Case Summary: Tanious v The Empire Life Insurance Company

Special costs may be awarded against the insurer in disability insurance litigation in response to a litigant's personal and financial circumstances, even if there has been no reprehensible conduct or bad faith on the part of the insurer.

Tanious v The Empire Life Insurance Company, 2019 BCCA 329, per Dickson J.A.

Facts + Issues

The Respondent insured (Tanious) was diagnosed with multiple sclerosis and her physical, cognitive, and emotional health deteriorated. Tanious began using crystal meth in an attempt to improve her cognition and in January 2012 her employment was terminated.

She was covered by a group policy of disability insurance issued by the Appellant insurance company (Empire). From late December 2011 onwards, Tanious was unable to work due to anxiety and depression. She applied for long-term disability benefits under the group policy, however Empire rejected her claim.

Due to her condition, Tanious could not pursue a claim against Empire without counsel. She retained an experienced disability litigator pursuant to a contingency fee agreement to sue Empire. She did not plead that Empire acted in bad faith in rejecting her claim. The trial judge allowed Tanious' claim for past and future long-term disability benefits.

Following the trial, Tanious sought solicitor-client costs. She relied on an affidavit sworn by her counsel which discussed various aspects of the litigation. The evidence of her counsel was that her fees under the contingency fee agreement were significantly less than her fees would have been had she been charged an hourly rate. The trial judge awarded special costs based on his view that that in the particular circumstances of the case, such an award was warranted in the interests of justice.

Empire appealed on the following grounds:

That the trial judge had erred in law and principle in awarding special costs absent bad faith or reprehensible conduct on the part of the insurer. That the trial judge erred in admitting and relying on the affidavit of insured's counsel. HELD: Appeal dismissed; special costs award upheld.

It was held that in British Columbia, party and party costs are the general rule absent litigation misconduct, but in exceptional cases special costs may be awarded for non-punitive purposes in the interests of justice. The Court held as follows:

At para. 34 - 40: [34] At common law, costs and disbursements incurred in civil proceedings were not recoverable. However, beginning in the late 13th century in England the court was empowered by statute to award them to a successful party. In British Columbia, the statutory right to recover costs has existed since the late 19th century and is currently conferred by Rule 14-1 of the Supreme Court Civil Rules. Under Rule 14-1(9), unless the court orders otherwise, costs in a proceeding must be awarded to the successful party: MacKenzie at paras. 29, 64; British Columbia (Minister of Forests) v. Okanagan Indian Band, 2003 SCC 71 (CanLII) at para. 19.

[35] The court's power to order costs serves as a tool to further the efficient, fair and orderly administration of justice. The traditional purpose of a costs award is to indemnify the successful party to some degree for allowable expenses and services incurred in a civil proceeding. While the indemnification principle is a cornerstone of a costs award, in the ordinary course the costs regime provides only partial, not full, indemnity. The general objective is to reallocate some of the successful party's litigation costs to the loser, not to make the successful party whole. Without more, a discrepancy between actual costs and a costs award does not amount to an injustice or contravene the principle of indemnification: Okanagan Indian Band at paras. 20-21; MacKenzie at para. 81; Asselstine at paras. 4-6.

[36] Costs awards also serve other purposes and objectives. For example, they may encourage settlement, deter frivolous actions or defences and sanction unreasonable conduct committed in the course of litigation. In addition, on occasion costs may be awarded to enhance access to justice, mitigate severe inequality between litigants and encourage socially desirable conduct. In other words, costs awards...