Canadian courts have weighed in on the pre-tender defence cost debate in Lloyd’s Underwriters v. Blue Mountain Log Sales Ltd., 2016 BCCA 352. The British Columbia Court of Appeal recently overturned a lower court decision which had required an insurer to pay pre-tender defence costs in circumstances wherein the Insured had been defending a claim for nearly two years prior to provision of notice to its insurer. The lower court had ruled that the Insured had not prejudiced the Insurer and therefore was entitled to relief from forfeiture of its policy rights, including the right to defence costs incurred.
On appeal the Court focused on the express words of the Policy, the insurer’s defence obligation could not arise until the insurer was actually aware of the claim against the Insured. The trigger of the defence coverage obligation was the notice and tender of the claim. Amounts paid prior to notice and tender were voluntary payments that were not recoverable. Further the circumstances did not satisfy the prerequisites for relief from forfeiture, and therefore the lower court’s ruling on that basis was inapposite.
A more in-depth review of this case may be found at: http://www.blaney.com/articles/it-says-what-it-says-pre-tender-defence-costs-should-not-be-covered-under-the-policy-1