Insurance adjusters may owe a duty of care to insureds, the breach of which can rise to individual liability in tort




Individual Liability of Insurance Adjuster and Elements of a Claim of Bad Faith In Harsch v Saskatchewan Government Insurance, 2021 SKCA 159, the plaintiff made a claim for No-Fault Benefits under The Automobile Accident Insurance Act, RSS 1978, c A-35 (the “AAIA”). The defendant Saskatchewan General Insurance (“SGI”) determined that the plaintiff was entitled to benefits and an SGI adjuster, the defendant Ms. Bernuy, was responsible for handling her claim. Eventually, SGI determined that the plaintiff was no longer entitled to no-fault benefits and Ms. Bernuy informed the plaintiff of this by letter. In response to the termination of her benefits, the plaintiff brought a claim against both SGI and Ms. Bernuy alleging that they had failed to act in good faith. The plaintiff sought damages, including punitive damages, against Ms. Bernuy personally.The defendants brought a motion to strike the plaintiff’s claim against Ms. Bernuy under Rule 7-9 of The Queen’s Bench Rules. The defendants argued that as Ms. Bernuy had acted within the parameters of her employment and there were no facts pleaded that alleged otherwise. Therefore, the defendants claimed they were entitled to rely on the immunity provisions of the AAIA.The Chambers judge was satisfied that Ms. Bernuy was indeed protected by s.86.1 of the AAIA and therefore absent any culpable conduct, the plaintiff’s claim that she failed to do something within her authority was inadequate to establish bad faith. The plaintiff was required to plead malice, an intention to harm, or recklessness evidencing an absence of good faith. The Chambers judge struck the claim under Rule 7-9(2)(a) on the grounds that it disclosed no reasonable cause of action. Essential Elements of a Claim of Failing to Act in Good Faith Kalmakoff J.A. (Ryan-Froslie J.A. and Schwann J.A. concurring) delivered the judgment of the Court of Appeal. He explained that for a first party insurer like SGI, the scope of the duty of good faith must take into account the statutory nature of the automobile insurance system in which it operates (para 24). It was not necessary to establish malice or intent on the part of the insurer to make out a claim of bad faith. The question was whether the denial of benefits by the insurer was the result of “overwhelmingly inadequate handling of the claim, or the introduction of improper considerations into the claims process” (para 25). In a first-party insurer context, SGI had to act honestly, with reasonable diligence, and with neutrality (para 25).Kalamakoff J.A. explained that to plead a claim of failure to act in good faith as a cause of action, the plaintiff had to plead material facts that engaged the question of bad faith. A judge considering whether to strike such a claim must be mindful of the fact that the scope of the duty of good faith is not settled in Canadian law (para 26). Pleading a Claim against an Individual Adjuster Kalamakoff J.A. emphasized that, given the absence of a contractual relationship between an insured and an individual adjuster, any liability against an insurance adjuster must be based in tort. The fact that an employer will be vicariously liable for an employee’s actions, does not preclude an action against the individual employee. For an employee to be personally liable for something done during the course of their employment, the employee’s actions must have been tortious, or the actions must “exhibit a separate identity or interest from that of the corporation or employer so as to make the act or conduct complained of their own” (para 27-29).Kalamakoff J.A. recognized that there were conflicting decisions on the issue of the liability of insurance adjusters but stated that there was enough case law to support that an adjuster may owe a duty of care to the insureds and therefore, be subject to individual liability in tort. In such a case, the pleadings must allege material facts giving rise to personal liability. The plaintiff must also plead why the adjuster is being sued separately from the employer (para 30-31). The Effect of Good Faith Immunity Clauses By virtue of s.86.1, Ms. Bernuy had immunity from civil liability for “anything in good faith done, caused, or permitted or authorized to be done, attempted to be done or omitted to be done … pursuant to or in the exercise or supposed exercise of any power conferred by … or in the carrying out or supposed carrying out of any duty imposed by” the AAIA or its regulations. Such a clause typically means, that liability will not attach to an employee on the basis of mere negligence. However, liability was possible in certain circumstances including an intention to do harm or for behaviour so out of line that a court could not reasonably conclude was demonstrated in good faith (para 32).In the context of an application to strike a claim for failing to disclose a reasonable cause of action, Kalamakoff J.A. stated that an immunity clause was simply a defence that was dependent on a factual finding of good faith (para 39). The question of whether to strike a claim on these grounds should be focused on the sufficiency of the pleadings and not on any defences that may exist to the plaintiff’s claim. To that end, as long as the plaintiff has “pleaded facts alleging conduct on the part of the defendant that is intentionally harmful, reckless, seriously careless or a substantial departure from the defendant’s legislated mandate, such that an inference of bad faith can be drawn” a claim that the defendant breached a duty of good faith should not be struck (para 40). Chambers Judge Erred by Striking Claim Though the Chambers judge had accurately stated the law on the necessary pleading for a claim of lack of good faith, Kalamakoff J.A. ruled that the judge erred by concluding that the potential applicability of s.86.1 of the AAIA meant that the plaintiff had disclosed no reasonable cause of action against Ms. Bernuy. The facts as pleaded by the plaintiff (which included allegations of failing to investigate the claim, relying on improper evidence, capriciously terminating benefits, and failing to comply with a statutory to duty to assist the insured), if taken to be true, were sufficient to engage the question of bad faith (para 43-45).There were also sufficient material facts to ground a cause of action against Ms. Bernuy personally. Given the unsettled nature of the scope and duty of care owed by an employee of a first-party insurer, it could not be said that it was plain and obvious that the claim would fail (para 46).Finally, Kalamakoff J.A. reiterated that a plaintiff is not required to negate a defence in their pleading. The Chambers judge had erred by concluding that Ms. Bernuy was necessarily protected by s.86.1 and therefore had erred by striking the plaintiff’s claim for disclosing no reasonable cause of action on this basis. Kalamakoff J.A. cautioned that he was making no comment on the strength of the plaintiff’s claim. A statutory immunity defence was still possible, as was a finding that Ms. Berny owed no duty of care to the plaintiff. However, with these still questions open, it was not appropriate to strike the plaintiff’s claim.Kalamakoff J.A. set aside the Chamber’s judge’s decision and remitted the matter to the Court of Queen’s Bench.

April 14, 2022
Harsch v Saskatchewan Government Insurance, 2021 SKCA 159