In Lloyd's Underwriters v. Blue Mountain Log
Sales, Blue Mountain, which was insured by Lloyd's,
was named as a defendant in a law suit in Washington State. Blue
Mountain did not realize that the law suit might trigger coverage
under its insurance policies and did not tender its defence to
Lloyd's until almost two years after the litigation first arose
and during that period, defence costs were incurred.
Lloyd's applied for a declaration that it had no liability
for pre‑tender defence costs and relied upon standard CGL
policy provisions which included:
"Upon the happening of an
accident or occurrence which may give rise to a claim hereunder,
the Insured shall give notice thereof as soon as practicable
"The Insured shall not, accept
at his own cost, voluntarily make any payment, assume any
obligation or incur any expenses ..."
Lloyd's argued that the failure of Blue Mountain to give
timely notice is a breach of a condition precedent that triggers
Lloyd's responsibility under the policies and that defence
costs incurred before the notice fall outside that
Mr. Justice McEwan noted that Lloyd's did not
allege any prejudice due to late notice and he noted the relief
from forfeiture provisions in both the B.C. Insurance Act
and the B.C. Law and Equity Act. He decided that in the
absence of prejudice, Blue Mountain could be relieved from the
negative consequences asserted by Lloyd's and he concluded that
Lloyd's could not avoid pre‑tender defence costs on the
basis of Blue Mountain's failure to give more timely
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