For the first time in BC, a Court has decided that an insured is
entitled to special costs, rather than the lower tariff costs,
solely because they were successful in a coverage action against
Williams v. Canales, 2016 BCSC 1811 involved a personal
injury claim by Klaudia Williams against her personal trainer
(Naomi Canales), Amazing Personal Training Studio ("APT")
who provides facilities for personal trainers, APT's principle
(Jeff Weltman) and Arbutus Village Holdings (the owner of the
premises). Mr. Weltman, APT and Arbutus Village Holdings (the
"Insureds") brought third party proceedings against their
insurer, Intact Insurance Company ("Intact") seeking a
declaration that Intact was obligated to defend the Insureds
against Ms. Williams action and seeking reimbursement for defence
costs incurred to date. The Insureds also brought third party
proceedings against the broker (the "Broker") because of
the denial of coverage from Intact.
Intact had denied coverage to the Insureds and declined to
defend them based on an exclusion clause in the policy. The
Insureds were successful after a summary trial in their third party
proceedings against Intact. The Insureds subsequently brought an
application for special costs against Intact and the Broker sought
a Sanderson Order against Intact.
Special costs (or solicitor-and-client costs) are significantly
higher than tariff costs and more closely approximate actual legal
fees charged by a lawyer. Special costs are awarded when an
opposing party has engaged in outrageous, scandalous or
reprehensible conduct deserving of rebuke from a Court.
In line with appellate decisions from other parts of Canada, a
BC Court held that Intact was required to pay special costs to the
Insureds despite there being no finding of reprehensible conduct on
the part of the Intact.
The Court relied on an Ontario Court of Appeal decision to
explain the rationale to the exceptional use of special costs
 Entitlement to solicitor-and-client costs in the third
party proceeding flows directly from the unique nature of the
insurance contract which entails a duty to defend at no expense to
the insured. The obligation to save harmless the insured from the
costs of defending the action is sufficiently broad to encompass
the third party proceedings. 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
This decision is also of note because of the Court's
decision to award the Broker costs payable by Intact pursuant to a
Sanderson Order without any prior judicial determination of the
Broker's liability. A Sanderson order requires an unsuccessful
defendant to pay a successful defendant's costs directly. The
claim against the Broker was moot once Intact was found liable for
coverage and was discontinued. However, the Court still assessed
the Broker as 'successful' in the Action despite the fact
that they were not a participant in the summary trial and made the
cost award on that basis.
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