Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff continued litigation after appraisal and full payment by insurer for fire loss.

• Defendants sought substantial indemnity costs, alleging frivolous claims and bad faith.

• Trial judge assessed whether plaintiffs’ conduct rose to the level of "reprehensible" or "outrageous."

• Court evaluated the timing and fairness of settlement offers by both sides.

• Defendant’s cost claims were found disproportionate to the scope and value of the case.

• Costs were awarded on a partial indemnity basis, rejecting elevated cost sanctions.

Background and claim

John Jordan and William Nielson brought an action against Commonwell Mutual Insurance Group and Finnegan Insurance Brokers Ltd. following a fire that destroyed a hunting camp on November 13, 2018. The parties agreed to submit the insurance valuation to appraisal under the Insurance Act, resulting in a binding award of $32,918.26, which was paid by the insurer. Despite this, the plaintiffs continued the action, with Jordan alleging misrepresentation and inadequate insurance advice from the broker.

The defendants ultimately succeeded in dismissing the claim through a court ruling prior to this costs decision. The trial had been brief, and no defence witnesses were called.

Cost submissions and arguments

Following the successful defence, both Commonwell and Finnegan sought costs on a substantial indemnity basis—$116,286.80 and $97,714.39 respectively. They relied on Rule 49.10, pointing to early offers to settle and asserting that the plaintiffs’ conduct in continuing the litigation was unreasonable and vexatious.

Finnegan emphasized that only one plaintiff sued it and that the co-plaintiff’s absence demonstrated lack of credibility in the claim. The plaintiffs rejected the notion that their case lacked merit or involved misconduct. They argued that they made multiple efforts to settle and that the defence offers had impractical timelines, making proper client instruction impossible.

Court’s analysis of conduct and proportionality

Justice Carey found that the plaintiffs had not engaged in the kind of outrageous or scandalous conduct that would justify elevated costs. While he acknowledged the case may have been weak and that the filing of a multimillion-dollar claim was imprudent, he found it did not materially affect the trial’s length or complexity.

He also highlighted that both sides made serious offers and there was no evidence of bad faith or abuse of process. Importantly, he found the defence costs claimed were “staggeringly disproportional” to the amount in dispute and the narrow issues involved. The trial itself was short and simple, and the involvement of four lawyers was found excessive.

Outcome and winner

The court awarded costs of $10,000 to each defendant, inclusive of disbursements, significantly lower than what was sought. Substantial indemnity costs were denied. While Commonwell Mutual Insurance Group and Finnegan Insurance Brokers Ltd. were the technical winners, the cost ruling strongly emphasized fairness and proportionality in light of the modest value of the dispute.