An insurer is responsible for pre-tender defence costs absent an identifiable prejudice arising from the late notice of the claim.

[2015] B.C.J. No. 783

2015 BCSC 630

British Columbia Supreme Court

T.M. McEwan J.

April 22, 2015

The insurer petitioner sought a declaration on whether it was required to cover pre-tender defence costs. The insured respondents did not give notice of claims under the policy until almost two years after litigation first arose. When the claims were first made, the insured did not recognize they might trigger coverage under the policies issued by the insurer.

The court considered the two lines of cases regarding notice provisions in commercial general liability policies. The first line supports the principle that the insurer is on risk from the time the cause of action arises and the implications of late notice is considered as a question of prejudice to the insurer due to the lapse of time. The second line stands for the idea that notice is a condition precedent to the assumption of risk and coverage does not exist for the cost of defending a claim until the insurer has been provided with notice of the claim.

In this case, there was no allegation of prejudice due to late notice of the claims. The failure to give notice was due to inadvertence on the part of the insured. The court concluded the weight of Canadian jurisprudence is that the breach of a notice provision should be treated as imperfect compliance, rather than non-compliance, and so it is subject from denial of coverage or forfeiture. The court rejected the petitioner's application for the declaration that it had no liability for pre-tender defence costs. The court did not determine the insurer's actual exposure to defence costs.