Following a successful insurance coverage application establishing that the insurer owed a duty to defend the insured in an underlying action, the parties were unable to agree on costs.
The insured sought full indemnity costs, while the insurer argued that such costs should be reserved for exceptional circumstances.
The court held that where an insurer wrongfully refuses to defend and the insured must bring a declaratory application to establish the duty to defend, the contractual nature of the insurance relationship justifies substantial or full indemnity costs.
The court concluded the insured should be made financially whole for bringing the application and awarded reasonable full indemnity costs.
