Clark Wilson LLP Insurance Bulletin
Case Law Review Archive
A SAGL OF PUNITIVE DAMAGES
Art is making something out of nothing and selling it – Frank Zappa
Mrs. Brigette Sagl was very fond of buying such “nothings” and amassed an impressive art collection before a fire destroyed her home. The destruction of this art collection would lead to litigation and ultimately punitive damage awards both for and against Mrs. Sagl.
The events which to the fateful fire are thus: In the 1980’s Mr. Sagl founded Belltronic’s a company that manufactured electronic components. The profits from this extremely successful company enabled Mr. and Mrs. Sagl to live a lavish lifestyle. They owned a penthouse apartment in Germany, an apartment in Italy, a mansion in Georgia and “the Rockwood Estate” a 113 acre property in Ontario with a 16,000 square foot home filled with furniture, artwork and sculptures. As the court noted, Mrs. Sagl had a “penchant for collecting furniture, paintings, sculpture, figurines, china and glassware, jewellery and clothes”. However, this lavish lifestyle was not to last:
Two events burst the bubble. Rudy had an affair with Bridgette’s sister, which destroyed the marriage. At first, Rudy was prepared to look after Bridgette financially but the recession in the late 80s into the 90s took its toll on Belltronics’ $100 million annual sales.
As a result of the matrimonial proceedings that followed, Mrs. Sagl received an award for equalization payments from Mr. Sagl in excess of $7 million. She also continued to collect paintings in what the trial court referred to as a “fetish” until she ran out of wall space and began filling storage areas and closets with paintings, prints and frames. On December 16, 1997, Mrs. Sagl’s home and nearly all of the artwork was destroyed by fire.
Unfortunately some of the art did not belong to Mrs. Sagl and as a result an action was commenced against her by the actual owner.
Bismark v. Sagl
Ms. Bismark was a painter who contracted with Mrs. Sagl to promote her artwork for the purpose of sale. Mrs. Sagl never did promote or market the paintings but rather hoarded “the paintings unto herself and [claimed] ownership”. She further misrepresented to Ms. Bismark that some of the paintings had been sold to an American buyer. The trial judge called this action “despicable” and commented on Mrs. Sagl’s conduct at trial as stating that “she appears completely dishonest”, “lies without flinching”, and is “disingenuous”.
At the time of the fire, Mrs. Sagl had some 300 of Ms. Bismark’s paintings in her possession. Evidence from the insurance action (discussed below) was adduced which showed Ms. Sagl to be claiming the value of these paintings to be in excess of $200,000. However, using the values to which the parties had agreed to sell the paintings they were only valued at $ 116,000.
The trial judge awarded Ms. Bismark the value of the paintings and also awarded her $50,000 in punitive damages, together with pre- and post-judgment interest.
In making the award for punitive damages, the trial judge commented:
[49] I am reminded of the adjectives appearing in cases where punitive damages are considered: outrageous, heinous, repugnant, malicious, vindictive, arrogant, insulting, harsh and reprehensible.
[50] If I have been too subtle to this point in my findings, let me correct that now. Bridgette Sagl was all of these in her treatment of Ruth von Bismark.
On Appeal, the Court of Appeal disallowed the award of pre-judgment
interest on punitive damages but otherwise upheld the trial decision. The
citation of the trial judgement is: [2000] O.J. No. 2757 (Ont. S.C.J.).
The full text of the Court of Appeal decision can be viewed at: www.ontariocourts.on.ca/decisions/
2002/may/vonbismarkC34804.htm
Sagl v. Chubb
Mrs. Sagl’s home was insured with Chubb Insurance Company of Canada (“Chubb”). Following the fire, Chubb refused to pay for Mrs. Sagl’s losses and alleged arson, maintaining that the fire was deliberately set by a person or persons acting on behalf of and pursuant to her direction. Chubb argued that the house had been “staged” in preparation for the fire to occur that night by reason of the maid having the night off, son Ryan staying at a friend’s house, the dog being left outside and, Mrs. Sagl going out for dinner with her companion, a Provincial Court Judge.
The Court commented that, although Chubb was supported in its allegations of arson by the Fire Marshall and the police (who both concluded arson), they ought to have looked more closely at the arson evidence. The Court held that the Fire Marshall’s evidence was flawed and that Chubb’s failure to impartially scrutinize the evidence was a breach of the duty of good faith:
[231] In my view, Chubb had tunnel vision and failed to consider the evidence in an impartial and common sense way. There was no direct evidence implicating the plaintiff in any way with the fire. Chubb knew the high standard of proof required to support its allegations of criminal activity by the plaintiff, and without any proof Chubb persisted in persecuting the plaintiff with false allegations.
[232] It is a serious matter to allege that a plaintiff has committed a criminal offence without putting forth any direct evidence to prove the allegation. That is a breach of the duty and good faith and is reprehensible conduct.
In making an award for Punitive Damages the Court stated that:
[237] Almost ten years have passed since the fire. I find that Chubb’s conduct has been malicious, oppressive and high-handed and merits the condemnation of the Court.
[238] In the Kogan case the award for punitive damages was $100,000. Counsel for the plaintiff submits that Chubb did not learn from the Kogan case.
[239] In the circumstances of this case over the ten years, I find that an award of $500,000 is not unreasonable. Therefore, the judgment will include an amount of $500,000 for punitive damages.
The reasons for judgment in Sagl v. Chubb can be viewed at:
www.canlii.org/en/on/onsc/doc/2007/2007canlii36644/
2007canlii36644.html.
If you have any questions about the decision or any other insurance matter, please contact Krista Prockiw (telephone 604-643-3105 e-mail kxp@cwilson.com) or any other member of the Clark Wilson LLP Insurance Practice Group.
For more information on bad faith and punitive damage awards, see: Insurance Bad Faith Litigation.
