In the recent Hoang v The Personal Insurance Co., 2017 ONSC 4193 (CanLII) case, the Court ordered the insurance company to pay full indemnity costs (all legal fees) where the insurance company had wrongfully denied coverage.
The Hoang case arose after a young boy was injured crossing the street, after having been dropped off on the opposite side by his father. Ultimately, the boy’s mother sued his father for negligence and obtained judgment (against the father), which the father’s insurer refused to pay. That required further legal proceedings be brought directly against the insurer to prove coverage. The court found there to be insurance coverage, and ordered the insurer to pay for all legal fees incurred in reaching that determination. In reaching that decision, the court held that:
“The assured (insured) is entitled to any costs reasonably incurred by him in resisting a claim, by way of damages, where the insurers wrongfully repudiate liability on the policy, and the insurers will face liability for any costs incurred by the assured in forcing the insurers to admit liability under the policy. This view is both authoritative and logical. One purchases an insurance policy for coverage in the event of liability, and it is the premium payable under the policy that is the cost of that coverage. Insurance companies are by their nature constantly involved in litigation, and it would be unfair and burdensome to make their customers pay a premium plus legal fees in order to obtain the coverage they bought.”
The Hoang case and decisions cited therein make it more feasible for insurance policy holders to pursue insurance claims where insurance coverage has been wrongfully denied. It also serves to put insurance companies on notice that there may be real consequences that arise from improper claims denials. An article I was quoted in about this is available here.