This section reviews the development of the law on the subject of the insurer’s duty of good faith prior to and following the Fidler decision referenced immediately below.

The insurer’s duty of good faith is now a firmly entrenched principle following the Supreme Court of Canada decision in Fidler in 2007. The duty of good faith is not limited simply to the denial of the claim. It extends throughout all aspects of the manner in which the claim is handled by the insurer.

The chapter reviews the awards made of damages for breach of the duty of good faith and the factual basis which have led to such claims. Even more important are the awards of punitive damages which have been substantial and often in excess of the compensatory sums awarded for the violation of the good faith obligation.

An awareness of why both such forms of damages have been awarded and in what amounts is important not only to create realistic client expectations but also to allow for a reasoned settlement of taxable and non-taxable claims should a client be re-assessed by the taxing authority.