The Dangers of Denying Insurance Coverage and Playing Hardball

Enhanced Interest and Costs: Barry v Industrial Alliance Insurance and Financial Services Inc (IAF), 2022 ABQB 265

By: Brad Findlater, Wilson Laycraft
Originally published May 4, 2022

A recent Alberta Court of Queen’s Bench decision from the Honourable Justice Feasby in Barry v Industrial Alliance Insurance and Financial Services Inc (IAF), 2022 ABQB 265 (“Barry”), highlights the potential dangers associated with denying insurance coverage that was properly due and payable to the insured, then playing “hardball” during the litigation.

Background

This litigation concerned a life insurance policy taken out by a husband, where his wife (the plaintiff and widow with three children) was the beneficiary. The policy holder died in a mining accident overseas in 2015 and for over 6 years the beneficiary has been trying to collect on the life insurance policy of $1,000,000.00. The insurer denied coverage on the basis that beneficiary hadn’t proven the death of the policy holder.

A summary judgment application was brought by the plaintiffs seeking to have their claim proven that the policy holder was in fact deceased and that the insurance policy should be paid out.

Decision: Interest and Costs

The summary judgment application was granted. When dealing with interest the Justice highlighted the following at paragraph 99:

“A denial of coverage allows a life insurance company to retain money that should have been paid to a beneficiary. The rate of interest under the Judgment Interest Act is lower than the rates of that even the most creditworthy borrower can obtain in the market. The low rate of interest under the Judgment Interest Act creates a structural incentive to deny claims.”

[Emphasis added]

Based on the inadequacy of the legislative interest, combined with what was deemed improper conduct of the defendant, the Justice exercised his discretion to award interest at the rate of the prime lending rate of the Royal Bank of Canada plus 2% compounded monthly.

With respect to costs, the Justice found that the conduct of the insurer went beyond playing “hardball” and was “improper” (see para 104). In awarding enhanced costs of 75% of actual costs incurred, the Justice held the following:

“Just as the nature of insurance contracts alone does not justify enhanced costs, neither can the Court turn a blind eye to the asymmetry in power and resources between litigants. The present litigation pits one of Canada’s largest insurers against a 34-year-old widow and mother of three who emigrated to Canada only 10 years ago and her mother-in-law who resides in Burkina Faso, one of the poorest countries in the world. Nothing about IAF’s conduct of this litigation indicates that it was interested in answering the question at its heart – whether Mr. Barry was deceased. IAF, knowing well the asymmetry of power and resources between the parties, used all the tactical and procedural tools available to it to gain leverage on the Plaintiffs. IAF’s hardball tactics would be questionable in litigation between evenly matched adversaries; its conduct is not tolerable when there is a gross asymmetry of power and resources between the litigants. When viewed in the context of the asymmetry between the litigants, IAF’s hardball tactics constitute litigation misconduct that justifies an enhanced award of costs.”

            [Emphasis added]

Conclusion

Sometimes insurance companies improperly deny coverage under a policy of insurance. In defending its decision, the insurer has infinite resources to litigate and it can often be overwhelming for normal persons who simply want what they paid for.

This case highlights the need for policy holders who have been denied coverage, to hire a skilled and experienced lawyer who can look out for your interests and overcome the hardball approach that insurers can take.

Wilson Laycraft has experienced counsel who may be able to assist you with your insurance claim, such as life insurance, property insurance, business interruption, or others. For more information, please reach out to the author.