Accounting for Law

Costs award against insurance company good news for B.C. insureds

A Supreme Court of British Columbia award of full costs against an insurance company which refused coverage is a stride forward for policyholders and access to justice, says Vancouver insurance lawyer Sean Lerner.

Williams v Canales [2016 BCSC 1811] involved a woman who sued her personal trainer, the gym, and the landlord alleging she was injured during a training session.

These defendants were all insured under a liability insurance policy and they called on the insurer to defend them against the woman's claim.

The insurance company, however, refused to defend the claim citing an exclusion clause in the policy.

The defendants in turn sued the insurer for coverage under their policy and were successful. The court ordered the insurer to defend the claim. The defendants then sought reimbursement of the legal fees spent trying to force the insurer to cover the claim - an award known as costs.

However, this is where it gets interesting, Lerner a principal at Lerner Law Corporation tells The costs award the policyholders sought was an award of "special costs", which simply means full indemnity of legal fees spent. Normally the costs awarded to the successful party at the end of litigation are called "party and party costs". Party and party costs are calculated according to a court-mandated formula and they generally are a fraction of the person's actual legal fees.

Special costs are usually ordered only in special circumstances, usually only where the other side has conducted themselves in a way the court finds reprehensible. However, for courts in Ontario, New Brunswick, Newfoundland and Manitoba, the concept of awarding the policy holder solicitor-client basis is the norm for insurance coverage disputes.

In the Williams case, the court ordered Intact to pay the insureds on a special cost basis and for the brokers to be paid on a party and party basis.

“This is a significant case because we didn’t have this kind of ruling in B.C. until now,” says Lerner. “It brings B.C. in line with the trend across Canada and creates a more level playing field for policyholders and the insurance companies who have much deeper pockets.”

“It’s an important reassurance for policyholders in this province that if they are forced to take legal action against their insurers, to make the insurer fulfill its obligations under the policy, they will be able to recover their full legal costs when they succeed,” he says, “Legal costs can be significant, so at the end of the day, this is an access to justice issue.”


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