ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
AUSTCO MARKETING AND SERVICE (CANADA) LIMITED
Applicant
– and –
LLYOD’S UNDERWRITERS
Respondent
J. S. Cavanagh, for the Applicant
D. L. Maxwell, for the Resondent
HEARD: June 27, 2013
Decision on costs
Mr. Justice W. Tausendfreund
1My reasons of August 26, 2013 in this Application included a declaration that Lloyd’s owes a duty to defend Austco in the action brought against it by Cimtel Inc. and Wireless Resident Nurse Alert Technology Inc. That duty to defend is based on a contract of insurance issued by Lloyd’s to Austco.
2The parties were unable to resolve the question of costs which arose from my reasons and requested a decision on that issue.
3Austco seeks full indemnity for legal fees and disbursements it incurred in this Application on which it was successful. Lloyd’s accepts its obligation for costs in this instance, but stated that full indemnity costs should only be awarded in exceptional circumstances for which these facts do not qualify.
4I respectfully disagree with the position advanced by counsel for Lloyd’s. The Ontario Court of Appeal in E.M. v. Reed, 2003 52150 (ON CA), [2003] O.J. No. 1791 held at paragraphs 22-24 that the unique nature of the insurance contract which includes a duty to defend at no expense to the insured calls for an entitlement to substantial indemnity costs. The court stated further:
…It is the contractual basis for the claim to solicitor-and-client costs that justifies the award and therefore constitutes an exception to the usual rule that solicitor-and-client costs will not be awarded except in unusual circumstances.
…English jurisprudence also appears to support the award of solicitor-and-client costs in such situations. See R. Merkin, Colinvaux's Law of Insurance, 7th ed. (London: Sweet & Maxwell, 1997) at 405:
The assured 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.
- The American case law similarly favours the view that where an insurer breaches its duty to defend and the insured is required to bring a declaratory action to establish the duty, the insured should be reimbursed for those costs that are attributable to establishing the duty.
5I find that Austco as the insured is entitled to be made financially whole on this Application which held that Lloyd’s has the obligation to defend the action brought against Austco. It is therefore entitled to its costs on a full indemnity basis. Nevertheless, these costs must be reasonable: see Savage v. Belecque, [2012] O.J. No. 2818, 2012 ONCA 426.
6I reviewed the time dockets and particulars of disbursements submitted by counsel for the Applicant. Austco shall be entitled to payment of costs, as follows:
Fees - $16,000.00
Disbursements - $1,441.32
Plus applicable HST
7Both counsel referenced further possible costs in regard to defence of the main action. That issue was not raised in the Application nor addressed in my reasons. For that reason, I specifically refrain from addressing that question.
Tausendfreund J.
Released: October 21, 2013
COURT FILE NO.: CV-13-56837
DATE: 20131017
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
AUSTCO MARKETING AND SERVICE (CANADA) LIMITED
Applicant
– and –
LLYOD’S UNDERWRITERS
Respondent
Decision on costs
Tausendfreund J.
Released: October 21, 2013