Recently, in Forgotten Treasures v. Lloyds Underwriters, 2019 BCSC 485, British Columbia’s Supreme Court disagreed with the defendant Underwriters' refusal to file a defence until factual particulars of certain bad faith allegations were provided. Forgotten Treasures is an interesting read:
The claim involves gem-encrusted golden statues; a curbside robbery; and, a policy condition requiring the “treasures” to be accompanied by two people while in transit, which was said to be breached by the Underwriters who denied coverage following the heist.
In its suit for coverage, the Insured alleged bad faith, largely concerning behavior by the loss adjuster who allegedly “failed to examine the claim objectively, treating the denial of coverage as a foregone conclusion.”
The Underwriters refused to file a defence without particulars of the material facts upon which each allegation was based. For example: “[W]hat are the material facts by which you state your conclusion that [the adjuster] was “abrasive”, “combative” and “unprofessional”[?] Exactly what did he do, what did he say, to whom did he say it and when did he do or say it?”
Dismissing the application, Baird J. explained there was a difference between what is properly the subject matter of a demand for particulars and what is more properly material that should be obtained at discovery. He quoted the following passage from a guiding authority:
“At the heart of the distinction between the two lies the question whether the material demanded is intended to, and does, delineate the issues between the parties, or whether it requests material relating to the way in which the issues will be proved.”
With the benefit of hindsight, the Underwriters may have overplayed a weak hand. The decision reflects a degree of animosity between everyone involved (i.e. while the dispute over particulars developed, the plaintiff Insured obtained default judgment, which Baird J. also set aside). Of course, coverage litigation involving bad faith allegations can be tricky to manage and often requires counsel’s calm and steady hand.