The Price of Precaution for Defendants – Brocke Estate v Cromwell
10/15/2014 3:46 PM
Generally speaking, insurance companies have a responsibility to defend claims advanced against their insureds in accordance with the terms of an insurance policy. Where claims are advanced by a plaintiff seeking damages above the limits of an insurance policy, while the insurance company must still defend against the claim upon behalf of their insured, the insured will be required to personally pay the portion of an award of damages that is over and above the policy limits. Where an insurance company alerts its insured to this risk, it may be that an insured ought to take steps to protect him/herself against that risk, such as seeking independent legal advice (that is, independent from the legal advice its insurance company obtains). However, the recent case of Brocke Estate v Cromwell should be considered regarding what reasonable steps an insured might take in such instances.
In Brocke Estate v Cromwell, a claim was advanced against the Defendants following a fatal motor vehicle collision, seeking damages higher than the Defendants’ policy limits. Although the insurance company had retained legal counsel to defend the Defendants’ against the claim, the Defendants decided to hire their own independent legal counsel to represent them at Trial because the claim exceeded policy limits. Among the issues in Brocke Estate v Cromwell was whether the fees of the Defendant’s independent legal counsel should be considered by the Court when determining which party should pay costs to the other, and how much.
At paragraph 77, the Court concluded that the Defendants’ legal fees ought not bear upon a consideration of costs in Brocke Estate v Cromwell. The Court noted that the insurance company had not admitted that the claim warranted an award of damages in excess of policy limits, and, in fact, had consistently argued that damages were well below the policy limits. Furthermore, it had never signalled to the Defendants that it felt there was a realistic chance that an award after Trial would exceed policy limits. The insurance company had also acknowledged that it had a duty to defend the claim beyond policy limits (even though it would not be obliged to pay for damages awarded above policy limits). Therefore, the Court held that there had been no conflict of interest between the insurance company and the Defendants and no reasonable need for the Defendants to hire independent counsel – if there had been, the Court noted, the insurance company would have had a duty to pay for such independent counsel. The Court held that while the Defendants were certainly entitled to be as cautious as they were, they could not expect the Plaintiff to contribute towards the cost of their independent legal counsel.
The full text of Brocke Estate v Cromwell can be found at http://canlii.ca/t/g84nw.
If you have questions or would like to discuss this topic further, please contact Sandra L. McCulloch at Patterson Law at 1-888-897-2001.
Please note that this article is meant to provide information only and is not intended to confer legal advice or opinion. Please note as well that many of the statements are general principles which may vary on a case by case basis. If you have any further questions, please consult a lawyer.