, in which the jury returned a verdict in favour of Ms. Baker finding that she was totally disabled within the meaning of the policy; awarding retroactive benefits in the amount of $220,604; aggravated damages for mental distress in the amount of $40,000; and punitive damages in the amount of $1,500,000.[8]

Further, the trial judge found that full indemnity costs were appropriate on public policy grounds, because Ms. Baker’s disability insurance benefits, of which she was “wrongfully deprived”, should not have been “eroded by unrecoverable legal expenses”.[9]

Analysis of Punitive Damages

In upholding the large punitive damages award, the Court of Appeal stated that “nothing about the quantum of the award warrants appellate interference”, because it was “open to the jury to conclude Blue Cross engaged in systemic and deliberate misconduct” in handling Ms. Baker’s claim, and that a “significant punitive damages award was necessary” to deter such conduct in future.[10] Because juries do not provide reasons for their decision, appellate courts generally take a deferential approach to reviewing their verdicts, however in reviewing punitive damage awards, the review will be based on the court’s estimation of “whether the punitive damages serve a rational purpose”.[11] This “rationality test” applies to both whether the award of punitive damages should have been made, and its quantum.[12]

The Court was satisfied that jurors understood the “nature of punitive damages, when they were available, and what they were meant to achieve, and the restraint that should be exercised in determining quantum”.[13] Blue Cross chose not to call all but one of its appeals specialists as witnesses, with the result being the jury never had evidence of why representatives of Blue Cross acted the way they did.[14] The Court noted the “repeated instances” of Blue Cross “ignoring information, misinterpreting experts’ reports, and relying on ill-informed advice of their contracted doctors to deny benefits”, all of which was a sufficient basis for the jury to award punitive damages.[15] Further, if jurors concluded that Blue Cross was “not just cavalier” in the way it handled Ms. Baker’s benefits claim but that it “undertook a deliberate strategy to wrongfully deny her the benefits she was entitled to under the policy”, the fact that Blue Cross then failed to call “critical witnesses to provide context about their handling of the file could further serve to support a finding that the conduct was deliberate”.[16]


As to the quantum of damages, the Court disagreed the awarded punitive damages were too high. Punitive damages are intended to “punish wrongful conduct, denounce that misconduct, and act as a deterrent for future misconduct”.[17] Deterrence plays an important role when dealing with claims against insurers, and deterrence is impossible unless the punishment is meaningful”.[18] The Court noted that it would be “difficult to envision how an award of anything less than $1.5 million would even garner the attention of senior executives” at Blue Cross, “let alone deter future misconduct”.[19] The evidence further pointed to issues with claim handling at Blue Cross being systemic, and that there may be many other claimants who were treated in the same manner, which reinforced why a “significant award of punitive damages” was “required”, otherwise the award could become a “nominal cost of operating in a way that wrongly and systematically denies policyholders their legal right”.[20]

Costs Analysis

Leave to appeal a costs order will only be granted in “obvious cases where the party seeking leave convinces the court there are strong grounds upon which the appellate court could find that the judge erred in exercising his discretion”.[21] This is a high threshold, because appellate courts recognize fixing costs is “highly discretionary” and “trial judges are best positioned to understand the dynamics of a case and to render a costs decision that is just and reflective of what actually happened on the ground”.[22] Here, the trial judge erred in finding that full indemnity costs were appropriate on public policy grounds, which created a “new category of cases where full indemnity costs will automatically follow”.[23] Costs awards should be based on the “assessment of the dynamics of the litigation”.[24]

The Court of Appeal upheld the quantum of costs awarded, but the basis of that award was the conduct of Blue Cross in its “marked disregard” for its good faith obligations to Ms. Baker, which was only partially addressed in the awards of damages, its litigation strategy “wherein it shielded its employees from appearing at trial to explain themselves”, and its decision to refuse a “generous offer to settle”.[25] Overall, this is a significant win for plaintiffs who have been unreasonably denied LTD benefits.

[1] Baker v Blue Cross Life Insurance Company of Canada, 2023 ONCA 842

[2] Ibid at 30

[3] Ibid

[4] Ibid at 37

[5] Ibid at 44, 47

[6] Ibid at 1

[7] Ibid at 2-5

[8] Ibid at 6

[9] Ibid at 7

[10]Ibid at 12

[11] Ibid at 16-18

[12]Ibid at 19

[13] Ibid at 24

[14] Ibid at 27

[15] Ibid at 30, 31

[16]Ibid at 31

[17]Ibid at 32

[18]Ibid at 33, 34

[19] Ibid at 34

[20] Ibid at 35, 36

[21] Ibid at 40


[23] Ibid at 41

[24] Ibid at 42

[25]Ibid at 44, 47

Written by

Alexa practices personal injury law at Cohen Highley LLP in London, with an emphasis on disability law and human rights. She is passionate about helping others, and is active in the local community to promote diversity and access to justice. She is currently a member of the Board of Directors of the Regional HIV/AIDS Connection, and volunteers as a committee member for the Brain Injury Association of London and Region.

Alexa completed her undergraduate studies at Western University in Political Science and was honoured to attend Osgoode Hall Law School to complete her Juris Doctor degree. During her time at Osgoode she had the opportunity to work with the Barbra Schlifer Commemorative Clinic, which provides legal services and advocacy for women who have experienced violence.

Alexa’s practice interests include sexualized violence and historic abuse, discrimination and other human rights abuses, and she is always interested in collaborating on matters that promote fairness and equality in the community.