Canada: The Changing Landscape Of Costs And The Duty To Defend In British Columbia

Last Updated: August 12 2019
Article by Fareeha Qaiser

In British Columbia Court of Appeal decision West Van Holdings Ltd. v. Economical Mutual Insurance Company, the Court confirmed the primacy of the pleadings when determining whether an insurer owes a duty to defend, concluding that insurance policies are not special contracts justifying special costs for successful litigants seeking coverage where there is no reprehensible conduct on the part of the insurer deserving of judicial censure.

The Facts

This case concerned whether the defendant insurers (the "Insurers") owed a duty to defend the plaintiffs (the "Insureds"), notwithstanding environmental and pollution exclusion clauses (the "Exclusion Clauses") in their respective insurance policies.

The pleadings in the underlying action relied upon the Environmental Management Act (the "Act").

The Insurers refused to defend the Insureds on the basis that the underlying action was outside the scope of their policy coverage based on the Exclusion Clauses.

There was no allegation that the Insurers' conduct in the litigation was reprehensible or that they had breached their duty of good faith.

Trial Court

At the trial level, even though the insurance policies contained Exclusion Clauses, the Court held that the Insurers still had a duty to defend the Insureds against an action arising from soil contamination as the claims in the underlying action fell within the initial grant of coverage and brought the claim within the scope of coverage. The trial judge found the Exclusion Clauses to be ambiguous and found that they did not oust coverage for statutory retroactive property damage liability arising from migration of pollutants which may have been caused by previous landowners or operators, pursuant to the Act.

Further, the trial judge awarded special costs (or full indemnity costs) to the Insureds, relying on prior case law that concluded that insurance policies that include a duty to defend were unique contracts providing coverage for defence costs. As such, an insured should be fully compensated for the costs incurred to obtain the defence.

Court of Appeal

The Court of Appeal, after careful consideration of the pleadings forming the basis of the claim, the policies' terms, and the law, concluded that the Exclusion Clauses were not ambiguous and excluded coverage for the claims in the underlying action in relation to the migration of pollutants and acts by the Insureds occurring during the respective policy periods.

The Court further concluded that such claims do not fall inside the policies' initial grant of coverage because the claims would relate to occurrences that took place before the commencement of the policies' respective policy periods. The pleadings' inclusion of the Act did not give rise to a claim for the escape of pollutants caused by the acts of predecessor owners or operators of the Insureds' lands. A review of the pleadings suggested that there was no possibility that the Insureds would be exposed to retroactive liability. As such, there was no duty to defend.

The Court also considered the issue of special costs. British Columbia Rules of Court provide for party and party costs and special costs. Party and party costs are typically awarded in most cases and only provide partial indemnity based upon a tariff scale. Special costs provide greater indemnity but are usually awarded due to reprehensible conduct by a litigant. Special costs in British Columbia, if awarded, involve an assessment of what fees are reasonably necessary, the result of which is that a litigant is not necessarily fully indemnified by such an award.

The Court concluded that, in British Columbia, costs must be awarded in accordance with the Rules of Court, which do not provide for full indemnity costs. Further, special costs are only awarded where there is reprehensible conduct or where the parties have made provisions in a contract for special costs.

Appellate courts in other provinces have concluded that insurance policies containing a duty to defend, despite being silent on the cost issue, still allow for full indemnity costs awards. Lower courts in British Columbia had previously adopted such reasoning.

The Court reviewed the policies in place which did not address the Insureds' entitlement to costs in the event of a coverage dispute. The Court held that an award for special costs cannot be justified by implying such a term into the policies. To do so would require the following: 1) a particular custom; 2) something incidental to a particular kind of contract; or 3) a term necessary to provide business efficacy to the contract. None of these were found to apply in this case.

The Court held that there was no principled reason to award costs in a duty to defend case in a manner different than other litigation. As such, an insurer facing a duty to defend claim should be treated no differently than any other defendant alleged to have breached a contract.

Practical Considerations

The impact of this decision on the costs available for insureds in coverage disputes in British Columbia is considerable. This decision has levelled the playing field as both insureds and insurers will be entitled and subject to the same potential costs consequences. Poor conduct during the litigation raises the risk of special costs but either party is only otherwise entitled to partial indemnification.

This decision continues to highlight the importance of having exclusion clauses that are broader in their wording, clear and unambiguous, and specific with respect to both concurrent and retroactive liability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Alexander Holburn Beaudin + Lang LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Alexander Holburn Beaudin + Lang LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions